Immovable property tax is one of the national taxes the administration of which is subjected to continuous changes. Frequent amendments to the law “On Immovable Property Tax” (1997) also evidence the mentioned changes. The procedure for tax calculation, tax base, and tax rates has been considerably changed in the course of time. The research provides a discussion on the changes in tax formation, development, and administration in Latvia to understand better the essence of immovable property tax. The research aim was to analyse the development of immovable property tax and the course of reforms for the period of 1998-2012. The research also studies the expected changes in the application of immovable property tax from the year 2013. It is envisaged to transfer the rights to local governments to determine the immovable property tax rates in their administrative territories within the range of 0.2-3% from 2013. The research concludes that frequent reforms of immovable property tax have promoted the development of a new, stable, and predictable methodology for the future application of immovable property tax in Latvia. The analysis of revenues from immovable property tax for the period of 2006-2011 is based on the annually growing significance of immovable property tax. The research suggests that immovable property tax is the only tax the revenues of which have increased within the period of 2009-2011 and the largest revenues from immovable property tax are collected in Riga City municipality comprising 53% of the total revenues from immovable property tax collected in Latvia.

The research aim is to analyse the peculiarities for application of immovable property tax in Latvia and to assess the main factors affecting the amount of immovable property tax and contradicting the basic principles for imposing taxes. It is essential to review the methods how the State Land Service determines cadastral values for real estate, since the cadastral value is the base for calculation of immovable property tax. The revision is required as the establishment of a fair tax system is impossible without adequate and comparable cadastral values. In the future, land shall be valued pursuant to lease and not to expropriation transactions in Latvia, while the cadastral valuation of buildings might be done consistent with the method of expenses by determining construction expenses of buildings. The issue on mass inspection of physical condition of buildings and data updating shall be solved in Latvia. In addition, an issue on possibilities to apply the most fair procedure for tax calculation shall be solved on the governmental level, i.e. to calculate taxes consistent with procedure for the use of immovable property registered in the Land Register as well as to cancel the limitation for increase of immovable property tax stated by the municipality and to regulate the tax burden through tax rates.