Government faces taxing time over property levy

 

INSIDE POLITICS: Citizens could be forgiven for thinking that TDs opposed to property taxes have pursued power at the expense of responsibility

THE ANTICS of the TDs who are threatening not to pay the €100 household charge and the opposition of Fianna Fáil to the inspection of septic tanks have once again exposed the shallowness and self-destructive nature of Irish politics.

Given the scale of the challenge facing the State, never mind the threat to the euro which dwarfs our current problems, the political fuss over a tentative first step towards a comprehensive property tax is a sad reflection on the level of political debate.

There is some irony in left-wing TDs being so trenchantly opposed to a property tax but the absurdity of the debate was highlighted by the sight of Mick Wallace, a bust property developer recently convicted by the courts for failing to pay the pension contributions on behalf of his workers, encouraging people not to pay the very modest household charge.

Even worse is the way sections of the media, particularly RTÉ, have been cheerleaders for the campaign to break the law. It would be interesting to see how the State broadcaster reacted if a group of TDs organised a campaign for non-payment of the television licence fee of €160 a year.

Of course nobody likes the idea of having to pay more tax, but one of the glaring lessons of our economic crash is that the State’s taxation system needs to be put on a firmer foundation to narrow the gap between revenue and expenditure. That means widening the tax base.

The experience of the 1980s has taught us that, insofar as it is possible, extra taxes should not be imposed on work but on fixed assets like property. The Commission on Taxation, which reported in 2009, was in no doubt that this was the correct approach and it recommended that €1.2 billion a year should be raised through a comprehensive property tax.

The €100 household charge is just a fraction of the kind of property charge recommended by the commission which proposed that the lowest rate of tax for houses worth less than €150,000 should be €188 a year with more than €900 a year for middle-range houses.

The Government is highly unlikely to endorse a property tax on that scale, as it would certainly impose a crippling burden on a lot of people who would be unable to pay such steep charges. However, some form of property tax is necessary. not only to raise revenue but to limit property prices in the future. The flaw in the flat rate €100 charge is that, modest as it is, the same rate applies to every house, big and small.

That state of affairs, however, is likely to last for just a year with a graduated system taking either valuation or size, or a combination of both, coming in to replace it, possibly as early as 2013.

A lot of issues need to be taken into account in devising such a tax or local charge that is low enough so most people can afford to pay, while also being progressive and fair. The system of domestic rates that applied from Victorian times until 1978 was widely regarded as unfair.

The problem was that it was abolished without anything being put in its place to fund local services. The residential property tax that emerged in 1985 was so riddled with exemptions and thresholds that it raised a derisory amount for the exchequer.

Now we are finally getting around to facing reality, it seems that a rational debate on the scale and nature of a property tax does not seem to be possible.

The irony is that there would be far less fuss if income tax had been increased in the budget on a scale that would have brought in 10 times more than the household charge. That is a reflection on our political system and the shallowness of so much of the debate about the state we are in.

The septic tank registration scheme is another example of how hysteria can be created about an issue which is actually quite simple. Either we want to live in a State that protects its citizens by setting down ground rules to protect basic standards like clean drinking water, or we don’t.

An EU directive on ground water standards was issued as long ago as 1975 but the Irish national authorities never bothered to implement it because they lacked the political will to establish a system of inspection for households with septic tanks. Eventually, the State was brought to the European Court of Justice by the EU Commission in 2009 and was forced to agree to act.

It emerged during that case that one county, Cavan, had actually applied the EU directive in 2004 due to the foresight of its councillors and county manager. Cavan was actually exempt from the negative finding of the European court because it was already in compliance. If Cavan could devise its own inspection procedure with appropriate fees, why the fuss about a similar scheme at national level? The attempt to whip up a non-compliance campaign on this issue is another example of warped political standards.

Far from being an attack on rural life, ensuring that ground water is protected from pollution will protect it in the long term.

The Government faces a challenge to persuade the people of this State to comply with property charges and septic tank inspections, given the incitement to law breaking from some members of the Dáil. It will be an illuminating test for our democracy.

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