The ability of the Department of Finance to competently forecast revenues from the new so-called Local Property Tax, has been questioned on here before. And a letter sent by the Secretary General of the Department last week to the Oireachtas Committee of Public Accounts reinforces the wing-and-a-prayer approach in the Department.
Two of the key components to estimating the revenue from the new property tax are exemptions and deferrals. Certain properties won’t have to pay the tax, unfinished estates, local authority housing, homes affected by pyrite for example. And certain households whose income falls below a certain level can opt for a deferral of the tax, whereby it is accumulated until the household’s circumstances improve or the property can be sold.
The letter dated 15th April 2013 – available here – sets out the Department’s estimates. It believes that 14-16% of households will be entitled to claim deferrals because their income is below €15,000 for a single-person household or €25,000 for a family-household. There will be other deferrals also, for example, for buyers in 2013, but the Department is unable to estimate these.
In 2013, the Department hopes to get about €260m in property tax, and in 2014, double that as the tax will apply for a full 12 months.
Elsewhere in the letter, the following data is provided
Number of homes in State – 1.99m
Properties unsold by builders – 17k
Properties in unfinished estates – 5k
Pyrite-affected houses – 12k
Local authority housing* – 120k
Approved housing body housing* – 27k
Homes for which tax demands have been sent – 1.6m (we separately know from Minister Noonan replying to a parliamentary question that some 1.29 letters are being sent out, some recipients own more than one property)
*there is an exemption only if this housing is provided to those with “special needs”
There is no reconciliation between the 1.99m homes and the 1.6m which the Department believes will be subject to the tax. The 14-16% for deferrals would equate to about 300,000 homes but letters would still need to be sent out by the Revenue to these homes.
Furthermore, there are areas where the Department was unable to provide estimates such as properties vacated for medical reasons, diplomatic properties and estimates of properties that will be bought by a first time buyer in 2013. Significantly there is an admission that until people return their tax forms to the Revenue, the State is unable to accurately predict exemptions and deferrals.
77% own their own home in Ireland, unlike Germany at 46%.
The impact on virtually all socio-economic groups in Ireland will cause serious damage to the economy …. fear to spend. A bad idea … daft!