Household tax debate fails to see democratic appeal

Thu, Apr 5, 2012, 01:00

OPINION:FROM THE perspective of individuals who are broadly concerned with good governance and social justice, the best that can be said about the debate on the household charge is that it has been especially unsubtle, misleading and damaging to Irish democracy.

The attitude of the Government side, or rather Fine Gael’s attitude, is reflected in arrogant and bullying statements by Phil Hogan, Alan Shatter and others.

The relative silence of a supine Labour Party has been equally revealing. It cannot admit there is anything wrong with the current proposals even though they are evidently dishonest, unworkable and have little to do with social solidarity.

The net result has been a fiasco for the Government. Worse, it has called into question whether a system of local taxes based on principles of equity, solidarity and the provision of locally financed, locally managed services, based on local priorities and the will of local people, can ever be implemented in Ireland even though it is the norm in other democratic western democracies.

At the same time the left-wing opponents of the measure have not, perhaps, made it sufficiently clear that they do not share the same ideological position as those essentially reactionary elements opposed to any property tax at all.

To quote a certain Enda Kenny TD, “it is morally unjust and unfair to tax a person’s home, and by so doing grind him into the ground. Indeed, in cases it could probably be unconstitutional.”

Of course, that was back in 1994, but it was nonsense then and remains nonsense now.

Ruth Coppinger’s article in yesterday’s Irish Times is powerfully argued and makes many valid points. At its core, however, is a denial of the very principle of progressive local taxation. We are told that a so-called property tax (not simply the inequitable €100 charge under discussion this time) would simply “be a home tax hitting low and middle incomes”. Presumably, therefore, she does not favour a tax based on people’s homes or properties in any circumstances and as a matter of principle.

I would argue that a more nuanced approach would embed a critique of the present disastrous measures in a broader debate about the need for proper local taxes. Moreover, it would draw on examples like France, Spain and Germany – in fact, almost any developed country with proper local services – to argue in favour of such a system. The Government has largely failed, for instance, to explain what local authorities actually do, what services they provide or how they need to be financed.

Behind all of this, of course, must be the well-founded suspicion that this is not about local democracy and local services at all.

Rather, the Government is trying to transfer some of the costs of service provision to a system based on local taxes, but without a commensurate decrease in tax collected centrally.

People believe, with reason, that any savings thus generated at central government level will be used to pay off bondholders and to meet debt-servicing and other central government costs, and that the inevitable result will be a substantial and growing increase in the overall burden of individual taxation.

This is without even taking into account the desperate situation of those who paid tens of thousands in stamp duty on boom prices which will never again be seen in their lifetime, people who will never be able to sell their houses and people who are struggling to pay huge mortgages. To cap it all, people reasonably believe that this taxation measure will do nothing to guarantee good or accountable local services.

Writing in the New Left Review, Prof Wolfgang Streeck argues that “ . . . economic power seems today to have become political power, while citizens appear to be almost entirely stripped of their democratic defences and their capacity to impress upon the political economy interests and demands that are incommensurable with those of capital owners”.

This issue lies at the heart of the debates we are seeing in Ireland about the household charge but also, more generally, about our alleged collective political responsibility to discharge the debts of developer capitalists, backed by rogue banks and rogue political parties. The sense of anger expressed by so many, notably in the refusal to pay the household charge, is entirely understandable.

All taxes are unpopular, but some are fairer than others. In general, governments will aim for a mix of taxes – sales tax, income tax, corporate tax and property tax are obvious examples. But some of these are not progressive and may even be regressive – everyone has to buy goods and services for instance, so that the tax levied does not distinguish between rich and poor.

Corporate tax has been cut back so much in Ireland that a disproportionate burden falls on personal contributions. Income tax is capable of being progressive, but property tax is also progressive, if properly managed, and property can’t be spirited out of the country, as capital can, thus avoiding being taxed. Moreover, because it is fixed it can be the basis of providing the funding for local services in particular areas

The Government, if it is to avoid a running disaster on this issue, now needs to promote an open and honest public debate about local reform, including local taxation, in Ireland.

It needs to give people some sense of ownership in this debate – perhaps through the type of public forum used successfully on previous occasions – and needs to separate it from the broader issue of Ireland’s ongoing economic crisis.

It needs to be able to guarantee that local funding for local services will be ring-fenced and that there will be tangible benefits in terms of improvements in such services.

Finally, it needs to adopt appropriate measures to address those in financial difficulty, while insisting that local services need to be paid for, whether a homeowner is in negative equity or not.

Piaras Mac Éinrí lectures in the department of geography in University College Cork

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