THE Government faces getting far less from the property tax than it has targeted, experts have warned.
Owners of houses valued at up to €150,000 will be hit for a property tax of €135 in a full year. Those with houses of between €150,000 and €300,000 will have to pay an annual tax of €405, calculations by Ernst & Young show.
But if there is a big non-compliance campaign it will mean the controversial new tax will not yield anything like what Finance Minister Michael Noonan is banking on.
Calculations based on new tax to be announced today in the Budget show that homeowners will be expected to self-assess the value of their home for property tax purposes. It's believed there will be seven or eight valuation bands, John Heffernan, a tax partner at Ernst & Young, said.
Homeowners will be expected to decide themselves which band their home falls into and apply the tax. The tax is set to apply at a rate of 0.18pc for properties up to €1m. Mansions valued at more than this will have a tax of 0.25pc applied to them.
The tax will only apply for half of next year, but after that the full tax will apply.
Mr Heffernan has questioned Government plans to raise €500m in a full year from the new tax. He said this would suggest an average property tax per household of €330.
But the tax expert questioned if the Government's revenue target from the tax can be met. Giving people exemptions and deferrals would reduce any amount generated from the tax. This would particularly be the case if homeowners who paid high rates of stamp duty during the boom get relief from the new measure.
"A large anti-tax and non-compliance campaign could also impact on the expected yield," Mr Heffernan said. The Revenue Commissioners will collect the tax. Mr Heffernan said it was possible the tax will be collected from PAYE taxpayers by reducing their tax credits. A tax credit is an amount deducted from the total amount of tax a person pays.
However, this will prove to be a problem as the Revenue will not know the value of the property unless the homeowner voluntarily submits a property value. The same will apply if the tax is collected through the social welfare system, Mr Heffernan said.