Addition of 'mansion tax' will see reduced property tax
The new property tax to be announced in tomorrow’s budget will be reduced slightly as a result of the late addition of the so-called mansion tax for properties worth over €1 million.
Government sources yesterday confirmed that the levying of a higher tax rate on high-value properties will have a knock-on effect for middle and lower income households but conceded it would be marginal. The rate to be unveiled by Minister for Finance Michael Noonan tomorrow is expected to be 0.18 per cent of the value of the property, with a rate of 0.25 per cent for properties worth over €1 million.
The new rate would mean a tax bill of €450 per annum for a house worth €250,000 as opposed to €500 if the rate were 0.2 per cent.
The new tax will yield some €250 million for the exchequer in 2013 after it is introduced in July, and €500 million in a full year.
Some Fine Gael Dublin backbench TDs said homeowners in the capital would be more adversely affected by the tax. Mary Mitchell O’Connor from Dun Laoghaire and Olivia Mitchell from Dublin South said they had a huge number of representations from homeowners who had ordinary properties, were in negative equity, but would still face steep property taxes.
Ms Mitchell O’Connor said the way the tax was being designed was unfair and “outrageous” and she would continue to lobby Mr Noonan.
While most of the €3.5 billion in adjustments were signed off by Cabinet after a fraught meeting on Saturday, negotiations involving the two biggest spending departments, Health and Social Protection, were continuing last night, as Minister for Public Expenditure Brendan Howlin attempted to finalise the adjustments .
Government sources confirmed the targeted cuts for both departments had been reduced by €150 million each. The target for cuts in Social Protection has been reduced from €540 to €390 million, while the overall adjustment in Health will be €780 million, down from €920 million. Mr Howlin and Mr Noonan have found savings elsewhere and the more modest targets will allow both Ministers, Joan Burton and James Reilly, to row back from making the most severe cuts.
Mr Noonan dismissed reports of acute strain between the Coalition parties over tomorrow’s budget, saying most of the plan had been agreed for weeks.
“I don’t know who is writing those headlines but it’s just not true. Relationships are very good,” Mr Noonan told reporters in Brussels.
“The debate on Saturday was about the last €100 million or so out of an adjustment of €3.5 billion and there are different takes on it, different opinions and different political assessments on what should be in a tax package or what should be in an expenditure control package.
“But it’s around the margins, the main thrust of the budget has been agreed for some weeks.”
Backbench TDs from both Coalition parties voiced discontent about various aspects of the budget. A number of Labour TDs expressed disappointment that there would be no increase in the universal social charge for those earning over €100,000.