Property tax to cost 0.25 per cent of house value

 

THE PROPERTY tax will be pitched at 0.25 per cent of current house value, a Government source has predicted.

The source said the new tax to replace the €100 household charge “would not be a million miles away” from the example cited in an ESRI report focusing on a tax rate in the region of €2.50 to €3 per €1,000 of house value.

A rate in this region is geared to bring in revenue of about €500 million per year. The report published in April also recommended exemptions for the low-paid.

Minister of State for European Affairs Lucinda Creighton told The Irish Times last week there should be no automatic exemptions from property and water taxes for pensioners or social welfare recipients, although ability to pay should be taken into consideration.

The ESRI report explored various options, rather than providing a definite recommendation of a particular blueprint, although it noted that site market values are rarely used in developed countries. It noted differences between the average prices of houses in Dublin and the rest of the country mean that if a single tax rate was used nationally, the burden on Dublin homeowners would be “disproportionate”.

It also recommended the new property tax take account of mortgage interest payments or mortgage debt outstanding in a move which could go some way towards dealing with issues such as mortgage distress and negative equity.

The International Monetary Fund is today expected to warn the Coalition about potential delays in the introduction of the new tax, although the source said the report had a long-term focus and “doesn’t have immediate considerations for the budget”.

A spokesman for the Department of Finance described the IMF document as “entirely separate from the EU-IMF programme”. It was a consultation carried out with all countries which are members of the fund and focused on medium to long-term policy issues, he added.

Ireland’s social welfare payments will also come under scrutiny in the IMF document. The European Commission recently said more needed to be done to alleviate and eliminate problems caused by some features of the social welfare system. The commission highlighted “the broadly flat and open-ended unemployment benefits that do not diminish with the duration” of unemployment.

Meanwhile, motorists are set to face increased charges as a consequence of the “restructuring” of motor tax promised to the IMF and European Union. The upcoming budgetary measure was revealed in the Government’s latest submission to the troika authorities.

Increases in vehicle registration tax and road tax are expected to take effect from early next year, with changes to bands based on carbon emissions which determine motor tax bills. A key change will see band A split into four categories with different rates applied.

Minister for Transport Leo Varadkar is known to want to ring-fence any increase for road maintenance as local authorities struggle with cuts.

Fuel costs are also on the rise.

In last year’s budget, Minister for the Environment Phil Hogan made provision for an increase in motor tax effective from January 1st this year. This measure aimed to generate additional income of some €47 million in 2012 to be used for exchequer deficit reduction purposes.