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How many property millionaires will the Government create in 2012, at the same time it levies €100 on all houses?

December 21, 2011 by namawinelake

Millionaires? “Property” millionaires? In 2012? At the same time as the Government is levying a new flat tax of €100 per home on 80% of the homes in the country. Surely this is a case of over-indulgence in the mulled wine. You’d think…

Although the Government’s capital programme has been cut back in 2012, there is still a meaty schedule of infrastructure works – road-building and the like. And it remains an unaltered feature of Irish infrastructure spending that land which is compulsorily acquired is paid for through the nose. An acre of land might be worth €6-15,000 in terms of its existing use, but once the State decides it needs it for infrastructure, that price can rocket to well over €100,000 an acre. Not convinced? Why not ask the Limerick land-owner who pocketed €10.4m for a contribution from his land-holding so that a tunnel scheme might have been built; indeed €56.5m was spent on land acquisition in that one Limerick scheme alone.

Of course there are arguments about valuing land which the State compulsorily takes from citizens so as to improve the general infrastructure of the State. But these issues were dealt with, decades ago, when the Kenny Report was produced in 1974. In essence, it recommended that landowners be paid a 25% premium on top of the existing value of their land if there was compulsory acquisition. Successive governments – Labour, Fine Gael, Fianna Fail – all welcomed the recommendations in the Kenny report but somehow, never managed to get around to implementing those recommendations. And by the way one recommendation was a register of  property sale prices which we may eventually get by the middle of 2012 – almost 40 years after Justice Kenny started his deliberations! And I’d be willing to bet that without the IMF breathing down our necks it mightn’t even be happening by 2012.

But what about implementing the rest of the Kenny report? How much would that save in 2012? €160m, the estimated sum to be collected in the flat property tax? Indeed might an urgent reform of compulsory purchase procedures not only yield more than the €160m which the flat property tax is projected to bring in, but also give the State a cheaper and more competitive means of doing business, as well as giving society in general a sense of fairness? The losers would be landowners who might have received a premium of over €100,000 an acre for their land in excess of what it was worth with its existing use; but even they would receive a 25% premium, worth €1,500-4,000 an acre.

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Posted in House Price Database, IMF, Irish Property, Politics | 13 Comments

13 Responses

  1. on December 21, 2011 at 11:06 am Brian Flanagan

    @NWL
    I, along with many other of your readers, often read over your blog entries more than once. However, there is no need for you to print them twice VBG!

    Many thanks for the fantastic research and blog.Very Happy Christmas and (better) New Year for us all.


    • on December 21, 2011 at 11:11 am namawinelake

      @Brian, thanks, the WordPress software on which the blog is hosted is very slow this morning, and the entry was pasted twice. Now corrected.


  2. on December 21, 2011 at 11:14 am Andrew S

    Hi,
    Love the blog, and very very rare I’ll disagree, but as I’ve skin in the game my otherwise rational / sense making head is turned! :)

    Paying a large premium over agricultural prices for infrastructure is justified in some cases (certainly not in all / as a blanket thing) as we don’t know in the future if that land could have been sold for far more as residential land.

    There’s an option price in there to some degree, loss of future earnings potential etc. so it can be though of more as a profitable piece of business than a lump of clay that’s being sold, hence the crazy price spike.

    The 25% model reflected agricultural practice of its time, profitability per acre etc. but would be draconian.

    I’m fully behind property taxes, I just wish it was 0.02% of value or 0.2% of equity. That would leave me on the hook personally for 10x the €100 fee, but it’d be much much fairer nationally.


  3. on December 21, 2011 at 12:36 pm Irish Left Review · To Joe Higgins From Irish Left Review

    […] has an excellent post on the relatively simple point that if the Kenny Report (first published in 1974) was implemented […]


  4. on December 21, 2011 at 12:51 pm patrick

    Can I echo Brains View and thanking you for your Fantastic research and comments during the Past year.
    Looking forward to your Continued Contributions in 2012 and wishing all your Posters a very happy christmas and Prosperous new year


  5. on December 21, 2011 at 1:27 pm Jake Watts

    Looks like “someone” in government bothered to look up the term regressive taxes.

    http://www.examiner.ie/breakingnews/ireland/hogan-govt-working-on-more-progressive-property-tax-533071.html


  6. on December 21, 2011 at 3:55 pm Swinia

    • Whilst I read your comments with much admiration, I feel, as a property professional, that this article is mis guided and lacks a clear understanding of the CPO code. The CPO code has been tried and tested through the courts and is generally deemed a fair and reasonable system. It is underpinned by the “principle of equivalence” as laid down in statute Horn V Sunderland which basically says “the owner shall be put into the same position in so far as money can do”. It never has been nor never will be a gravy train for landowners. Furthermore I know for a FACT that all the lands for the Newlands Cross and Wicklow Motorways have been purchased some while back.


    • on December 21, 2011 at 8:15 pm Joseph Ryan

      @Swinia
      It never has been nor never will be a gravy train for landowners.

      As John McEnroe used to say
      “You cannot be serious”!!


  7. on December 21, 2011 at 5:32 pm John gallaher

    Similar to UORR then,lots of ehm what they called again,”property professionals”involved in taking a bit of land,for the common good.In many cases enhancing the balance significantly.


  8. on December 21, 2011 at 10:44 pm swinia

    Joseph, with the greatest respect – your not, i don’t believe in a position to make a judgement call on this. Are you aware of the 15 rules on compensation as defined in McDermot and Wolfe and underpinned by statute? rule 1 is ignoring the lands are under compulsion rule 2 is the value of the lands is determined as the market value as at the date of notice to treat. The state have very powerful armoury and the recourse to have compensation determined by the state arbitrator should they deem landowners unreasonable.


  9. on December 21, 2011 at 11:09 pm John gallaher

    While not advocating a “Chavez” lots of fees in the current deal for the professional classes.Almost,set up to encourage disputes resulting in retaining property professionals.


  10. on December 22, 2011 at 7:52 pm Jake Watts

    @nwl

    With all due respect, I have to take issue with your use of the term “flat tax of €100” to describe the government’s single household tax of €100. This is not a flat tax. It is a uniform payment assigned to all regardless of the value of the property. A flat tax would be, for example, to apply a uniform 5% tax on the value of all property. I think you are confusing it with the flat tax proposals suggested for income tax, which obviously do take into account one’s income. The more income, the more tax paid. In the case of the household tax, the value of the property is not taken into account at all. Everyone pays the same; the very definition of a regressive tax.


  11. on January 10, 2012 at 3:23 pm Irish Left Review · Normal Business Resumed or the Great ‘Have-Property-Prices-Hit-the-Floor’ Game

    […] accommodation issues (price, quality, tenants’ rights in a fragmented mom-and-pop sector); land prices and the Kenny Report; planning mechanisms for future land use; a potential regressive property tax; arrears and negative […]



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