How Finland Approaches Land Value Taxation: an Experiment to Cost-Effectively Value Land in a System Where Land and Structures Are Valued Separately

Risto Peltola

Finland is among those rather few countries where higher rates are applied to land than structures in property taxation. As the valuation methods used in our country are more than 20 years old, and the valuation itself almost as old, the methods and the valuation itself are in urgent need of updating. A new system of valuation was ordered by the Ministry of Finance, and it has now been developed. Based on the availability of data and how valuable the location is, a toolbox of three valuation methods is introduced: 1) for most invaluable land zip-code medians are recommended, 2) for more expensive land a spatial moving average of nearest comparable land sales is recommended, and 3) for most expensive land a spatial moving average of nearest comparable apartment sales is recommended as a second method. In this paper those methods are explained and evaluated. The paper also includes results of an extensive analysis of effective property tax rates.

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Document type:How Finland Approaches Land Value Taxation: an Experiment to Cost-Effectively Value Land in a System Where Land and Structures Are Valued Separately (2216 kB - pdf)