Shane Ross: The Celtic cowboys win again
Published 02/12/2012 | 05:00
Happy days are here again. For some. Property tax will be introduced in Wed- nesday's Budget. More work for the clown princes of the Celtic Tiger. Estate agents are licking their lips in anticipation.
The property tax will force you and me to value our own houses. Some suckers will be compelled to call on an estate agent for a valuation. God help them.
Estate agents have always been mighty obliging about valuations. Clients can normally order their own estimate of the value of their home. Their friendly agent will even print an authoritative version on his own headed writing paper. That way, the valuation looks authentic, as though the estate agent, using his well-advertised 'expertise', has spent hours struggling with the valuation, right down to the last 10 grand.
Remember the role of estate agents in the last boom. They were the seducers, inventing low "guide" prices to suck in buyers. Alternatively, if a client wanted a high valuation, they would give it to him – for a fee.
Valuations were a joke. There were guide prices, advised minimum values, phantom reserve prices, estate duty valuations. You name it, estate agents would deliver it, tailor-made.
I could even do it myself. I became a professional auctioneer, a Celtic cowboy, without a bull's notion of how to value a house. Like others, I qualified without a qualification. I could produce a deposit and bang a gavel. Lots of similar cowboys are still roaming around in the property jungle, lashing out valuations to order.
You may soon need one of the cowboys. The property tax is riding to their rescue, just as lucrative business at Nama has saved the skins of property developers and favoured solicitors.
While the property tax will benefit rascals operating in the housing market, it will be the tipping point for many property owners. Your home and mine could soon become a liability.
There is a madness abroad in Leinster House. Political insiders are becoming delusional. They see bricks and mortar as a source of liquidity. For many home owners, they have become a noose.
No longer is the family in the big house flush with money. A big property can come with a resident with a small income or even transform itself into being a large debt.
Take a stroll down a typical Dublin housing estate. Identical houses will contain people of utterly different fortunes. One may contain a married couple with two cars, two children and two jobs. Next door could be a family with no cars, five children and two lost jobs. Next door will be a retired public servant on a tiny pension. Next to him is a single mother with two kids. The poor pensioner bought his house 30 years ago for a song. Today it is worth €500,000.
He is 80. He does not want to move but may be forced to sell by the property tax, now predicted to amount to at least €1,000 for a big house worth €500,000.
The family with no cars and five children bought their house for €1m at the height of the boom. They paid €90,000 stamp duty – borrowed from the bank. They are deep into negative equity and mortgage arrears.
The single mother inherited the house from her parents. She is living on social welfare. At the end of each week, she is one of those with nothing to spare. Nothing.
The couple with two children, two cars and two jobs both work for US multinationals. They are the only ones that can afford to pay the €1,000 property tax. They too paid €90,000 in stamp duty and believe that they should be exempt from an additional annual property levy.
All four would be liable for far less tax if they had bought a house outside Dublin. Residents of the capital will have a just grievance if a property tax is introduced on a valuation basis this week.
Accurate valuations will be impossible. No sweat for estate agents, who never gave them anyway. Today, the market itself is uncertain, even dead. Prices are sliding, down by at least 50 per cent from the peak. And they are still falling.
And that is what the Government is taxing: a tumbling asset that may have morphed itself into a net debt.
This week, middle Ireland will be beaten into a budget battering. Next week, it could be in revolt.
The pensioner will not be able to pay, the recently redundant couple in mortgage arrears will not be able to pay, the single mother will not be able to pay, the multinational couple will be unwilling to pay. Property tax could be the last straw.
The Government is confusing a property asset with a cash cow. Yet the same middle classes whom they are targeting have no cash left in the till. They are drained by redundancies, higher mortgages, health insurance, pension levies, universal social charge, car tax, petrol and heating. And they are certain to lose part of their last lifeline – child benefit – this week.
The coping classes will be reeling, demoralised after this Budget.
Worse still is the government threat to plunder the property tax from tax-compliant citizens' wages and social welfare. If it is left to the home owner's employer – or the State, in the case of social welfare recipients – to pillage the tax from a citizen's pay packet, confiscation will have reached a new art form. Home owners, already with precious little take-home pay, will have less. The necessities of life will suffer. Children's needs will be sacrificed.
What will a property tax do to cure unemployment? It may give work to a few bent auctioneers, willing to put a low value on houses to satisfy the client, but will be a suffocating penalty on those who have achieved modest success for themselves and their families.
Instead, the Government could opt for a more ambitious Budget. It could be radical. It could announce that it will achieve a rise in employment by lowering corporation tax to below 10 per cent. Such a bold move would drive Angela Merkel mental. It might cause her a few headaches at home in election year.
Bravo, behold a chink of light: the delicious thought of Mrs Merkel stamping her feet when we started to flex a bit of Irish muscle. Imagine if we offended the Germans. God forbid, they might begin to treat us with a bit of respect rather than as obedient puppies. They might listen to us when we threaten a unilateral cancellation of the Anglo promissory notes and demand a deal on the legacy bank debt. Top that with the prospect of attracting a few multinationals away from mainland Europe, especially Germany, and we will begin to make progress.
Scrap the property tax completely. Refuse to pay the Anglo promissory notes. Reduce corporate taxes from 12.5 per cent to below 10 per cent. Drive Mrs Merkel up the wall. That is the route to recovery, not making our middle classes miserable to pay off German bankers.
It beats lining the pockets of the Celtic cowboys.
Sunday Indo Business