Families facing property tax bills that could reach €1,000
Published 18/04/2012 | 05:00
MOST homeowners face property tax bills of between €400 and €1,000 a year under plans drawn up by the Governments's own economic think-tank.
Those with houses worth €160,000 -- now the national average -- will have to pay €400 a year.
And families with homes worth €300,000 face a €750 annual bill while those with a home worth €400,000 would be hit with a €1,000 bill.
The Economic and Social Research Institute (ESRI) has calculated that setting the tax at €2.50 for every €1,000 the property is worth would raise Taoiseach Enda Kenny's target figure of €500m per year.
This is three times more than the current €100 household charge will bring in.
The ESRI experts recommend that those earning less than €15,000 a year should be exempt from the tax.
But doing this would put a greater burden on those on middle and higher incomes.
This would put huge pressure on those on average salaries as they struggle to meet mortgage, utility, food and motoring bills.
The authors of the report also admit that retired people could end up being big losers as they often own property but live on relatively low incomes.
The report also concedes such a tax may further knock house prices as it could act as a disincentive to own property.
Fianna Fail has warned that bringing in a tax such as that suggested by the ESRI would be "political dynamite" as four out of 10 have so far failed to pay the Household Charge.
The ESRI study released today recommends that the tax should be based on the capital value of homes rather than the value of the site, even though this would mean Dublin homeowners would be hit harder.
The last time there was property tax -- between 1983 and 1997 -- it was deeply resented by Dubliners who paid three-quarters of the total take. The ESRI admits that imposing the tax calculated against a property's value would mean "the burden on Dublin homeowners would be disproportionate".
This is because property in urban areas tends to be more expensive, even though it often has a smaller floor space.
Another option would be to calculate the tax against the site, instead of the property. This would be less expensive for Dubliners but would mean large houses on big plots in rural areas would pay more.
The ESRI economists dismissed the idea of basing the tax on the value of the site the home is built on. This is despite Fine Gael's election manifesto advocating this approach.
Basing the tax on site size would be complicated because there is no database on site values. In contrast, a national register of property prices is being compiled.
This could potentially give a starting point for house values.
The ESRI report also criticises the current household charge for hitting those on low incomes too hard.
The report recommends that adults earning less than €15,000 should be exempt from the forthcoming full property tax. This threshold would rise to €20,000 for a couple, with €5,000 added into the calculation for every child.
This would mean a family of two adults and five children could have an income of €50,000 and be exempt.
An allowance would also need to be made for those who paid high stamp duty during the boom, while the new system would need to take account of those in mortgage distress, the ESRI said
Above the income threshold of €15,000 per adult, there would be some relief for different income bands. Without this there would be no incentive for those receiving an exemption from taking a job, or doing overtime.
But setting the income threshold lower at €12,000 per adult would mean everyone paid a lower tax, of €2.30 per €1,000 of property value.
An assumption is made in the report that house prices have fallen by 60pc. This would mean the average house price has fallen to €125,600.