Per aspera of cadaster: why the new system of estate valuation may not work

05.05.2016

The more demands are made to the new methods of cadastral valuation, the greater the risk of getting an unexplainable result.

The Government threatens to carry another reform of cadastral valuation. Private evaluators are kept away from this process, as the new methods are supposed to eliminate all the problems with unfair taxation. But the low quality of cadaster data, dependence on budget pumping up requirements, falling out of a considerable amount estate facilities from the taxation turnover make us doubt about the suggested measures validity. Business people and the citizens are getting ready to another experiment with fear.

Cadastral valuation is questioned almost by everybody. This has become a trend. Media provides a variety of opinions ranging from that of the President to that of a housewife. The President, based on multiple complaints of citizen and business people agreed to the Government's suggestion of introducing fundamental changes into the cadastral value estimation. But the suggested by the Government approach will not solve the key problems, one of which being the low quality of information.

To see into the matter, one has to take an unbiased look at what is going on in the cadastral valuation, that "black box", where the legally acquired property is put and unclear tax liabilities are taken out.

First, let us refer to the legally acquired property. State Real Estate Cadastre provides the information about estate property, this information is public, available on Federal Service for State Registration, Cadastral Records and Cartography website. Throughout Russia there are 68 mln land plots registered, only 36 mln of those include data, regarding the borders. In other words, the state is not aware of a half of those borders. And nobody is aware except for the owners, who out of habit use their lands, where they are used to do that every year. The location is the main factor, altering the cost of estate property.

If the borders of your neighbor are not defined and yours are, the cost of both land plots shall differ fundamentally.

The cost is determined by the state order as well as the road construction, nutrition of children at schools, spacecraft assembly or procurement of cars for government officials. Obviously, not everyone is given access to a spacecraft production. Even the terms of spaceport construction may be shifted to ensure the quality. The situation with cadastral valuation is diametrically opposite. The winner here is the one, who faster and cheaper evaluated a million facilities. The faster - the better.

The majority of cadastral valuation in 2015 was carried out within averagely four months. Such period of time is inexcusably small, it cannot provide an honest and quality cost evaluation of an entire region's land facilities. And improper planning of activities by regional authorities leads to the same results as asphalt laying in December by independent asphalt placers.

If you apply for a cadastral valuation in public interest once in a five-years time, there is no need to hurry. The evaluator should be able to meet all the requirements of guidance documents, undisturbedly analyze and, what is the most important, comprehend the region's estate market, publicly disclose all the preliminary results of cost evaluation and consider all the suggestions on its correction.

So where are those greatly desired by everyone uniform policy of cadastral valuation? It does exist, but it is only known to those, who are supposed to use it, and have time to strictly observe it. However, the policy is almost 10 years old. It has gone out-of-date in some aspects and has several versions for various categories of land.

To believe that the new methods will solve all the problems is to live in a never-never land. Moreover, there are concerns that the more demands are made by the methods, the greater the risk to get an unexplainable result after executing all of its formal requirements. The painting "Golden Fall" was painted without any methods, although the result is incontestable.

One more conceptual problem is in the fact that the client of the valuation and the utilizer of the result is one and the same person, interested in the increase of consolidated regional budget. So, basically, it does not matter what methods were applied by the evaluator, what expert finding were attached as the budget is a matter of the state concern. That is why, if the tax burden is reduced on electorate, it will have to be increased on business.

But let us go back to the "black box". It still conceals the powers of public authorities and local governments on establishing the rates of property taxes. As soon as those are applied to cadastral cost, the "box" provides us with those unclear volumes of charged tax. Why do those authorities contained within the "black box"? The mechanism of establishing the tax rate on the maximum possible level shall be maximum transparent. The Tax code demands all elements of tax to have economic justification.

Any increase of cadastral cost, even a verifiable one, may be leveled by reduction of a tax rate to maintain social stability, business continuity and maintaining the very ability of paying taxes. Glaring violation of taxpayers' rights for economically feasible tax rate still remains not noticed within the "black box".

In this respect surprises the desire of the government to bring an entire reform of cadastral valuation to structural reformatting of cost valuation without leaving all the system and core issues unnoticed.

So the task to increase the quality of Cadastral Register is not included into the Federal Target Program of "Development of Unified State System of Titles Registration and Cadastral Real Estate Registration (2014-2019)" with total budget for 6 years mades up 57 bln rubles. One of the expected outcomes after execution of Federal Target Program is "to increase to 54,9% the share of land plots, registered in the State Real Estate Cadaster, with borders, meeting the requirements of RF legislation by 2019 ". I.e. the blank spots amounting to a half of cadastral map of the country are considered to be be a successful application of allocated budget.

Renewed methods are adopted without clear understanding of their results and whether they are able to meet the society's requirements.

Instead of increasing the valuator's independence the opposite decision is being made: the valuator will be fully dependent on regional authorities, because state-financed entity is fully controlled by them. And the valuator is not the issue, if he is a professional, the trust to his work will appear in the society. However, it's not so easy to build a reliable house on a boggy soil without quality foundation. It does not matter, who builds the house, the people will still be scared to visit it. The same example may be applied to the cadastral valuation: without quality information in Cadastral Register the addition of state establishments, independent valuators or some other types of valuation establishments will remain only for reporting the successfully introduced reforms.

Right now we are forced into another experiment on cadastral valuation and we are not certain about its results. They say they do it for us and the cost will now be fair, but it looks like we are being demonstrated another dangling carrot for a deep trap.

Source: Forbes.ru.