Usage of Automatic Valuation Models for taxation purposes: a case study in Greece

The usage of Automated Valuation Models for taxation purposes has been discussed extensively at the past. Here we work in detail such an approach for Greece. In Greece, taxation is based on a system of zones. Each property belongs to one and only zone, and then from an initial objective value per square meter and with the use of certain coefficients one adjusts and calculates the objective value for each property. This value is used further for taxation and other purposes. There is always a big question/debate whether such values represent the market values of the properties (or they approach them at least) leaving aside of course discussion about taxation policies of the government. Triggered by the recent update of the zone values, we attempt to compare those values with market values obtained, based on historical data, via our AVM. The scope is to examine the plausibility and realism for the existing system as well as to demonstrate potential improvement if somebody needs to keep using such an approach. Our results show that there is a huge number of zones with rather impossible low values, below the average cost of building a new property as well as problems in the coefficients used to adjust the characteristics of the property. In general the objective values underestimate the market values in a great extend. Further discussion and suggestions for improvements is made.