The government tried to increase property taxes with Ordinance 16 (Tax Increases), but Parliament amended it by extending the deadline to 2025. The World Bank, in a report sent to the Ministry of Finance, explains how the increase should be implemented.

To improve both efficiency and equity, Romania should move to a base linked to current market value.

It is important that the database is then regularly updated, as outdated estimates can lead to the development of inequity if values ​​change differently over time from one region to another.

In 2020, the institution recommends re-evaluation every 3-6 years.

The transition to a market value basis will require significant efforts to develop a mass valuation model and related administrative systems.

Full implementation is not possible before 2024.

The World Bank has committed to assist Romania in developing the necessary evaluation model and related systems, including analysis and advice on this, which will be provided in subsequent reports.

Romania should consider combining land and building taxes into a single tax, as this would facilitate market value assessment based on transactions.

A land value tax would be more effective because such a tax would not discourage investment in improvements.

For low-income taxpayers, the difficulty is that there is no clear connection between the value of the property and the owner’s income. One option is targeted support through a personal tax allowance (or tax credit if a progressive tax is adopted).

Read also:

How and when to abandon reduced VAT rates for food and medicine, according to the World Bank

What changes does the World Bank propose to micro-enterprises: lowering the bar to 250,000 euros from 2024

The oddity of the World Bank report: it wants a progressive tax on labor, not aggregate income

Reports of international institutions that are kept secret in Bucharest. Chairman of the Fiscal Council: “If there is no courage to do something decisive, we will have to resort to extreme decisions”