According to a study by IOBE, the abolition of the supplementary ENFIA is estimated to increase disposable income, the value of real estate, while it will also have favorable effects on employment.
According to the study, the current structure of real estate taxation has a strong negative effect on the real estate market, on private construction activity and, more broadly, on the Greek economy, study emphasizes of IOBE, which focuses on the positive consequences that its de-escalation would have.
IOBE points out that serious problems arise from combining the main with the supplementary ENFIA, as the latter is an additional tax real estate with a sharp escalation (progressiveness) of tax rates.
According to the study, the abolition of the supplementary ENFIA is estimated to boost disposable income and real estate values – factors that contribute to the increase in consumer spending expenditure.
In addition, rising property prices will improve the price-to-cost ratio of construction and stimulate investment in new housing.
The rise in economic activity resulting from these effects will improve expectations and boost overall investment in the coming years.
According to IOEB estimates, GDP will be higher by 1.1 to 1.4 billion euros in the years following the abolition of the additional property tax, compared to the case in which the existing tax regime is maintained.
Most of the effect comes from an increase in disposable income, some of which feeds into consumer spending. The increase in consumer spending due to the wealth effect is also estimated to be particularly important, while the increase in total investments and investments in housing has a smaller effect.
Therefore, with the abolition of the supplementary ENFIA, it is estimated that the growth rate of the Greek economy in the coming years could be 0.60-0.67 percentage points higher than predicted.
The results of the abolition of the supplementary ENFIA will also be favorable for employment. According to IOBE’s estimates, new full-time jobs may exceed, within five years, 33,000, a particularly significant figure given the high rate of unemployment in Greece.
investments
What are private investments in real estate.
There are also investments in land, but mainly they are investments in buildings, which every investor or user aims at. Which are notable today and are the only ones trusted by foreigners who invest in our country.
There are two types of buildings: The future ones, those that will be built tomorrow, which will be much better, but much less, will they are primarily intended only for private use, and about which others, more competent, will tell you later.
And the existing buildings, the main characteristic of which is their great and of course constantly increasing antiquity. Of the 4,105,000 buildings, of which 3,000,000 buildings are exclusively residential buildings, 41% were built before 1970 and 58% before 1980.
The existing building potential testifies to substantial adequacy in all building categories. The construction of state-of-the-art building volumes can only be successful if its users are secured. Where the need is much more immediate is in the area of drastically improving existing buildings in terms of functionality, energy efficiency, health, safety, accessibility and also static adequacy.
Old buildings clearly outperform new ones. newer in their position. They are more central and often served by transport, energy, telecommunications and other infrastructure networks unknown to remote buildings. Today, when we talk about construction in Europe, we primarily mean the radical renovation or reconstruction of existing building volumes, and not the construction of new ones. That is why today in Brussels a real industry has been set up for the production of Instructions and Recommendations for multiple and costly interventions in existing buildings, many of which, however, are exclusively inspirations of those who produce and market the corresponding products or services.
So the main goal of private investment in real estate is the modernization of existing buildings, and often their radical reconstruction, what in Brussels is passionately promoted as deep renovation. However, private individuals are unable to meet this goal, for many reasons, such as the high cost of these technical interventions, whose specifications are constantly changing, their effectiveness is uncertain and repayment impossible, the dramatic reduction in income from real estate and the suffocation of every attempt to utilize it, combined with the lack of the slightest incentive that could encourage and help the citizens concerned.
But in our country the main reason is the heavy overtaxation of the private sector, and especially of urban real estate, which manifests itself in a sweeping barrage of simultaneous:
Capital Tax, through ENFIA and TAP
Rental Income Tax, where it still exists,
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Income Tax from the existence of presumptions of living, which pile up additional burdens on taxpayers, and which constitute a very serious disincentive to the purchase or even the rental of a decent residence, given that, according to the current legislation, if the zone price of of their house exceeds €2,800/sq.m., the presumption of residence (owned or leased) is increased by 40% and if it exceeds €5,000/sq.m. it is increased by 70% !!!
So today we have a multi-faceted TAKE ALL tax system. With the combination of an income tax that reaches 45% to which we should add the solidarity contribution that reaches up to 10%, and the ENFIA that doubles over €250,000, so we are no longer talking about taxation, but about real exploitation of taxpayers , and much more those who have no income from their property.
Direct victims of this system are private property owners, and especially those subject to the additional tax, and entrepreneurs in the construction industry.
While indirect victims are all businesses related to the construction and renovation activity.
Entrepreneurs in the construction industry have the following unique peculiarity in relation to all other professionals. They are not only taxed with income tax on the profits from their business activity but also with capital tax on their unused goods. Unsold apartments, shops, offices, plots of land for reconstruction are taxed with a heavy annual ENFIA. What other category of professional is taxed with annual capital duty on unused goods, on goods on the shelves? That is why this sector that gave work to the workers and turnover in the market came to the verge of complete dissolution, as a result of which an excellent know-how in the construction of high-level buildings is being lost, in fact evaporated.
Thus with objective values that were always of a political dimension and not a commercial one, and that focused mainly on the collection of votes rather than tax revenues, and with tax rates determined not by fiscal and social reality, but by how much we want to collect by stepping on corpses, a ¨Frankenstein’ tax system was formed, the tragic results of which we are all living in recent years.
The dramatic performance of this tax riot has now been recognized internationally. According to this year’s International Tax Competitiveness Index of the Tax Foundation, which utilizes data from 2018 and was presented yesterday for the first time in Greece by KEFIM, Greece is ranked 29th among the 35 OECD countries assessed in the general ranking and for property taxation property in the 32nd place in the ranking, falling six places compared to the previous year 2017.
Property of the real estate market. He moves today just like the sleeper who tosses and turns in his bed without knowing if he will wake up, or if he will just change sides! And don’t be fooled by any current interest in short-term rental or Schengen visa properties. In reality there is no real estate market when there are only sellers, when the owners, from “citizens” have become “sellers” of real estate…
Construction of new buildings, especially for renting: Unknown concept in the last 10 years.
p>Renovation of properties: Minimal and only for apartments that are to be made available for short-term leases. Woe and alas if “measures are taken” against them, supposedly to protect the tenants, when it is clear that all apartments that are renovated but not “caught” in these leases, will very soon be allocated to students and regular tenants.
Real estate litigation: A real Golgotha of unimaginable bureaucracy, with dozens of all kinds of largely useless supporting documents for every notarial deed of real estate, which burden the owners, without solving the slightest problem, delaying every transaction for many months , even a simple parental provision.
This is why the NO movements are flourishing today: I do not Buy, I do not Build, I do not Maintain, I do not insure, but also I do not inherit!
What to do to be done in the country to see better days; Drastically reduce overtaxation, and to do this the country needs a smaller State! And, on our topic, what needs to be done to increase private investment in real estate:
Transfer of ENFIA to the Municipalities, in a merger with TAP, with a limited “flat” tax rate and no additional tax , which increases even fivefold the burden on the main tax, resulting in the dramatic depreciation of urban property, construction and investment idleness in our country, as well as unemployment and withering in the relevant branches of our economy!
Gradual reduction, in any case, of the budgetary request of ENFIA to 50% of the current one in four years, which reduction should be “ERGA OMNES”! That is, any reduction adopted, by any government, will only be truly fair and effective if it applies equally to all taxpayers, without exclusion or unfavorable treatment of any of their categories, and especially those who paid the most during the crisis years and therefore the they need it more than anyone else because they are at risk of confiscations and criminal prosecutions!
Establishment of serious tax incentives for energy upgrading and functional renovation of existing buildings. In a country where direct construction subsidies are not possible, the only key is tax incentives. The state has an interest in helping society and the economy to renovate existing buildings of all kinds, with a refund of 50% of the tax, based on legal tax documents, certified technical specifications of materials and works and legal and insured employment.
Rent Taxation: Establish an intermediate bracket of 25% and abolish the bracket of 45%.
Adjustment of objective values (zone prices) to today’s harsh economic reality.
Simplification of the procedures for transactions in real estate, with the first step being the reduction of the huge series of supporting documents required for them.
Reduction of living (residence) presumptions to 50% of the applicable ones, so that they can be adapted to today’s incomes, not pre-crisis.
Abolition or significant reduction of VAT on new construction and building repairs, and a three-year suspension of capital gains tax on the purchase and reconstruction of real estate.
It is not the first time we highlight all of the above, and it doesn’t look like it will be the last. But it is comforting that on the one hand organizations such as SEPAK and POMIDA are still holding up the flag on this vital issue, and that from the official opposition side at least, the role and contribution of the construction industry in restarting the economy has been understood , as well as the need to support it, especially in the renovation of existing buildings. So let’s hope that the future, there is a chance that it will at least be better than the nightmarish present…
