EUTaxObservatoryWorkingPaperNo.23 Allthatglitters? Goldenvisasand realestate March2024 JoãoPereiradosSantos KristinaStrohmaier

Using a difference-in-differences (DiD) approach, we estimate the impact of the golden visa program on the difference between the transaction price and the fiscal value of the property. [...] In his seminal work, Saez (2010) developed the bunching method in the context of the personal income tax to assess the welfare losses of taxation by estimating the elasticity of taxable income.8 Given the simplicity of the approach and its non-parametric nature, the approach has now widely been applied in many other fields, such as social security, insurance, education, and sports economics. [...] Figure 2 presents the main results of the bunching analysis for the total number of transactions (pre-reform in (a) and post-reform in (b)), the number of housing properties (in (c) and (d)), and the number of commercial buildings (in (e)) and (f)). [...] However, in the absence of the golden visa program at the €500,000 threshold, we would expect the (percentage) difference between the transaction price and the fiscal value to be smooth. [...] The GVP is the difference between the market and the fiscal value assessed by the Tax Authority.