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The Minister of Finance Jürgen Ligi replied to the interpellation concerning land tax exemption (No 373), submitted by Members of the Riigikogu Kadri Simson, Mailis Reps, Yana Toom, Priit Toobal, Tarmo Tamm, Lauri Laasi and Aivar Riisalu on 10 December. 

The interpellators highlighted two main problems relating to land tax exemption. The first of them concerns apartment buildings with business premises on the ground floor. In that connection, all the land belonging to the apartment building is partly commercial land but land tax exemption is granted only on residential land. Apartment owners obtain only partial land tax exemption although they do not engage in business. Another problem concerns the land tax exemption limit for co-owners. For example, in the case of a semi-detached house where the ground floor belongs to one family and the first floor belongs to another family, the current Act provides that both of the owners obtain tax exemption to the extent of 750 m2 and not to the extent of 1500 m2

The interpellators wished to know what the Ministry of Finance was planning to do to solve the two main problems pointed out in the interpellation. 

In Ligi’s words, the Ministry of Finance is not planning any amendment in these issues. “Land tax is not a poll tax, the object of land tax is a plot of land. The amount of land tax does not depend on whether the land is occupied by buildings or what the purpose of use of the buildings located thereon is,” Ligi explained. He added that if commercial land is under an apartment building then it is logical that either the purpose of use of the land is changed or the business located there pays the land tax.

Under the Law of Property Act, every co-owner pays land tax for a plot of land used as commercial land and residential land in proportion to the size of the apartment ownership for both residential land and commercial land. „The tax incentive for land under a residential building was aimed at lowering the tax burden to a certain extent, but not at eliminating land tax altogether. The intended purpose as residential land was established as the prerequisite for obtaining land tax exemption in the Act,” Ligi said. He added that the Chancellor of Justice had written to the Finance Committee on 14 February 2013 that the establishment of the criterion of intended purpose in order to obtain land tax exemption is in conformity with the Constitution. In the opinion of the Ministry of Finance, land tax exemption is equally ensured to all owners of residential land, and apartment ownerships and plots of land in common ownership are exempt from land tax to the extent of 1500 m2

When answering the question about amendments to the Land Tax Act, Ligi said that no immediate great changes are planned. The Bill on Amendments to the Land Tax Act which is in the legislative proceeding of the Riigikogu at present provides essentially that land tax on lands which have not undergone the land reform will be calculated on the basis of the price of the taxation of land not designated for a specific purpose. Local governments will be required to submit the basic data necessary for calculating land tax to the Tax and Customs Board through the land tax information system starting from 2015. A list of lands for public use will be established. When the Bill enters into force, land tax will not be paid on lands used as public land, and land under public bodies of water, under water bodies for public use and under roads for public use. The Act is planned to enter into force on 1 January next year. 

Ligi also replied to the interpellation concerning the future of ferry traffic (No 372). 

During the open microphone, Ester Tuiksoo and Enn Eesmaa took the floor.

The Riigikogu Press Service