Results of a comparative study of comercial property taxation in Europe 2001

With the formal establishment of the European Single Market in 1992 and the accomplishment of the third stage of the European Money Union in 1999 many barriers for a dynamic economic exchange between the EU Member States have been reduced. The competition distorting character of the heterogeneous national tax regimes - that means 15 specific national tax systems with different taxes, tax bases and rates - as one competition hindrance still on existing is getting more and more value. To guarantee the operation of the Single Market it is necessary to minimize taxation differences dependent on location. The principle aim of this doctoral thesis is to estimate effective tax burden and tax reliability differences for domestic direct investment in commercial properties in five European countries (Germany, Netherlands, United Kingdom, Sweden and Croatia). Qualitative and quantitative analyses will show comparitive tax advantages or disadvantages on real estate in relation to other European competitors and to develop tax reform proposals for the German legislation.Beginning the thesis with a theoretical overview of the general concept of interstate tax burden comparisons the tax profiles of the examined states will be introduced and their effects on competition demonstrated: It will be focused on the tax implications of a domestic investor directly purchasing, holding and selling real estate in his homeland for investment purposes, despite of whether the investor is an individual, a partnership or a company. The analysis takes into account all relevant taxes - profit taxes and non profit taxes, both at the state level and the municipal level, respectively direct and also indirect taxes like VAT - that may be influenced by the investment of a commercial property both at the level of the company and the level of the private individual shareholders, and also the valuation and depreciation of immovable assets. Effective tax burdens and tax reliability tests will be calculated basically over a 10-year period and will be compared applying various sensitivity analyses for alternative assumptions about the legal form holding real estate, rental agreements and the time of disposal on the fundamentals of a property model based on aggregated data from office buildings by IPD. The discussion paper will be concentrated on representation of the qualitative and quantitative research and will present consequences and conclusions in relation to the results of the analyses.