Adequacy of Current System of Property Taxation in the Slovak Republic

Abstract

The revenue of local taxes, being the own revenue of municipalities as the basic local self-government unit, does not constitute a sufficient revenue source for the functions of the local authorities. This situation is not satisfactory and municipalities need to increase their revenue which should be achieved by a reform of the real property tax. The proposal of the government to introduce the ad valorem system is not the best solution to the problem under current circumstances, which also seem to be acknowleded by the Government itself in the light of its more recent announcment to create the necessary preconditions for such a reform. The author considers it crucial to take into account the problems of an insuficient database necessary for the successful introduction of an ad valorem sytem, the high costs of updating the database to keep the the system fair, and the necessity to solve other problems of the municipalities asociated with their role and tasks as tax administrators (especially the presence of high amounts of uncollected arrears on local taxes and charges). Until conditions enabling the introduction of a successful reform are created, the increase in revenues and the improvement in tax equity may, at least to a certain extent, be achieved by an update of the statutory values of lands and by further adjustments of current tax rates by more factors, because at present, the municipalities are able to reflect a limited number of attributes in fixing the tax base.

Keywords: Slovak Republic, property tax, immovable property tax, valuation, tax reform

JEL Classification: K34