Implementation of building taxation and mass valuation in Lithuania : outcomes and lessons learnt
Bagdonavicius, Arvydas & Steponas Deveikis
Ad valorem principle in real property taxation has hardly fought its way in Lithuania. For a long time real property tax has been paid only by legal entities. Taxable value of buildings and structures has been estimated with reference to nominal values. The specialists of the State Enterprise Centre of Registers commenced preparatory activities regarding the implementation of mass valuation system for land and other real property from 1998. OECD and Lincoln Institute of Land Policy (USA) provided much support in this field. Mass land valuation has been performed in Lithuania since 2001, and we have already discussed this issue in previous FIG conferences. In June 2005, the Seimas (Parliament) of the Republic of Lithuania has enacted a new wording of the Law on Real Property Tax. The Law provided that taxable value of buildings and constructions was estimated against the property market value set using mass valuation approach and in separate cases (for industrial property) against the replacement costs of property. It also established that real property value set by individual valuation might be also considered as taxable value. This Law came into force as of 1 January 2006. The Centre of Registers has developed mass valuation models for buildings and prepared value maps. ORACLE Discover, NCCS, GIS software were use in this process. In case the specialists failed to adopt standard software for certain works they tried to search for own solutions (GIS, merging valuation results with the Real Property Register data) in order to have full automation of valuation system and implementation of basic AVM and CAMA principles. On 29 December 2005, the Minister of Finances of the Republic of Lithuania in his order has approved building mass valuation reports and value maps after the procedures of public discussions were completed. With the Law on Real Property Tax and mass valuation results coming into force, the process of appeals began. Many taxpayers were shocked by the increased tax amount compared to the previously paid tax against the taxable value that was set using other principles. The appeals brought to light a wish of taxpayers to reduce taxable value by any means. Property valuers more often use income (income capitalisation) and residual value approach in the individual valuation reports.
Event: XXIII International FIG Congress : Shaping the change
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