Is the grass really as green as we’d like to think of in the Circular Economy? From the government’s perspective our current Real Estate is a great cash cow. What if commodity banks would take over the ownership of buildings and make them available to us for use?
The income from property transfer tax has therefore come to a halt since property sales virtually no longer exist, other than the exchange of Ltd.’s holding real estate between commodity banks. Such a value is then multiplied by a tax rate like property taxes by the municipality. But what is the real property value of a building without having recent transaction prices? Or is the building now divided along 40 manufacturers of construction products, each with a piece of property on which the government is going to collect taxes separately? Also the inheritance tax on buildings is based on a percentage of the property tax, as well as a range of other taxes and deductions such as income tax.
From the present milking cow to the new milking cow
In this way real estate will suddenly no longer be the governments cash cow for public finances! Why would a parliament or council accept that if the gap is no longer closed with income or capital gains? So the grass seems pretty green and juicy beyond the fence of the Circular Economy, but how do we get to the decision-making on redesigning laws and regulations and minimization of the risks of the transition?
As an example of the ultimate Circular Economy we know the version of a product as services to the consumer. So had we not already in the Mesopotamian period, finished with the introduction of the new economy? Or have we?
Alongside tax on labor and natural resources, property tax is one of the government’s three core general revenues. In addition, a series of charges in the form of duties, tariffs and fees exist, all with a limitation to the budgeted costs. And that has been true since the beginning of governments, because the person who has an income and the person who wants a license and acts on it, can pay. And whether those who pay also determine what happens in that government, depends on the social organization and the ruling vision. In the Netherlands a lot of income on buildings – real estate – is the source of municipal taxation and with that an important part of the municipal budget of which each municipality collects one fifth directly. But more importantly, it is this 20% that constitutes all the policy freedom a council has!
Ownership of materials with private banks, the government or is there an alternative road?
In ‘the circular economy world’ you frequently hear “ownership is stupid, use is smart” and more comments about the disadvantages of ownership. At the same time I see new organizations that take ownership of natural and technical resources as the basis of their business model as commodity banks; so is ownership the heart of smart? And what makes my confusion even more complete is that from the government point of view, ownership of buildings and transactions in ownership are the basis for a whole series of tax revenues, both in governmental and municipal treasury. At the same time the statutory definition of ownership is restricted to registered property, particularly in buildings. As it is contained in the Civil Code (CC) and recorded by the notary at the Land Registry. How can all this simultaneously come to pass? And how are politicians going to, or rather, going to be able to make decisions, I truly wonder?
The first counter-question that every politician with apolitical resolution – proposal for a new policy – will have to face is: “Where does the budget you need for your proposal come from?” This as a basis for sustainable management of the – by definition – limited amount of money every section of our government has available. Not being able to answer that question will mean the end of your proposal, and – if you do that regularly – the end of your credibility. So we will have to answer this question by a change in our social rules; make them more solid, like buildings. How do we get – be it in small steps or just in one big leap – to that circular building in the new economy where we can gain so much from sustainable material management?
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