PROPERTY TAX:PROPERTY tax is coming back, but not until 2012 when a flat tax of €100 per home will be imposed on an estimated 1.8 million householders, as well as on property developers sitting on undeveloped housing sites.
The tax is the first phase of a proposed site tax expected to net the Government €530 million over the next four years. The money will be ringfenced for local government to replace the millions lost in levies from property developers.
According to the national recovery plan, an interim site value tax will be introduced in 2012, and finalised in 2013 when a full value-based tax will be introduced. The interim measure will involve a fixed local service charge contribution of about €100 per annum. That charge will rise to an average of just over €200 per dwelling in 2013.
The tax will apply to 1.8 million households as well as to zoned lands comprising an additional 700,000 housing sites. The owners of many of these sites are bankrupt property developers who will be unable to pay the levies. The annualised tax is expected to raise €180 million in the first year, and an additional €175 million in each of the years 2013 and 2014.
It is not clear if the charge will replace the €200 levy that already applies to second homes. This levy raised about €65 million in 2009 with a final tally of takings not yet available for 2010.
Stamp duty remains unchanged in the recovery plan, a move that has surprised many in the property industry who expected to see it cut back substantially or even axed to encourage market recovery. As it is, purchasers other than first-time buyers are still paying up to 9 per cent on transactions of properties worth over €125,000. Stamp duty on residential property transactions has brought in about €80 million so far this year, down from a peak of €1.3 billion in 2006.
The €100 per property seems modest, but there is a general acceptance that the amount is likely to be jacked up once it has become established. “It is only a matter of time before residential property tax becomes a major pillar in our government’s revenue generation machine,” says financial adviser Frank Conway of the Irish Mortgage Corporation.
The Society of Chartered Surveyors (SCS) welcomed the introduction of a property tax but says the proposal lacks transparency. It is also concerned at the lack of action on stamp duty reform.
President of the SCS Peter Stapleton said that while a property tax had a key role to play in broadening and stabilising the tax base, to introduce it as a site value tax was contrary to the spirit of transparency in the market place.
“The Irish economy needs a stable commercial, industrial and residential property market, so we will be working with Government to implement measures to achieve that stability. Site value taxes are difficult for the general public to understand and contrary to the spirit of transparency in the market place,” he said.The Irish Auctioneers Valuers Institute also found fault with the proposed tax. “The basis of assessment is both unwieldy and unfair,” said vice-president Roland O’Connell.
