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Moscow citizens first to carry burden of true-to-life real estate tax

October 15, 2014, 17:13 UTC+3 Zamyatina Tamara
© ITAR-TASS/Artyom Geodakyan

MOSCOW, October 15. /TASS/. Real estate taxes in Moscow will soon catch up with those in Paris and London, while our wages will stay there where they are, many residents of Russia’s capital are telling each other with a pinch of irony. Everybody hurries to visit the official website of the state register service (Rosreyestr) to see how high the property tax is to rise as of next year.

The federal law setting new rules of charging the taxes on individuals’ real estate will take effect as of January 1, 2015. Russia’s regions will have a free hand for five years to come to establish the basic limit of the real estate tax and to introduce it step by step. The government of Moscow, the capital city, was the first to support the bill on taxing the property of individuals.

Before the owner of housing, a garage or countryside summer cottage paid a tax pegged to the so-called “balance sheet” value stated in the official inventories - quite often grossly understated. Now the tax will be computed on the basis of the cadastre value, very close to the one existing on the free market. Up to the present moment under the law adopted back in 1991 all Russians have been paying real estate taxes based on rates effective back in the socialist era. Now each person will have a chance to feel oneself a full-fledged participant in free market relations. Without much enthusiasm, though, and possibly even grumbling: “Was it really worth fighting the Communists?”

The tax on an average Moscow apartment having a floor space of 54 square meters will go up approximately ten times to about $126 a year. For a newly-built apartment over 100 square meters in the center of Moscow the owner will have to pay about 40,000 roubles ($1,000), the chief of Moscow’s economic policies and development department, Maksim Reshetnikov, told the media. A considerable increase in the tax burden will occur for about 5-6% of Moscow’s residents who own large luxurious apartments in the city’s historical centre.

The new tax will by no means affect a third of real estate owners in Moscow: 1.7 million people are entitled to all sorts of benefits. They are retirees, war veterans, people with disabilities and holders of the Hero of the Soviet Union or Hero of Russia titles. By the law those entitled to tax exemptions will be relieved of all taxes on one property item - an apartment, a garage or the countryside cottage (dacha). People of creative professions - artists, sculptors and designers - will enjoy discounts off the taxes of their studios.

Moscow is a city of stark contrasts. In the city centre and in prestigious suburbs whole quarters are surrounded by tall perimeter fences and equipped with security booths at the entrance, turnpikes, and CCTV cameras. Inside, a very different life is on in a very different environment: restaurants, swimming pools, underground car parks, playing grounds, and winter gardens in the glass-roofed attics. Such deluxe apartments usually belong to big business tycoons or high-placed officials.

In the meantime, millions of Muscovites live in tiny apartments inside five-storey prefabricated blocks of flats put up back in the Krushchev era - the late 1950s and early 1960s - with long expired lifecycles. Khruschev was ousted fifty years ago, but the tenants have kept paying taxes on the same terms with the owners of VIP properties.

Russians often say the lax enforcement often compensates for the strictness of Russian laws. Pretty soon many Muscovites will see their more well-off neighbours hurry to re-register 200-metre apartments in elite residential areas in the centre of Moscow in the names of old-age retirees or acquaintances in art professions and holders of all sorts of honorary titles and government awards,” people in the know have been joking.

Political scientists have their own vision of the affair. As follows from their explanations to the press, the new law on the real estate owned by individuals in Russian provinces will take effect only in 2019. In other words, after another presidential election in Russia, due in 2018. Although the authorities are concerned about raising money for the national budget, they are cautious enough to avoid angering the electorate in subsidies-dependent regions. Moscow is Russia’s wealthiest territory and the living standards there are higher than elsewhere in Russia. Naturally, it was selected for testing the collection of taxes the new way.


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