Property tax to be abolished on January 1st 2008

The government has announced that property tax is to be abolished from January 1st 2008.

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The tax is to be replaced by a council charge of 4,500 kronor ($630) per home, or a maximum of one percent of the taxable value. The charge for apartment complexes will be a maximum of 900 kronor per apartment.

On Tuesday the four governing parties agreed on a framework for the abolition of property tax.

A government working group has been charged with analysing the results of the reform. If the proposal has undesired effects, the working group is free to test other alternatives. Any changes must however be financed from within the residential sector.

A working group led by Finance Minister Anders Borg spent the last few months looking at the consequences of removing the tax. The group consisted of civil servants from all four parties.

The Alliance announced its plan to freeze the tax at last summer's week-long political retreat at Almedalen.

"This could decide the election," a confident Christian Democrat leader Göran Hägglund said at the time as he announced that he had got the other Alliance parties to sign up to his party's model of abolishing the tax and replacing it with a low district fee.

In anticipation of the abolition of the tax, the government froze the taxation values of houses, reduced the tax on apartment blocks from 0.5 percent to 0.4 percent and set a ceiling of 5,000 kronor for the tax on the value of a house's plot. It also removed the standard taxation on housing associations.

The state treasury currently takes in 16 billion kronor annually through property tax on houses and apartment complexes. Tax on commercial buildings adds a further 9 billion kronor to the coffers.

Tuesday's agreement solely concerns residential property tax.