The goal of WP 2 Econometric valuation models is to develop the statistical models which the tax administrations can use to periodically re-estimate the new tax base which we will propose as a result of WP 1.
A large literature concerning hedonic pricing models already exists. The goal of the RETAX project is to advance these models even further. However, we plan to build flexible models which will be able to estimate different variations of the desired tax base. This means that at the end of the project, we will be able to evaluate different scenarios.
Work packages 1 and 2 are strongly related. The research concerning the design will directly affect the development in WP 2 because, in the end, we need the right models to estimate the new base. However, the opposite is also true. During the conceptualization of the new design we need to know what is practically possible. We cannot only look at optimal theories and policy objectives when creating a new design. There are also practical issues with which the new property tax will need to comply. In order to prevent the same inertia as we have witnessed the last four decades, government agencies should be able to re-evaluate the tax base in a cost-effective manner. This means that we will have to take a pragmatic approach and make sure that all required data are currently available or will be available in the future. This requires a constant interaction between the researchers from both work packages and a flexible attitude during the project. One goal is to develop econometric models which are able to estimate the potential rental value of properties under their highest potential use. However, if the research in WP 1 indicates that certain elements of the structure (building) should be included in the tax base to render the desirable distributional effects, the methodology in WP 2 should allow for these changes in a flexible way.