As a citizen and as a property professional, I am in favour of a property tax. Taking emotions, financial struggles and apparent dissatisfaction with current government out of the debate, it is a progressive form of taxation and one that Ireland should have implemented (or retained) much earlier. While families crushed under the weight of negative equity would reject that the property tax is a wealth tax, in reality, a wealth tax is exactly what it is. The wealth or financial status of the homeowner dictated the value of the home purchased. Those with significantly higher incomes purchased, in the main, significantly higher value properties. As such, those higher value homes must attract a higher portion of tax. This is certainly imperfect in the current market, where those with higher incomes are the same people with higher levels of unserviceable debt and greater levels of negative equity but what is the alternative – to implement the same tax to a two bedroom cottage in Offaly as a seven bedroom house in Dublin? It is not reflective of people’s current disposable income or debt levels, but property tax, with the correct and fair exemptions and waivers, is a fair tax. What makes it more unpalatable at the moment is the blatant lack of services in return. When you pay your car tax, you expect to have quality roads to drive on. If your car is damaged in a giant pothole, you contact the local authority seeking compensation, as is your right arising from payment of the road tax. It is not so clear-cut with the property tax. What will you get in exchange for the money paid to your local authority? As pointed out in numerous debates, a tax implemented to raise a target amount of cash for the State, without reciprocal services and benefit, is effectively a levy. Local Authorities will need to pull together a convincing pitch to members of their communities, outlining where this tax will be spent and how the benefits will be felt if they are to have any hope of collecting the payments without recourse to chest-puffing and bully-boy tactics by the Revenue Commissioners.
The idea that property tax would become a reality was floated years in advance, it was phased in – most inefficiently, it must be said – by the household charge , it will only apply for a six months of the first year and it appears fully enforceable by the Revenue Commissioners. So far so good, the boxes from the standard checklist ‘How to avoid a national revolution’ have all been ticked by the current administration. And then we read the small print; section 5 of the Finance Bill, dealing with the implementation of the property tax requires that all sellers must supply, to the purchaser, a valuation of the property for the purposes of the local property tax. Failure to provide this valuation will result in a fine of up to €500 for the seller. That all seems reasonable, until we read on; the responsibility then moves to the new purchaser of the property, who is compelled under the legislation, to notify the Revenue Commissioners if the valuation or declared value falls short – within one tax band – of the price paid, in time for the next annual property tax payment. The Revenue Commissioners will then pursue the seller for the portion of under-declared and unpaid tax, together with any penalties arising on foot of the lower valuation. While the purchaser of the new home will not be liable to pay for the seller’s unpaid tax, they will be held accountable for failure to report it.
This so-called ‘snitch clause’, which has become the focus of the property tax debate, to the likely relief of many Cabinet members, is an attempt to deter any undervaluation for the purpose of avoiding or fraudulently minimising tax liability.
It is impractical and unreasonable is the extreme to shift this responsibility to the purchaser, when there are so many State and regulated professionals throughout the transaction. Taking the example of the new energy rating certificate, the BER, all estate and letting agents must acquire a BER certificate prior to offering the property for sale or let. Surely, such an agent could also collect the declared value or valuation used for the property tax, perhaps even seek proof of discharge of the current tax liability, prior to listing the property for sale? Or perhaps this could be included with the title documentation that the seller’s solicitor is obliged to furnish to the purchaser’s solicitor? Or perhaps it could form part of the Certificate of Title submitted to the mortgage lending company? With so many regulated professionals in the chain, it seems strange that the Revenue would even want to rely on the purchaser, who is presumed to have little knowledge about the steps involved and who is so reliant upon their solicitor to guide them through the legal issues.