Romania: Technical Assistance Report on Improving Revenues from the Recurrent Property Tax

IMF Staff Country Reports, June 29, 2022

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The paper highlights Romania’s Technical Assistance report on improving revenues from the recurrent property tax.
The current area-based property tax system in Romania is inefficient, producing revenue below its potential, while the taxable value determination is inequitable and complex.
The best guiding principle for the property tax reform is to remind taxpayers that a property tax is in the first instance a benefit tax.
Comprehensive property tax reform is complex, requiring both political and technical coordination, informed by realistic timelines.

Area-based property tax system:
- Is inefficient.
- Produces revenue below its potential.
Taxable value determination:
- Is inequitable.
- Is complex.
Value-based assessment:
- When possible to use the market-value approach in practice, it provides the better, more buoyant, and more equitable tax base.
- Tends to better differentiate the tax burden between low-income and high-income households—accounting better for ability-to-pay or vertical equity.

Two broad approaches are identified; the report emphasizes the first approach:
- Value-based assessment:
- Utilizes methods and techniques that rely on market transactions to inform the value of property.
- Generally agreed among experts to be preferable where practical because it yields a better, more buoyant, and more equitable tax base.
- (The existence of a second broad approach is noted in the report text, but details are not provided in the page content.)

Reform principle:
- Emphasize the property tax as a benefit tax to taxpayers.
Implementation complexity:
- Requires both political and technical coordination.
- Needs realistic timelines for comprehensive reform planning and execution.