Property tax is not 'worth the hassle' say fearful ministers

Shane Coleman, Political Editor

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.

August 16, 2009

Comments

#1 Gerard commented, on August 16, 2009 at 7:37 p.m.:

Gutless FFers.

#2 Briain Mac Fiaich commented, on August 16, 2009 at 9:05 p.m.:

Would not a home tax,as opposed to a property tax,be more equitable? A property tax is merely a home tax for people who own their own homes. People who rent or receive accommodation as part of their employment pay nothing. Often people who rent have more disposable income than those who own their property.

#3 John commented, on August 16, 2009 at 11:42 p.m.:

I already paid a property tax,its called stamp duty,a front loaded tax that set me back 23k,they can bugger right off if they think I am paying another red cent in property related tax,they had their pound of flesh off me,its not my fault aherne blew the lot on appeasing unions and growing the civil service into an uncontrollable mob with a staggering sense of utter entitlement.

#4 john commented, on August 17, 2009 at 12:25 a.m.:

should the tax not be based on market value:amount owed , we could call it the sucker tax , but then I suppose the revenue would owe us plebs that believed the government spin and purchased a home , whats NAMAs address so I can post them the keys

#5 Dublin Man commented, on August 17, 2009 at 1:14 a.m.:

Landlords will escape the tax simply by raising rents to cover the amount of tax, thus making tenants pay it !

#6 Niall, Dublin commented, on August 17, 2009 at 8:53 a.m.:

Well if my landlord tries to raise my rent to cover property tax, I will move somewhere else. Simple as that!

#7 Ian Walsh commented, on August 17, 2009 at 11:43 p.m.:

We are already taxed up to the neck. If this government bothered their jacksies to try and keep people in their jobs the the public finances would not be spiraling out of control. Where is the stimulus package?? Try and impose a property tax on people and watch the people revolt.

#8 Rory commented, on August 19, 2009 at 5:27 p.m.:

This is our government in a nutshell. Minimum hassle... wherever and whenever possible. I don't necessarily agree with the tax but its the philosophy behind the decision-making that is indicative of why we are where we are! Blatant populism is not leadership..

#9 John commented, on August 19, 2009 at 8:06 p.m.:

We live in a country where mortgage-bubble property values have provided a massive windfall to the government, which has, as has been pointed out, been wasted.
Worse still, it has left us the legacy of being uncompetitive as an economy.
The morally correct govenment policy should accept responsibility for its lack of regulation and protection of the consumer in the last ten years.
The negative equity situation which is widespread is predominately on properties which were recently purchased, and on which substantial taxes have been collected, directly and indirectly.
There should be an acknowledgement of the government's folly by way of a tax based on the net equity in a property.If the property is in negative equity, then the government should allow a tax credit using the same mathematics as it uses for determining the annual amount payable.
In the absence of a tax liablility, the amount should be credited to the owners mortgage account.
The days of reckless taxation should be gone.Fifteen years paying tax-credits to negatve-equity householders might help the government acquire a sense of responsibility, something which it has yet to demonstrate.
In relation to rental properties, given the low rents prevailing nationally and the current property crisis, any rental property tax should be levied on the tenant.
Rents are currently at 1993 levels.Were wages to be at the same level, we would be the most competitive economy in Europe.
But they are not and so it follows that landlords are possibly an endangered species.Any loans advanced to this sector in the last three years are probably in jeopardy, particularly if the rate was fixed.
If properties are to be maintained, some element of common sense must apply to the taxation of this sector.Otherwise, we are building up a problem for the future.With such high unemployment, the purchase of own homes for anyone who is renting and unemployed is not for now. It is essential that the maintenance of these properties be viable, given the difficult economics of the business.Otherwise, the rental properties of tomorrow will be a step back in time.

Name	(Required, published)
Email address	(Required, not published)
URL	(Optional)
Comment
If you enter anything in this field your comment will be treated as spam

Comments

Post a comment

Also in Home News

Share this article

Search

This issue 5 years ago

RSS Feeds