Problems of real property taxation in Lithuania

Abstract

There are three main real property taxes in Lithuania and all of them are applied to different persons and are calculated using different methodology. The revenue from real property taxes in different countries varies from 0.1% to 3% of GDP but in Lithuania it is even less than 0.1%. This revenue is allocated to municipal budget. Improvement of real property taxation system, changes in taxable value or introduction of new real property tax can increase revenue from taxation and encourage municipalities to improve living surrounding and infrastructure. Recent discussions in Lithuania about changes in real property taxation system show that new property tax for natural persons and changes of land taxable value can be introduced. The aim of this article is to analyze real property taxation trends in Lithuania and accuracy of mass appraisal. Comparison of mass valuation and real market prices in two municipalities was accomplished. Real market price and average market price of agricultural land were compared in Rokiskis municipality, apartments’ market prices and average market prices were compared in Kaunas city. The results of comparison in Rokiskis municipality show, that average market price calculated by mass appraisal is much less than real market value, therefore shifting to average market price as a taxable value will not harm land owners. Analysis of apartments average market price by mass appraisal and real market price in Kaunas city showed, that difference of values fluctuates from 7% to 98%. In all cases average market value was lower than real market value, so if the new real property tax was introduced, owners would not feel unjust because of wrong evaluation of their property.