IBI prop­erty tax – town halls' res­i­dents' sieve?

Costa Blanca News (South Edition) - - Vox Pop -

By James Parkes With IBI prop­erty tax pay­ment upon us every Septem­ber come the moans and groans of how much we pay – and, more pre­cisely, how much our coun­cils rake in every year.

IBI tax is the town halls' main source of in­come. It rep­re­sents 64% of the to­tal fig­ure, with sec­ond-placed ITVM ve­hi­cles tax rep­re­sent­ing a mere 10% of their in­come. And on a na­tional scale, only IRPF in­come tax and IVA (VAT) rake in more in­come – in these cases both go di­rectly to cen­tral and re­gional govern­ments.

IBI tax in­come has never dropped in Spain, not even dur­ing the worst year of the eco­nomic cri­sis – when the con­struc­tion bub­ble burst in 2008, IBI was not af­fected be­cause it does not de­pend on sales but on the own­er­ship of a prop­erty, re­gard­less of whether it’s a pri­vate owner or still the de­vel­oper's. This is why 10 years ago, IBI tax through­out Spain amounted to a to­tal of six bil­lion eu­ros, and in 2014 was well over 13 bil­lion.

Af­ter over 10 years liv­ing in a town that of­fi­cially has one of the high­est IBI rates in the re­gion, I can safely say that I have never seen my bill IBI re­duced; quite the con­trary.

So with all this said, lo­cal town halls have a very pow­er­ful fi­nan­cial tool in their hands, which has even­tu­ally be­come a res­i­dents’ sieve.

The way IBI is cal­cu­lated favours this. IBI is based on the rate­able value of the prop­erty (Valor Catas­tral), which is set by the of­fi­cial Ofic­ina del Catas­tro. Sup­pos­edly it should not be more than 50% of the mar­ket value, but due to the prop­erty mar­ket col­lapse this does not ac­tu­ally re­flect re­al­ity. In any case, town halls are then al­lowed to ap­ply a per­cent­age to that value and are given free­dom to choose be­tween 0.4 and 1.3% of it – which is what you pay on your IBI bill.

So coun­cils can ac­tu­ally charge more by in­creas­ing the per­cent­age they ap­ply. In some ar­eas, when the Valor Catas­tral has dropped (dur­ing re­ces­sion), coun­cils have in­creased the per­cent­age so they don’t ‘lose out’. Now that things are pick­ing up, they seem more re­luc­tant to drop the rate they ap­ply. Some coun­cils claim they have ‘lower’ IBI rates be­cause they ap­ply a lower per­cent­age, but be­cause the Valor Catas­tral has in­creased, then ef­fec­tively res­i­dents see no real dif­fer­ence – cer­tainly not down­wards. I know of sev­eral res­i­dents who have moved to ‘the next town’ sim­ply be­cause they could no longer af­ford to pay their IBI rates. A per­fect ex­am­ple are a cou­ple of ex­pats, on a pen­sion, who were un­able to face bill of over €2,000 every year and were ‘forced’ to sell up and move to a ‘cheaper town’. But it’s not only an ex­pat prob­lem, it mainly af­fects Span­ish res­i­dents who have lived in their own house for decades and sud­denly, with less in­come, can no longer ‘af­ford’ to live in their own town. Here’s where the sieve comes in. Cer­tain towns have, di­rectly or in­di­rectly, used their IBI tax to boast about the ‘wealth’ of their res­i­dents. ‘You must be able to af­ford to live here’ seems to be the motto. And that’s ex­actly what has hap­pened. Some towns seem to be tar­get­ing an ‘up­per-mid­dle-class’ res­i­dent.

Ef­fec­tively, the cost of a prop­erty is not the only thing you need to pon­der over when buy­ing. The ques­tion may not be 'Can I af­ford to buy here?' but more like 'Can I af­ford to live and pay IBI here?'

Al­though this is not al­ways the case, towns siev­ing out lower-in­come res­i­dents tend to boast they have much bet­ter ser­vices, fa­cil­i­ties and leisure op­tions for their res­i­dents – thus jus­ti­fy­ing the high rates. I in­sist, this is not al­ways the case and many town halls cling on to IBI in­come to pay off the huge amount of debt they have be­cause of some huge build­ing project or un­nec­es­sary coun­cil out­lets that were sup­posed to have been paid by de­vel­op­ers who later say their ‘Plan Par­cial’ de­vel­op­ment scheme was scrapped or sim­ply could no longer af­ford to go ahead with it

But at the end of the day, the higher the IBI, the higher the 'stan­dard' of res­i­dents. So if your rates have in­creased this year, be happy - you're liv­ing in a top-class town...

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