While the property tax may be new to Irish home owners, it is the norm in much of the rest of the world. We look at how much other countries pay and who is liable for it
WHILE WE KNOW we will have to pay property taxes within 12 months, the powers that be have yet to tell us how much that is likely to be or how it is going to be levied. Speaking last week, Minister for Finance Michael Noonan insisted the system had not been finalised and the Cabinet will today give the matter some thought when it meets for the first time after its long summer holiday.
The Government has told the Troika the tax will be based on a property’s valuation but the rate of the tax has yet to be decided. We do know the Revenue Commissioners will be responsible for collecting it, so the Government can avoid the civil disobedience that manifested itself when the household charge was introduce.
While the property tax may be new to Irish homeowners, and about as welcome as a cold sore, it is the norm in much of the rest of the world although nowhere, it appears, is the process simple. Or popular.
France
France funds local services through a set of property-linked taxes and charges that apply across the country. The most significant are the taxe foncière, a property tax for which the owner is liable, and the taxe d’habitation, a residence tax paid by the occupant of the house or apartment (an owner-occupier must pay both).
Both of these taxes are levied by the state but channeled to local authorities, which have the power to set the rates (up to a limit laid down in law). The amounts vary considerably, as they depend both on the rate chosen by the city or region and the notional rental value of a property. For example, a two-child household with an average income paid €444 in taxe d’habitation in Paris in 2010 compared with €1,162 in the heavily indebted city of Marseille. Various reductions or exemptions are provided for the elderly, students, people with certain disabilities and those on low incomes.
In addition to the two main household taxes, there are smaller levies and charges that local authorities can use to generate income for specific services. These include a rubbish collection tax (calculated from the notional rental value of your home) and a street cleaning tax (based mainly on the type of street). Households also pay for the water they use. Rates vary from region to region, but are calculated via water meters in houses and apartment buildings. That system is usually managed by private companies, and their involvement in local water provision has occasionally been a source of controversy. RUADHÁN Mac CORMAIC
Italy
Italians have to pay property tax levied by local councils. They are based on the property’s theoretical rental value according to the local land registry and vary from region to region. The municipal property tax is called the Imposta Comunale surgli Immobili (ICI), and is paid by anyone who owns property or land in Italy, whether they live there or not. The amount is based on the rendita catastrale (official value of the property). This used to be nominal but has risen significantly in recent years as the government puts pressure on local councils to maximise revenue.
The tax is charged at anywhere between 0.4 per cent and 0.7 per cent of the official value of the property with the actual level being determined based on the property’s size, location and condition. The tax is paid in two instalments, with 90 per cent falling due in June and a further 10 per cent due in December. If either deadline is missed a fine of 200 per cent of the total tax can be imposed. In some, but not all, parts of Italy, further taxes are imposed connected to refuse collection, water and other services. Local councils can also charge for the use of a vehicle in their area.
China
The property tax issue in China has been fermenting for a decade but it looks like it’s coming and it is being tested in a couple of provinces and cities ahead of a nationwide introduction, probably in March next year.
The government has allowed Shanghai and Chongqing to roll out trials for property taxes, which are collected on newly-purchased properties and high-end villas. It is also being tested in Hubei and Hunan provinces.
The tax is being introduced to try and cool the property market. The move has taken on new urgency after data from the National Bureau of Statistics showed that the number of cities where prices of newly-built property have seen monthly increases jumped to 50 in July out of 70 cities. The figure marks a twofold increase from June, and the prices of second-hand homes have been rising at an even faster rate than new ones.
The nationwide property tax is supposed to replace a raft of restrictions aimed at stopping speculative house purchases, which are driving property prices higher and making housing difficult to afford.
As it stands, about a third of the purchase price of a home goes to the government as land cost, with a one-off transaction tax and an annual bill for property maintenance.
Chongqing and Shanghai set low rates of between 0.4 per cent to 1.2 per cent of a home's price and exempted the majority of local home owners, as they tried to limit the burden, but that has raised very little revenue and prompted questions about how effective the measure is. CLIFFORD COONAN
Belgium
Property in Belgium is listed in a government-compiled register with each assigned a notional annual rental income value based on its location, size, type and condition. The tax is then calculated as a percentage of this notional value. The amount due varies from region to region but the owner of a four-bedroom house in good condition near Brussels could expect to have little change out of €2,000 a year.
England
Council Tax was introduced in 1993 to replace the wildly unpopular Poll Tax and has been used ever since to fund local services. Alarmingly, the average tax on property in England last year was just under £1,200. The tax is paid by the dweller rather than the owner. Properties are split into eight bands on the basis of their assumed value in 1991. The lowest band covers properties valued at no more than £40,000 and the tax hovers around £850 a year, while the highest band is set at over £320,001 and attracts a tax of just under £2,550. According to newspaper reports yesterday, the Lib Dems, as junior coalition partners are going to push to have a additional property tax which would see British people pay an annual charge of up to 1.5 per cent of a property’s value.
Germany
Property is subject to a local tax known as the Grundsteuer and, like the UK, it is typically paid by the person living in the property as opposed to the owner. The base is the “assessed value” (Einheitswerf), which is generally about 10 per cent to 20 per cent of a property’s value.
A basic tax rate of 0.35 per cent applies but it increases depending on the location of the property and the level of taxation required by a municipality. A small-apartment owner in a big city can expect to pay between €150 and €300 a year, with charges rising significantly for larger properties. Apartment owners also pay into a maintenance reserve fund, while refuse collection, water charges and maintenance of heating and electrical systems in communities bring additional costs.
