Friday 31 October 2014

Economic Workshop: 'Put us out of our misery over property tax proposals'

Charlie Weston Personal Finance Editor

Published 13/10/2012 | 05:00

FAILING to introduce a property tax will force the Government to hike income tax by 2pc, an economist has said.

Pushing up the standard tax rate by 2pc would cost a family on €70,000 a year an extra €1,400 in tax.

Economist Ronan Lyons told the Dublin Economic Workshop there was a need for a property tax, and it should be used to fund local government. But there was also a need to reform local government.

He said that marginal tax rates of direct and indirect tax were among the highest in the OECD. A wealth tax, like a property charge, was the obvious missing link, Mr Lyons said.

Residential property was still worth €300bn, despite the collapse in the value of homes.

He called on the Government to announce exactly what it was going to do in relation to the property tax. "Put people out of their misery," he said

Mr Lyons favours a site valuation tax, as opposed to a tax based on the value of the buildings. A site value tax would encourage sustainable use of land.

He said a full-value tax would be riddled with perverse incentives. For example, building an extension would increase the property tax bill for a property value tax.

"Any property tax will have to be bottom-up (i.e. self-assessment) with auditing," he told the conference in Galway.

Home owners should get a tax credit of €250 in year one to have their property assessed by a professional valuer.

Pensioners, those on low incomes and those in mortgage arrears should be considered for a deferral of the tax, but they would have to pay it eventually. He said there should be no exemptions from the tax.

And those in negative equity -- where the value of the property is now less than they borrowed to buy it -- could be given a tax credit of €10,000 per couple. This would have to be used by 2020, suggested Mr Lyons.

Workers should have the option of paying the property tax as part of the income tax system, something which the Government has said it is putting in place.

Irish Independent

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