Immovable property taxation policy in Latvia

Abstract

After the restoration of independence, Latvia took a path towards a market economy and private land ownership and which mentioned wide land privatization process and building an immovable property cadastre to collect information on immovable properties. Transition to private land ownership meant that immovable property taxation will start to tax privately owned assets not assets rented from the state, a model similar to other market economies. Initially, there were two laws on the taxation of the property – The law on land tax and the Law on Property Taxation to tax commercial assets and unfinished construction objects which were adopted in December of 1990 even before the starting of land reform and privatization. In 1997 new Law on immovable property tax was approved by the Latvian Parliament and it is still in force with numerous amendments which due to the rapid development of the immovable property sector have been approved until today. Before the global economic-financial crisis in 2008 prices of immovable property were increasing rapidly followed by contraction during the global economic crisis. Immovable property tax is often considered as taxing accumulated wealth however it may have distortions and disproportionate impact on those owners who did not contribute to immovable property value growth. Therefore, the aim of this research is to evaluate the development of the immovable property taxation system development in Latvia and to compare it with the systems of neighbouring countries. Therefore, to achieve this aim following objectives were set: to analyse legislative acts regulating immovable property taxation in Latvia, and practices of other countries and to draw research conclusions.