As we have previously reported, the government has found an innovative new way to squeeze even more tax out of our wallets. This time, in parallel with the proposed property tax. Under the latest government proposal, which is part of the proposed amendment to the Spatial Planning Act, municipalities are required to start levying a tax on unused building land no later than 2027, although only a few municipalities are currently subject to the levy. This is a clear attack on rural areas, where most of the undeveloped (but developable) properties are located. We spoke to economist Štefan Šumah about this, who explained the basic problem with such taxation.
The President of the Fiscal Council pointed out that the government will not be able to solve the financial problems that plague us each and every time with new taxes indefinitely. The government, however, is clearly not listening. What is more, it justifies the new tax, which is more than obviously just an excuse for additional budget revenue, on a false social note, saying that undeveloped land is exacerbating the housing problem.
How does the government justify this new attack on our assets? The Minister for Natural Resources and Spatial Planning, Jože Novak, justifies the tax on the grounds that “a lot of building land is inactive, it is so-called dead capital”. The proposal, however, ignores the fact that the problem has never really been a shortage of land, but overly complicated procedures and the fact that the state is actively ensuring that as little land as possible is available for development.
Municipalities would thus – under the government’s genius proposal – be forced to charge 30 cents per square metre of building land from 2027 onwards. So, for an 800-square-metre plot, the owner would have to pay 240 euros a year, and for a 400-square-metre plot, they would have to pay 120 euros a year. The measure, according to the Ministry of Natural Resources and Spatial Planning, would encourage owners “to build on, sell or rent out their land, thereby reducing the expansion of building areas on agricultural and forest land.” We have never before seen such centrally planned management of our freedoms in the history of our independent country – or even in the previous country.
People will pay for the incompetence of bureaucracy
In Slovenia, building permits are extremely slow to obtain, and in addition to the complex procedures we are witnessing, it takes time to obtain consents. The new tax will therefore not only affect those who want to save a piece of land for their children or grandchildren to build nearby when they get older, but also first-time builders. Although it will be up to the state to extend the time for property development, it will be the landowner building the first house who will end up having to pay the penalty for an empty plot.
“I buy a plot of buildable land, apply for a building permit, the process takes several years, and in the meantime, I have to pay tax because I don’t have anything built on the land I own. I go to court and wait even longer,” commented user Vasja Bočko on social network X, in a telling criticism of the government’s proposal. “Even better, you have no money, you struggle to buy land in a remote province, and then during the 10-year process of raising money for a house, you are taxed four times more than a Ljubljana investor because the plots are bigger in the province.”
An attack on property rights?
The new law is a fundamental interference with private property, where an individual has to pay the price for not having done something on their own property that the state imposes on them, and thus, of course, the right to property itself loses its meaning. Article 67 of the Constitution of the Republic of Slovenia provides that “the law shall determine the manner of acquisition and enjoyment of property in such a way as to ensure its economic, social and ecological function,” and the government will probably use the analogy that this is a justified form of restriction of the right to property on the basis of its social function. But the fathers of the Slovenian Constitution never interpreted the social function in such a way that property owners are dictated not only what they can do with it, but what they MUST do with their property (except when it comes to special institutes such as an emergency road). Such a robbery of the taxpayers cannot be justified on the basis of the social function of property. If the government could interfere so drastically with property rights, then there are practically no limits anymore and we no longer live in a free market liberal democracy, but a de facto hybrid socialism.
Šumah: an attack on the countryside
We asked economist Štefan Šumah for his opinion on the matter, and he believes that the government’s idea of taxing undeveloped building land might not be such a bad idea, but in the context that we can assume that there is enough building land and that people are buying it either as an investment or to speculate.
However, the problem is that Slovenia has a shortage of building land and would be hit the hardest in rural areas again, where, say, parents keep a plot of land for their children. Speculators with land in Ljubljana would certainly not be affected, as they would calmly include this tax in the price when they would sell it.
“They want to introduce this, rather than relaxing building legislation and thus allowing for more building land, which would, to use Adam Smith’s phrase, solve the housing problem with an invisible hand. By relaxing building legislation and increasing the number of vacant building plots, property prices would certainly fall. This, however, is clearly not in the interests of this government. It should also be kept in mind that Slovenia is the third most forested country in Europe and that since 1946, the forest area in Slovenia has increased by 20 percentage points, or almost 40 percent, and if only 2 percent of this forest were to be used for building land, the price of this would surely fall insanely, and the price of real estate would fall as a result. However, instead of making it easier for people to obtain their own property, they just want to make life more difficult for them with new taxes. Apparently, they don’t know any other way!” Šumah stressed.
He also added that the leftists just don’t understand the laws of economics. Together with the property tax, he argues, this tax is, in fact, a kind of tacit nationalisation, since everyone will certainly not be able to pay it and will be forced to sell the property or building land on which they have already paid all the taxes. Here again, the speculators who will buy the land will come to the rescue, concludes Šumah.
I. K.
