Moscow proposed a levy on the purchase of expensive property

The document provided for an additional payment by individuals on the purchase of properties whose price per square metre exceeds a set threshold. The levy was to be set at 5% or 10% of the value of the property. The day before yesterday, however, Sergei Sobyanin, the Mayor of Moscow, signed a negative opinion on the bill and explained in detail why it would be inappropriate to adopt it.

The main arguments are as follows:

1. Duplication of payments that already exist. In substance, the proposed levy coincides with the state duty for registration of ownership, which may result in one and the same legally significant act being charged twice.

2. The possibility of circumventing the mechanism. The bill makes it possible to avoid the levy by changing the form of the transaction or by understating the price in the contract of sale.

3. Excessive regulation. The aims stated by the authors are already achieved by the tax system in force, through the progressive scale of personal income tax and the higher rate of property tax on the most expensive properties.

In our view, this is a good example of the fact that any change in tax legislation has to be assessed not only from the standpoint of filling the budget, but also from the standpoint of its legal design, of how it is administered, and of its consequences for market participants. Those were the questions that proved decisive in the opinion of the Mayor of Moscow.

Follow Consul Group on Telegram.