Madam, – Brian Lenihan has dismissed the introduction of a residential property tax in the short term, on the basis that it would be too complex and take too long to set up and start yielding revenue. Yet, if he doesn’t do so now, there will be the same delay if and when he gets around to introducing it at some future date.
According to the 2006 Census there are 570,000 houses with mortgages or loans and 498,000 without mortgages or loans. There are a further 390,000 or so rented, local authority or not stated. My guess from the above would be that at least 750,000 would be able to pay a property tax, if those on very low income and those with recent crippling mortgages are excluded. At, an average, say, of €1,000 per annum (not high by international standards) this would raise €750,000 per annum.
At the same time, stamp duty could be abolished, or set at a nominal sum which would cover the cost of registration in the registry office (certainly less than €1,000, I would have thought). For those who have paid stamp duty in the past 10 years, there could be a scaled relief, say seven years exemption from property tax from date of purchase and a further lead-in of five years with 80 per cent, then 60 per cent, etc, discount in those years. This would recognise the stamp duty as a form of pre-payment.
For those on crippling mortgages on negative equity houses, there could be some form of interest relief. If say, 200,000 of houses with mortgages are in negative equity, at an average of €100,000 negative, the total value of negative equity would come to €20 billion. The annual interest on this at 3.5 per cent would be €700 million. A 25 per cent tax credit on this element would amount to €175 million.
I’m sure a property tax signalled now, and allowing relief in respect of recent stamp duty payments, and also taking account of some form of relief through the tax system for those paying mortgages on negative equity, could yield at least €500 million per annum from tax year 2011. The Commission on Taxation projects €1 billion to €1.2 billion yield, but I am not sure whether this would allow for any discounts, rebates, etc. And with property prices and sales so low and revenue from stamp duty down accordingly, now would be a good time to make the change.
Framing a property tax system is fraught with difficulties and potential anomalies, yet most countries have managed to deal with these and have a functioning system. It only takes the political will and courage to do it. – Yours, etc,