Commission proposes property tax

The report of the Commission on Taxation, which is to be finalised on Wednesday, will include proposals for a property tax, water…

The report of the Commission on Taxation, which is to be finalised on Wednesday, will include proposals for a property tax, water charges and a carbon tax.

It will also contain recommendations to keep income tax low and cut stamp duty on house purchases.

Work on the final draft of the report was continuing over the weekend but this was mainly focused on issues of tone and presentation rather than content, which is largely agreed.

It is understood that, if the property tax proposals are implemented, the average payment would be less than €1,000 per annum and could be in the region of €600 to €800.

The total amount of revenue to be raised from property tax is described as comparatively modest, at less than €1 billion per annum.

The commission is said to be concerned to avoid the mistakes made with the short-lived residential property tax of the 1990s, based on the owner's assessment of "the best price which the property would have been expected to obtain if sold on the open market".

Following sustained internal debate, the commission is to recommend basing tax-rates on different price-bands, for example, between €250,000 and €500,000, or between €500,000 and € 750,000.

"This is an attempt to come up with a reasonably pragmatic solution," sources told The Irish Times.

The important thing was to get the system into operation, they said. Refinements, including a more sophisticated valuation system, could be introduced in due course.

The householder would nominate the band to which his or her home belonged, although it is expected this would be subject to review by Revenue officials.

Commission members are aware that house prices are currently in flux and that owners are unsure of the value of their homes at present but it is hoped that the market will stabilise over a period of time.

The commission has also taken into account that, for example, retired persons on fixed incomes might be unable to pay the property tax, and account would be taken of special circumstances.

Whereas the initial tax-take would be expected to go towards reducing overall Government liabilities, the intention is that within "about five years", funds raised from property tax would in large part be allocated to the local authorities.

"This isn't going to be a massive revenue earner," sources said. "This is not going to be the solution to our public finance problems." The property tax would bring in "less than €1 billion per annum" .

In parallel with its property tax proposal, the commission will also recommend a sharp reduction in stamp duty on the purchase of houses.

A major theme in the report will be the need for a stable tax base which is not subject to the existing level of fluctuation. Stamp duty, for example, depends on the level of house sales.

Water charges are also proposed in the report, above a certain level of consumption, although the absence of a system of water meters poses a difficulty. Irish people use considerably more water than other European countries and a water charge would reduce waste.

The commission's brief includes the phasing-in of a carbon levy, which would mean modest increases in the price of petrol, coal and peat briquettes.

The 17-member commission is chaired by Frank Daly.