Fairness and property tax
A LACK of resolve by successive governments has bedevilled the introduction of a property tax and the establishment of a robust and broadly based system of taxation. Four years ago, a Commission on Taxation provided detailed advice on how such a system could operate in a fair and transparent manner, complete with exemptions and tax credits. Its advice was ignored. The present Government followed suit last year when it introduced a temporary, but unfair, household charge. Now, after further political dithering, the Cabinet is expected to agree on a “value-based” system.
Minister for Finance Michael Noonan was blunt in specifying the Government’s options in advance of the December budget: cut spending or increase taxes. As it happens, they will probably do both. But the severity of the financial cutbacks and reductions in service are likely to be modified by increases in taxation. Whatever the balance struck, families and individuals in financial difficulty can expect further distress as the gap between exchequer expenditure and income is being closed.
Fianna Fáil’s spokesman on finance Michael McGrath said the introduction of this tax would be “political dynamite”. He is probably right. Sinn Féin has already begun to criticise its impact on low-income earners while Joe Higgins and others on the left are likely to take up where they left off in their campaign against the household charge. The Government should follow the detailed advice of the Commission on Taxation on this occasion, now that they have granted responsibility for operating the system to the Revenue Commissioners.
The taxation report recommended establishing a valuation system involving eight broad property bands with an online database giving all local valuations; the provision of limited and full waivers for those on low incomes; a seven-year exemption for those who paid high stamp duty between 2000 and 2008 and a requirement that property tax returns should be made every three to five years, involving tax-clearance certificates. It also urged, as a priority, that a register be established with up-to-date valuations of all property and land in the State. As might be expected, successive governments ducked that one. They also appear to have forgotten the commission’s proposal for a windfall tax on land sold for housing and on land zoned for development.
Emotion, rather than rational calculation, tends to drive public opinion on taxation issues. Because of that, it should be remembered that the commission was specifically asked to devise a system that would keep the overall tax burden low and increase fairness within the system. Its findings were unambiguously designed to protect low-income households while charging more as properties increased in value. A market-value tax is likely to have a minimal effect on economic performance, unlike the alternatives involving higher labour or capital taxes. Having received a bloody nose over the introduction, administration and structure of a household charge, the Government should learn from its mistakes.