Property Taxation in Denmark

Jonas Glensbo

Student thesis: Master thesis

Abstract

The taxation of real property is the cornerstone of local government finance around the world, and for good reason: the taxbase is broad, easily defined and immobile, and by taxing market value, governments are able to recoup some of the costs of providing services. The taxation of real property is also disliked by taxpayers around the world; they perceive it as a threat to their home and their private economy, and are distrustful of governments’ abilities to fairly and equally value and tax their properties. Denmark is currently experiencing a lot of taxpayer unhappiness with the property taxes, and there are being taken steps, though lumbering, towards a new system of taxation. The current system is under fire for assessing home values too inconsistently and highly, and land values unequally. This thesis examines the economic underpinnings of the taxation of real property, before carrying out a comparative study of the legal regimes in Denmark, Sweden and California, in regards to the taxation of owner-occupied, single-family houses. The study finds that the Scandinavian systems in their base form do well on almost all parameters specified in the literature - however, in both countries, exemptions and freezes drive a wedge between the taxable value, and the market value, thus minimising the tax revenue, distorting the market and creating inequality. The system in California, trying to protect homeowners from shocks while saving on administrative costs, sacrifices revenue-potential and equality, even reducing taxpayer mobility. The thesis then discusses how the current unhappiness with the system in Denmark, may not stem from the system itself, but from unreasonable expectations about the accuracy of the system. The thesis recommends that the Danish government take the general unhappiness as an invitation to overhaul the system, aiming to create slightly more precise assessments, and countering the overvaluing of properties, by assessing at a lower rate of market value. The resulting decrease in revenue could be offset by phasing out the property value-freeze.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages89