GATHERING TAX STORM

 

Public anger is rising throughout the State at the failure of the political parties to grasp the nettle of taxation. It is centred on two issues: water charges, paid in most local authority areas, and the residential property tax. That these are real issues is clear from the massive vote given a month ago to Mr Joe Higgins, the independent candidate who campaigned against the water charge in the Dublin West by election, and the growing anxiety felt by many Fine Gael and other TDs in Dublin constituencies as the RPT, owing to the irrational and unequal surge in house, prices in recent months, begins to affect growing numbers of their voters.

This, of course, is not how things should be. The State, and local government, need to be financed, and, it is irresponsible and pusillanimous of the politicians to turn the question of how this should be done into a squalid populist auction. The proposals of the Taxation Commission some years ago, advocating a broader base for taxes, have been largely ignored, though used to defend the RPT as a step in the right direction. Yet further steps have been eschewed be cause they would be politically unpopular. A hugely expensive system of administration has come into existence, but the politicians studiously turn their eyes away from the inexorable cost growth this will entail in future years as inflation proofed pensions and built in perks wreak their havoc.

The discomfort caused by the water charges issue was evident at the Democratic Left conference in Dublin on Saturday. The party accepted the necessary budget compromise last year, but is jittery as the general election approaches. The most objectionable aspect of the charge - since water needs to be paid for - is that it is, in effect, a flat rate tax. The large house holder, probably with lawns to be watered and a couple of cars to be washed, is treated on an equal basis with the person of modest means with children and a small flat.

There is no pretence of justice or equity; no attempt to be rational by metering water, as in most continental countries, or relating the payment to a fair valuation of premises in an updated version of the old rates. The politicians are attempting to sell something that is generally seen as a fraud, and regrettably, if they respond to popular anger, their natural instinct will be to abolish rather than reform.

The RPT, in its present form, is equally irrational. No politician who argues in favour of its retention has explained why other kinds of fixed property, such as large land holdings, collections of paintings and objets d'art, share portfolios and the like should not also be subjected to an annual tax on value. Like the water charge, it is unfairly assessed income acts as a trigger for payment, and ability to pay is not taken properly into account. Most of all, it is an arbitrary tax since people are obliged to pay on an unpredictable and random rise in values which is of no practical benefit to them until they decide to sell. In any case, more often than not they are only part owners until they have paid off their mortgages.

Some politicians claimed until they learned better recently that the tax affected only a small number of people and was therefore an insignificant issue. That is the argument for taxing left handed atheists or green eyed transvestites. But it is, ironically, Fianna Fail and the PDs (then an integral part of Fianna Fail) who laid the ground for the present state of affairs with both water charges and RPT, by their short sighted abolition of rates as an electoral gimmick in the 1970s, and are now promising repeal of the property tax. The lack of an equitable and adequate system of financing local government is a 17 year old monster still waiting for a government with the courage to deal with it.