~Originally published in the Sunday Business Post, December 9 2012
The introduction of the new tax is not a problem, but taxpayers need to get something in return
Is there anyone who was genuinely surprised by the property measures introduced by Minister Noonan et al on Wednesday? This was undoubtedly the most leaked – and accurately leaked – budget of modern times. The imposition of the new property tax had been floated for many years, and since budget day 2012, we knew it was coming. Essentially, homeowners had at least a year to prepare. The actual figures and tax rates were speculated upon at length and the figure of 0.2 per cent was pretty much accepted as the likely rate as far back as last September. A cynic could certainly view this as a form of ‘market testing’, a way of gauging the public reaction, simply put, lazy policy making.
And it worked, the general relief for homeowners when the Minister announced a rate of .18 per cent, which works out at 180 euro per 100,000 euro market value, was palpable.
Of course, there was outrage too, as was expected. However, I do ask the question, how credible is this outrage? An Irish person holding property is any country in the developed world will be asked to pay local property taxes. It is only right and proper that they should pay the same in this country. Among experts and commentators there is plenty of disagreement about whether now is the right time for Ireland to be introducing a property tax, or how this tax should be calculated, or who should be responsible for paying it – but few disagree with the introduction of the property tax. There is a good reason for this, property taxes raise vital funding for local authorities and relieves their over-reliance on commercial rates, which are suffering hugely since 2007. The frustration with the tax appears to be the complete lack of services in return. It has been said that the government using property tax as a means to hit a fundraising target, effectively turns this tax into a levy. By failing to offer services in return for taxes paid plays into this notion. So, it may well be the case that the introduction of the tax is not the problem. The complete lack of quality, or any, local authority services makes it difficult to consider this a tax in the truest sense of the term.
Of course, as with any law, it will only be as good as its enforceability. By that standard, the legislation giving rise to the household charge liability might well be said to be poor law. But this tax is different to the household charge is one minor but essential aspect, it will be enforced by the Revenue Commissioners who have grown wings – and teeth – in recent years. Furthermore, not only will the Revenue Commissioners be collecting the property tax, a half year for 2013, it will also be collecting household charges together with arrears. By the end of the year, this liability will have doubled. It will be interesting to see whether protestors who stood firm all year, and who tucked those reminder letters from the council down the back of the sofa, will pay more attention to the brown window envelope carrying our State seal when it arrives in March.
From March to May, homeowners will then have the perilous task of valuing their home to the nearest 50,000 euro band. We have already heard talk of local residents associations coming together to ‘help’ with this and this could be a very dangerous move. There will be penalties for getting this wrong, will any non-professional be held accountable?
The day before the budget, auctioneers Allsop Space successfully auctioned almost 14 million euro worth of property. One of the properties sold was a three bedroomed semi-detached house in County Wexford. The property carried a reserve price of 60,000 euro and sold under the hammer for 87,000 euro. I was later contacted by a homeowner who has a house in the same estate, which was bought for 240,000 in 2006 and would have been valued last week at approximately 160,000. This homeowner will now use the example of the, perhaps distressed, property that sold on Tuesday to value his home for the purposes of the tax. The latest sale establishes market value in the area but it remains to be seen whether the Revenue Commissioners are likely to accept this.
In my opinion, the message from government is clear – when it comes to the property market, we can have it fair or we can have it equal but not both.
The imposition of the new property tax is an example of an equal but undeniably unfair measure, whereas the exemptions, particularly as they relate to new homebuyers, may be considered fair, but are incredible unequal. First time buyers and home buyer who purchase a new or previously unoccupied home in 2013, will be exempt from paying property tax until 2016. There was no mention of exceptions for struggling homeowners who bought at the height of the boom and are stuck in negative equity – equality will not work for these owners, fairness is needed.