Minister Brian Lenihan: tax plans

SIGNIFICANT resistance is emerging within the cabinet to the proposed introduction of a property tax in this year's budget and it is "less likely to happen than more likely", according to sources.

The Commission on Taxation report, due out in the coming weeks, is certain to recommend a property tax and finance minister Brian Lenihan indicated in his supplementary budget speech last April that such a tax was likely as a way of broadening the tax base.

However, some ministers are worried about the inevitable public backlash to the property tax and are privately questioning whether it is "worth the hassle" given the limited amount of money that will be raised.

"This will be less popular than swine flu. Do we really need to give our opponents another stick with which to beat us?" said one source close to cabinet.

"There is a lot of resistance among ministers to this and I think it is less likely to happen than more likely," he added.

The Commission on Taxation is expected to recommend an average payment of around €600-€800 per household, which will be calculated by basing tax rates on different price-bands of houses, for example, between €250,000 and €500,000 or between €500,000 and €750,000.

It would be up to householders to nominate the band applicable for his or her house, although this would be subject to review by the Revenue.

Although the introduction of a property tax would be accompanied by a sharp reduction in the rate of stamp duty, and account would be taken of householders' special circumstances, ministers expect a hugely negative reaction to any proposal to tax homes.

The short-lived residential property tax of the 1990s was fiercely opposed and quickly abandoned.

"This history of such measures in this country is bad," one senior government figure said this weekend.

The tax is predicted to bring in under €1bn a year and ministers are sceptical as to whether even this figure will be reached. Given the likely administration costs and the likely exemptions to make the measure politically palatable, there is a view among some government members that it might just bring in a few hundred million euros.

"It is not worth the hassle. It will be very difficult to implement. It's all very well in theory, but in practice it's a different matter," the senior figure said.

However, the Department of Finance is known to be keen on the introduction of a property tax as part of a move to establish a wider and more stable tax base not subject to high levels of fluctuation. The state of the public finances also demands that, alongside cuts of €3bn in spending this year, new sources of revenue are found.

Ministers are bracing themselves for a difficult few months on their return from holiday. Privately some accept it is "50-50" as to whether or not the government will be able to get the December budget through the Dáil.

"It's going to be very difficult. Everyone is very jittery," one minister admitted last week.