The IMF thinks it should be levied at yearly 0.5% of a home’s market value, Minister for Finance Michael Noonan indicated that it will be closer to 0.25% and because the IMF was using out-of-date figures for local authority rates and stamp duty, the view on here is that it should be closer to 1% of market value to bring our property taxes in line with OECD countries. And the betting on here is that by 2015, it will be closer to 1% than the 0.25% hinted at by Minister Noonan. But for 2013, when Budget 2013 is announced on 5th December 2012, you can probably expect an average property tax of €300-500 equating to about €500-600m in a full year, and given the necessity of having some exclusions and waivers and the ending of the €70m second home levy and the cost of administration, it is more likely to be an average of €400-plus on a €160,000 home with a 0.25% flat rate apply to bands of property values eg less than €50,000 to pay €125, home valued between €100-200,000 to pay €500. The Government has signaled that the new tax will be collected from mid-2013 but don’t let that fool you into thinking you’ll get a 50% discount in 2013, you’ll have the pay the full annual sum by the end of 2013!
Of course, it could also be zero if the Government follows the suggestion by Fianna Fail to substitute other measures for the property tax, but given the minimum €3.5bn size of the adjustment in 2013, the specific inclusion of a property tax in the Memorandum of Understanding with the Troika and the political capital already expended on the household charge, it is a safe bet that there will be a property tax in 2013 and that it will be an average of around €400.
It is understood the so-called “Expert Report” which was produced by a group led by quango-king Don Thornhill was delivered to Minister for the Environment Community and Local Government, Phil Hogan in July 2012 before the Dail summer recess, but it has remained under tight wraps since. It is unlikely to contain any surprises, this is generally going to cost you a few hundred euro a year and it will be a new tax, notwithstanding the fiasco of the 2012 household charge, which according to the Local Government Management Agency has not been paid by more than 600,000 households at the end of October 2012. Preparations are already advanced to have the once-feared Revenue Commissioners – those nice people who agreed a €2.1m tax settlement with Deputy Mick Wallace that might be paid off, at Mick’s discretion it should be said, over the next 50 years – collect the tax and it may form part of your tax code if you’re on PAYE; the Government has been seriously rattled by the resistance to the €100 household charge in 2012 and at this late stage of the year, there still appears to be widespread non-compliance.
There are various groups of opponents to the new property tax ranging from those objecting to any form of property tax at all, to those advocating different means of levying the tax and the account that should be taken of factors such as location and size of the property and site to the income of the householder. Given the bluntness that has characterized this Government’s term in office, you can probably expect a bald 0.25% charge in 2013 based on a band of values assessed by your local authority working off your registration information provided when you paid the 2012 household charge.
In terms of alternatives, we have Property Industry Ireland who submitted its lightweight pre-budget document on 1st October 2012 which simply called for general clarity and also a reform to property taxation, particularly with commercial rates. Last week, upmarket estate agents Lisney produced its own pre-budget submission and called for a flat rate based on bands of values but then adjusted for size. Lisney also wants to see residential stamp duty reduced or abolished. The Society of Chartered Suveyors in Ireland has produced its pre-budget submission and a separate submission on property tax where the Society appears to advocate a flat tax in the short-term though it is unclear precisely what its preferred option is for a permanent property tax. An updated submission from the Society was made in September 2012, but it again refrains from recommending a prescriptive method, save to say values should be self-assessed. The Dublin Chamber of Commerce is advocating a rate set by the 34 local authorities which will obviously benefit Dublin households where the concentration of population will lead to lower average household bills. For all the submissions, it is likely to be a simple national tax at 0.25% of the upper band value as calculated for your home by your local authority and payable from July 2013.
Just to clarify on Dublin Chamber’s two proposed principles in our submission.
First, was that the property tax should be directly linked to the local services it is funding. This would be similar to the NPPR approach instead of the Local Government Fund mechanism which is being used for the household charge. The Local Government Fund mechanism doesn’t act as a top up for rural local authorities the analysis shows that it is used to fund authorities below the efficiency scale found by the Local Government Efficiency Review Group of 100,000 population.
Second, was that at a minimum either the tax rate or the tax base should be determined at local authority level in order to ensure that the tax is fair and equitable across households within each local authority. It looks likely that a banding system with a national rate will come in so what could be done is that bands are determined by the value of the homes in the local authority – the top decile for each look authority would be in the highest band and the lowest decile in each would be in the lowest.
@nwl
First up – the rationale for a property tax is deeply flawed. The reason we were told some while back for its introduction was that a tax of this nature was required to ‘widen the tax base’. Lets examine this statement in relation to a property tax.
A widening of the tax base normally means taxing an economic activity not previously taxed, where at some stage the Govt will likely incur a cost in the provision of a service to that economic activity and any tax generated from the activity compensates the Govt for the service it would/is supply/supplying.
Taxing a dwelling house fails this basic test on almost every level. There is no economic activity in the day to day process of owning a house. The economic activity with regards to property is in the provision of a dwelling as a landlord to a tenant – this economic activity is already subject to income tax under Case V. There is no new economic activity created in buying and owning a house to live in. The services that go into the house are already taxed such as electricity , water (in many areas), gas, television etc. The taxing of a dwelling house is simply another form of income tax and dressing it up as method to widen the taxing base is a basic lie, because it isn’t.
The notion that its part of the tax base in loads of other countries and therefore it should be here is equally flawed. In most European countries school books are provided free of charge,not here but I don’t see any great rush to bring in a free schoold book scheme here etc etc I could go on but you get the idea. Just becuase other countries do something is not a sufficient reason to do it here. Nobody can seriously suggest that France or Germany has a better or worse tax regime than we have here. Neither of these countries have seen anything approaching strong economic growth for many many years so borrowing parts of their tax policy simply because its there suggests a make it up as we go along policy and it must also be remembered the Trokia have consistently suggested that they care not a whit how the additional tax is generated so long as its got somewhere. The tax regimes of France or Germany have not or never were the basis on which those countries ever flourished relative to ours so why the need to copy something we know doesn’t work?
Given the above defination surely we can find activities that are currently not being taxed which should be, as the Govt will at some point be out of pocket were the activity to continue untouched.
The most obvious one for me is a form of additional taxes associated with fatty and sugar based food items. The buying and selling of these food types is a real economic activity and given all the available evidence it currently, and most likely will, for a considerable period of time, land the state with enormous but completely avoidable additional healthcare costs. Taxing these food types to the point where consumer activity changes makes far more sense as a both a positive long term economic and health benefit for an entire nation rather than whats proposed. No doubt there are many more examples. Owning a house is not one however and I for one won’t be paying it.
@ Y or B
My take on the rationale for ‘increasing the tax base’ was for more security around tax returns. Is a Property tax not a good way to do that? As opposed to revenue from Stamp Duty, which can and did collapse overnight.
I can also imagine ways it COULD be used to change behaviour. Changing landlords minds about allowing property to fall in to desrepair for instansce (site tax), increasing work force mobility (more renters), or addressing our costly fetish with one off housing and dependance on imported tonnes of metal (aka cars) from elsewhere.
It also taxes wealth, like Dirt, it’s a crude form of wealth tax, but a form of one none the less. I’d rather see a welath tax that more income tax(es). Though of course there is a fairness issue here, why no other forms of wealth? The only answer seems to be because it’s easier to tax a house than a bar of gold under your bed.
Though there is the service argument, if the state builds a luas, and a stop is built next to your house, the state shares in the price rise of your property. The same is true in the reverse, if the state puts a smelly landfill next to your house it should lose too. Same is true of other services.
There is one other fairness issue. The cost of property taxes are generally refelcted in the price of the property. So the real losers in this are those that already own a property. Implementing a property tax is really taking value from them and giving it to the state. As future purchasers of property will simply get a reduced prices to accont for their potential liability.
So considering the negative equity problem, it’s poor timing for such a tax but if I was starting a tax system tomorrow (without a population up to its eyes in debt) I’d certainly include a form of it.
PS I am pro Sugar/Fat tax. As it goes someway to addressing our massive obesity problem. Which makes my list of major crises.
National Debt (in)solvency crisis.
Youth long term unemployment/Emigration crisis.
Household debt crisis.
Pension crisis.
Obesity crisis (Massive Health costs)
Drinking ciris (Massive Health costs)
@ John Foody,
It’s not possible to control everything.
In relation to obesity, it’s not sugar is the problem, the lack of exercise / desk jobs etc is the problem.
Of course there are people who drink 2 liters of fizzy drink / day, no matter what the evidence, they will not change their habit.
Ireland is a land of contradictions……… look at the penal level of annual motor tax on some vehicles. The population has shifted to smaller more economical cars. The Govt is now losing finance on the fact that large engined cars are almost extinct. With the Irish mentality of anything bigger than 2 liters as large.
Take alcohol…… it’s possible to buy a bottle of brandy in France for less than 6 euro, a bottle of Absolute Vodka is 28 euro in Ireland, despite it being 14 euro in Spain. Yet still there is a drink problem in Ireland despite penal levels of taxation.
Ireland will become a country which will not be worth living in…….. Alchohol will be taxed out of existance, as will cars and so it will be with property.
The time will come when a house which is greater than 1000 sq ft is considered LARGE. If any Paddy attempts to get above their station in desiring to live in a house greater than 1000 sq ft, then they must be hit with MASSIVE annual property tax.
Of course you can’t control everything. I refered to alcohol being a problem because it is, we all pay for it already, taxes for packed A&E departments, gardai wages, drunk kids on our streets, citizens with physical/mental health issues etc.. It’s a multi-fasceted social problem, increasing cost alone will not solve it but it will form part of the solution. The same with sugar. If price didn’t matter at all then you’d expect no worse behaviour if they were free and I think everyone would agree free sugar and alcohol would result in social destruction. Think ‘free bar!’.
As for your take on a property tax. If it goes up, the value of the property generally goes down, so high taxes and large dwellings should drag their value down and so make it no less affordable. Or you could decide to rent instead.
As for cars, it’s absolutely unfair how they’re changing the tax on it like that. However, anacedotally I’d say for those employed that are mobile, the high cost of running a car is pushing them towards renting nearer to work, in large villages,towns and cities and away from one off housing. Which, from the states perspective of providing services for people, is more effecient. As well as giving them money left from the car/fuel (money sent abroad) they’re not buying to spend locally.
@John Foody
But the basis of any tax is economic activity. With a wealth tax income or earnings are being transfered from one party to another i.e. some sort of exchange is taking place which can be taxed.
Ownership past or present is not an economic activity – the economic exchange has already occured. This is why a tax of this nature is deeply flawed because we don’t levy taxes on expected future gains on say art or gold bullion its only taxed when a future exchange occurs. There is no logic to this tax because thousands will claim relief for precisely the reasons I suggest namely past earnings have been used to purchase the property but current earnings are insufficent to pay becuase there is no economic activity taking place on which a charge can be correctly levied, there is no disputing this argument. Whilst this may indeed force people to sell houses which they can no longer afford the missing link here is that many thousands will not be allowed to so do as the banks will deny thousands in negative equity the ability to move so thousands of folks will be forced to pay a tax on a property the state (insofar as its mortgaged with a covered bank) refuses them to sell so we’ll end up with the following bizzare situation: a tax based on a arbitary valuation with thousands unable to afford to pay it, unable to move to avoid paying it and unable to support the loan on the property generating the charge in the first instance.Only in Ireland.
@ John Foody,
All things being equal, for the LONG TERM, i.e. 25 years into the future, will visiting tourists ask…
Where are all the motor vehicles gone?
Why is there no alcohol for sale?
Why does everybody live in small pokey houses?
And will the reply be……………
Nobody can afford to own a car as the annual motor tax is too high.
Nobody can afford alcohol as the duty tax is too high.
Nobody can afford a home bigger than a “small pokey house” as taxes are too high.
As MoF Mr Michael Noonan said some time ago, “If you tax something more, one tends to get less of it”
By increasing taxation on various items, i.e. large cars, large houses, and increasing taxation on alcohol, what we are achieving is a more UNEQUAL society.
Because it will only be the very wealthy who can possibly afford these things, whilst the rest of us will have to exist under a very mundane, boring and deprived form of living.
For a 400K house, with low ceilings, no side entrance justifibly command 4000 euro / annum property tax? i.e. the 1% as NWL mentions above.
And you know how these taxes operate John, high taxes just means you get less of it, therefore a shortfall will occur, which means the DoF will just move the goalposts, as all the 400K houses are broken up into smaller units, the 300K house will move into the 4k annual tax band, and when these 300K houses are reduced in value, then the 200K houses will move into the 4K annual tax band.
Before you know it John, we will all be back into council houses!!!
As it has been with private motor vehicles, so it will be with property. They will continue to move the goalposts as they seem fit.
John, I have serious doubts about this countrys ability to do anything right. There is NO reform, it’s all about cuts and taxes.
There was a recent article in Village magazine recently, about the cnditions in prision, 25 years of talking about improving prison conditions, and yet things are worse now than before. 25 years of useless, oxygen wasting talk, stacking shelves with committee’s report after committee’s report.
@ SportHog
I share you cyncism with regard to government reform, I think events will force reform though, the waves of austerity will eventually wash over the protected gravy trains. I also share your disgust at the state of our prisons.
Though you seem to be saying high taxes in and of themselves make societies less equal? If that’s true, why aren’t countries with already high property taxes, income tax and car taxes suffering high levels of inequality. Finland for example has higher tax rates on income, property, fuel and cars. It’s a more equal society than Ireland, same is true of Germany, Sweden, Norway.. Not exactly shitholes.
I’m not saying high taxes make things more equal but the facts don’t provide any evidence that high taxes make countries less equal. Of course those countries don’t use their taxes to pay of bondholders, they tend to invest them in rail infrastructure, nuclear power, education, health etc etc
I don’t believe that the owning a car and a house is essentially to being ‘wealthy’. There are plenty of wealthy individuals that rent and don’t require ‘social housing’.
Car ownership is falling among the next generations in the US and Europe, the car centric lifestyle and suburbs are being somewhat shunned by them, in favour of more urban lifestyles based around buses/trains/bicycles and feet.
Finally 25 years should provide us with a pretty efficent high end, cheap, electric car. So I’m sure the roads will still be used then.
John,
“Though you seem to be saying high taxes in and of themselves make societies less equal?”
I do believe high taxes on goods and commodities make a society LESS EQUAL. Yes I agree with you that there are various countries which have higher taxes than Ireland, and they are not “s**tholes” etc.
For simplicity lets talk about a bottle of whiskey.
If a bottle of Whiskey is taxed to 200 euro / 75cl bottle then who can afford it?
Can someone on social welfare justifiably send such money on a bottle of whiskey? Even a middle class person could not afford to buy the whiskey bottle. So who can afford to buy the bottle, only somebody who is wealthy.
Now I am not saying, having a bottle of whiskey in your cupboard makes you wealthy, or having a car on your driveway makes you wealthy either.
But what I am saying is that whether it be a camera, whiskey bottle, car or any other product, if it is taxed to high levels, that product is pushed out of the financial reach of more and more classes of society, until… eventually only one class of society can afford to buy that product…. and that will be the wealthy class.
With higher and higher duties and taxes on various goods and services, I see Ireland as a country which offers very limited freedom of choice for those who are not wealthy.
Please note, I am not talking specifically, but in general terms about the cost of living in this country and the ever smaller freedom of choice for people who are not wealthy.