Why is my neighbour's bill different for a similar house?

Under an area-based system, usually a difference in classified floor area or in how part of the building is used. Under a value-based one, usually a stale or differing assessment, or a relief one of you claims and the other does not.

Does improving the property raise the tax?

Under an area-based system only if you add floor area — a new kitchen changes nothing, an extension does. Under a value-based system any improvement can raise the assessment at the next revaluation, which is why some jurisdictions see visible under-investment in property upkeep.

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Two ways countries tax property, and why the bills differ so much

Property tax works one of two ways: a percentage of the property's value, or a fixed rate per square metre. Which model applies decides whether your bill is a few hundred a year or several thousand, and the difference between them is far larger than most people expect.

How it works

Applies an area-based rate to the floor area of buildings and the area of land, each at its own rate.
Or applies an ad valorem rate to an assessed value, which may be lower than the market price.
Separates residential from business use, because the rate difference between them is enormous.

area-based:  tax = Σ (area × rate for that use)

ad valorem:  tax = assessed value × rate
             assessed value = market value × assessment ratio

Polish statutory maxima (residential): 1.15 per m² of building,
0.71 per m² of other land, 33.10 per m² used for business

Worked example

A 140 m² house on 600 m² of land, worth 1,200,000 — taxed first under an area-based system, then under a 1.2% ad valorem system with an 80% assessment ratio.

area-based building: 140 × 1.15 = 161.00
area-based land: 600 × 0.71 = 426.00
area-based total = 587.00 a year
ad valorem: 1,200,000 × 0.80 × 1.2% = 11,520 a year
the same property, taxed 20 times more heavily

587 under an area-based system against 11,520 under a value-based one. Neither is wrong — they are simply different policies, and it explains why property tax barely features in some countries' household budgets and dominates others.

Reading the result

Under an area-based system, the use of the building matters far more than its value. The same 140 m² taxed as business premises at 33.10 per m² costs 4,634 a year — twenty-nine times the residential rate. Running a business from home can change the classification of the space it occupies.
Municipalities set the actual rate within a statutory maximum, so two neighbouring towns can charge different amounts for identical properties. The figures above are the ceilings, not what everyone pays.
Under an ad valorem system, the assessment ratio matters as much as the headline rate. A 1.2% rate on 80% of value is an effective 0.96% of market value, and assessments often lag the market by years.
Reliefs and exemptions are where the real variation sits: primary-residence discounts, agricultural land, historic buildings, pensioner reductions. Check what applies before assuming the standard calculation is your bill.

Common questions

Why is my neighbour's bill different for a similar house?: Under an area-based system, usually a difference in classified floor area or in how part of the building is used. Under a value-based one, usually a stale or differing assessment, or a relief one of you claims and the other does not.
Does improving the property raise the tax?: Under an area-based system only if you add floor area — a new kitchen changes nothing, an extension does. Under a value-based system any improvement can raise the assessment at the next revaluation, which is why some jurisdictions see visible under-investment in property upkeep.