Politics

• Nasty Nettle of Property Tax

  June 24, 2009 @ 3:20 pm | by Deaglán

  The political scene is overcome with ennui and sluggishness. The warm weather contributes to a mood where everybody wants to be somewhere else, preferably on a beach with a long, cool drink in hand.

  

  Wolfe Tone: admirer of the ‘men of no property’

  (Photograph by Cyril Byrne)

  Yet the summer will not be as quiescent as normal. We await the report from “An Bord Snip Nua” which is due anytime in the coming weeks. Then there is the report of the Commission on Taxation which I gather may be coming some time in July.

  As I write, I can hear Environment Minister John Gormley on the Dail TV monitor extolling the merits of his new €200 a year tax on second homes. This is the first such measure since the abolition of domestic rates, way back in the mid-70s.

  That was a huge issue at the time and one of the platforms on which the Fine Gael-Labour coalition came to power in 1973. Irish people are very possessive and touchy about their property. If you saw the RTE documentary on Cromwell’s land confiscations last Monday night, it helps to explain why (very good programme, though I couldn’t understand why the - otherwise excellent - actor playing Cromwell spoke with an Irish accent.)

  Just beforehand, Green Party Communications Minister Eamon Ryan was on Questions and Answers (the second-last show and then we get our Monday nights back) expressing a preference for a Site Value Tax. Dublin South is going to be tough enough for the Greens in the next election without the albatross of a property tax around their necks!

  The big quibble about property tax in the past was “ability to pay”. On the other hand, nobody asks you if you have sufficient funds to pay your motor tax. You just pay it, or you’re in trouble. Likewise with PAYE.

  Wolfe Tone may have sought to base his movement on the “men of no property” but there are a helluva lot of property-owners in this country - and they nearly all vote. The best chance of getting a property tax on the statute book is (a) to make it very small initially, with the option to increase in in due course and (b) to get cross-party support. The latter does not seem likely.
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13 Comments »
1.
June 24, 2009
3:33 pm
I find it odd that when the issue of elderly people in houses with small incomes is raised as an objection to what is after all an asset tax that no one appears to suggest simply rolling the tax up into the inheritance tax. That would save the elderly person having to fork over loads of cash while they are living but wouldn’t allow people with very substantial assets from making the same contribution as everyone else.
As for the notion that it’s double taxation (strictly speaking it’s triple not double as we pay tax on income and also on spending as it is), I’m not sure there are PAYE workers making up that great a proportion of those in multi-million euro houses. We think nothing of collecting tax from people off the interest of their savings that are resting in bank accounts or even from dividends from their investments but baulk when it comes to houses.
I wonder if we should look at whatever tax measure that comes in being related to how much of the capital of your house you own as opposed to the value of it i.e. if you have only paid off 90% of the mortgage you pay less than someone who owns the property outright. That might ease the burden on younger people who are the ones most hurt by negative equity while drawing most from those who benefited most from the capital appreciation of the last 15 years.
Comment by Dan Sullivan
2.
June 24, 2009
4:21 pm
How will this be collected? I paid property tax when I bought my house, so why should I pay it again?
Can we have “taxation without representation” seeing as the Government, from all recent opinion polls and the local, EU and by-elections, do not represent the people? If everyone refuses to pay, what can they do?
Comment by citizen girl
3.
June 24, 2009
4:35 pm
You would think from a green perspective that a sq foot tax would be more in keeping? A three-bed in South Dublin cannot be compared to those “classy” oversized McMansions one can see around the country.
The moral issue as I see it is that site value only became overvauled due to poor planning and governance. Now they have the cheek to use it as a stick to beat us with.
I’ll be left in the position of praying that property prices continue to fall. What’s the chances of getting the valuation indexed down on a yearly basis. lol
yours , very nervous in D4
Comment by Liam
4.
June 24, 2009
5:16 pm
Dan, did you mean to write “prevent” instead of “allow” in the following sentence:
That would save the elderly person having to fork over loads of cash while they are living but wouldn’t allow people with very substantial assets from making the same contribution as everyone else.
Comment by Deaglán
5.
June 24, 2009
5:58 pm
Yep that should really be prevent. I had it in my head when starting the sentence to say “but wouldn’t allow people with very substantial assets to avoid making the same contribution as everyone else.” but then dropped the “to avoid” once I got to it and then didn’t go back and reverse the direction of the earlier part of the sentence.
Comment by Dan Sullivan
6.
June 24, 2009
9:20 pm
The Minister said today: ” It is the first locally-based revenue stream to be made available to local authorities since the abolition of domestic rates over 30 years ago”. Deaglán repeats that assertion above. But of course that is not correct. Bin charges are locally based revenue streams and were originally brought in as flat charges that attached to the property of the resident as a charge. That was why the arrears in bin charges had to be cleared by householders when they went to sell their house. This new charge on second residences is not strictly a property tax either, it is a charge that is not determined by the value of the property or the transaction that takes place. Taxes by definition are based on value, income or the price. Can’t help feeling though that this charge is being talked of as a tax (although the Minister today in the Dáil referred to charge) to soften up people for a property tax down the line. Hence the Irish Times Breaking News Heading about the €200 property tax.
Joanna
Comment by Joanna Tuffy
7.
June 24, 2009
11:21 pm
I just cannot deal with this at all! During the boom there were no property taxes. Instead the Government, to add fuel to an out-of-control property market, gave a myriad tax incentives to entice people to invest in second homes and investment properties. We had banks literally throwing money at people. I recall my own mortgage-provider telling me time and again that I was ‘under-mortgaged’ and missing out on great opportunities! Now, when people cannot let or sell these goddamn properties and many more are struggling to repay the mortgages, our gombeen government throws in a property tax. What are they trying to do? Push people completely over the edge? John Gormley used to refer to ‘Planet Bertie’: what planet is this idiot living on? Do people become disconnected from reality upon entering Cabinet or the Dáil? Arguably this same Minister destroyed the Irish car industry by introducing a new Vehicle Registration Tax and motor taxation system, which basically wrecked the residuals on pre-2008 cars. What’s next?
Comment by Peter B
8.
June 25, 2009
9:29 am
The real issue here is to do with tax. Going back to the very origin of the word - it is an imposition on a factor of production with a specific purpose. In Ireland, we have followed a very imperialist model for income tax, based on the UK and have resisted ringfencing tax raised for a specific purpose.
For instance, almost 40% of taxes in 2008 came from relevant contracts tax. Stamp duty never exceeded income tax and the contraction in stamp & income taxes/duties has been overstated. It is relevant contract tax which has really hurt along with the decline in VAT.
My main issue goes to heart of the Adam Smith canons of taxation (equity, economy, convenience etc.). If there is a tax on property ostensibly to fund reparations on the creaking water and drainage systems like that my Great Grandfather put in at Vartry in 1902 for North Dublin and have hardly been touched since then, why should renters go free? Such a tax fails immediately on grounds of equity. In cities like Paris and Rheims where I have lived (and which raise such levies locally themselves) all households pay a charge for water (m3) and waste collection services etc. Landlords are responsible for building the fee into the rent and then paying this fee to the local authority on their tenants’ behalf.
Similarly, while motor tax is equitable in that it only applies to those using the roads it also fails on the grounds cause - it does not go to fund the traffic corps and road maintenance.
The reason why we have a bloated public sector is because of the model of taxation that we have. There needs to be far closer alignment between the reason why the public is being provided with a central service and the taxes that are being raised to provide that service.
The public sector should be incentivised to come within budget without having the budget cut so that the money can be used elsewhere where budgets are under pressure. Inflation does not apply evenly across 14 ministries.
It will only be when we re-write the manual for our tax code that we can adequately address the vastly under-serviced front-line service providers by ensuring they receive more efficient back-up from the resources raised to support their particular service offering.
Comment by robespierre
9.
June 25, 2009
2:01 pm
We could also look at a proper concept of being resident in Ireland along with reviewing what obligations we make on people who are citizens irrespective of where they live.
I’m pretty sure the Japanese have a residency tax which is collected locally. In effect it would be a poll tax-like instrument. Also, charges for specific services especially if directly-related to your usage of same makes a lot of logical sense. But since when has logic had anything to do with how we raise revenue?
Comment by Dan Sullivan
10.
June 26, 2009
5:30 pm
Please feel free to correct me on this but, following the 2002 budget in particular wasn’t the government consistently accused of introducing ’stealth taxes’ to cover the cuts in income tax?
So, I’m wondering if ‘broadening the tax base’ is now a new way of approving of the stealth taxes we disapproved of.
Anyway is there anyone out there proposing a ‘flat tax’? Has anyone calculated where we would be if we simply imposed the same tax rate on all income / profit / capital gains / inheritance, with no tax avoidance loopholes, no tax deductible spending, no sales taxes and so on.
You start with a single person’s tax-free allowance, increase it fairly generously based only on the number of dependants you have then swipe the same proportion of what’s left regardless of who you are or how you come by your income.
Comment by dealga
11.
June 27, 2009
11:53 am
I think there was a flat tax in one of the Baltic States. Latvia, if I’m not mistaken but that would not be a very encouraging case-study at present. It looks as if the Government here is reaching tax-overload and will now be looking more to spending cuts. But the level of protest over every cut makes it very difficult politically. Interesting to hear Brian Cowen on RTE Radio’s News at One yesterday, taking a proactive approach to the debate. If this is part of a continuous process of engagement, it could change things but if it’s just another one of his occasional forays, like the famous speech at the Four Seasons some months back, then it will run into the sand.
Comment by Deaglán
12.
July 14, 2009
10:23 am
This is nonsensical since the tax is €200 regardless of whether you own a pitiful studio apartment in a dingy rural town or a spectacular monstrosity blighting the scenery of a beautiful part of the countryside. Surely it would have made sense to at least base the tax on the since or value of the property, as is the case with PAYE or road tax? Similarly, a flat rate tax applied PER UNIT on landlords will simply be passed straight on to tenants, many of whom are already feeling the pinch of a 75 euro “fee” for registering with PRTB (as if somehow, it was “optional” for landlords to pay this). Its also regardless of whether or not you are profiting from it (i.e. renting it to holiday makers or tenants) or simply using for your own pleasure. A very regressive tax that is likely to stir up much trouble in future.
Comment by Laura
13.
August 1, 2009
3:05 am
I have a good income, my husband has less. He also will have little or no pension as he is working part-time for low wages. My parents left me a small amount of money - we cleared bills, and used the remainder as a deposit for a second property. The remainder of the property cost is being met by a mortgage. The mortgage takes half my PREVIOUS income. With levies etc it now takes 83% and they want to tax me ANOTHER 200 euro - I think NOT
Comment by Colette

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