Property tax to bite families next year as levy fast-tracked
Three-beds face higher levy of€200 - €300 n Court blitz on household charge dodgers
Published 19/03/2012 | 07:53
HOMEOWNERS will feel the brunt of a full property tax next year as the Government fast-tracks the drive for a permanent levy.
The controversial tax will cost large numbers of homeowners more than the €100 household charge.
However, a number of key decisions have yet to be made, including how to account for regional differences and low-income families.
Despite the predicted difficulties, ministers are keen to get away from the flat-rate charge where the €100 tax is the same for all, regardless of income or property type.
The new system is expected to be self-assessed and could mean the owner of a regular three-bed semi-detached home having to pay between €200 and €300.
Government sources say the property tax is expected to be in the form of a "site valuation tax".
That would tax the value of the site itself and ignore what the house was worth. As the tax is on the raw value of the site, it takes account of the location more than the physical bricks and mortar of the house itself.
So, two houses side by side -- one run-down and one modern -- on the same size site, would be levied the same amount of property tax.
The Coalition currently has a problem of enforcing the€100 tax this year, with only 250,000 out of 1.6 million homes paid up to date.
However, ministers are planning to take high-profile sample court cases against household charge 'dodgers' before the end of the year.
And Labour is insisting the changeover to the property tax has to happen in 2013.
Environment Minister Phil Hogan has indicated in the past month that the new system will be in place by next year.
But the problems with the introduction of the household charge highlight the difficulty of bringing in an even more complex system by next year.
An expert group is due to report back to the minister in six weeks with a formula for applying the property tax.
In order to introduce it in time for next year, the Government will have to make decisions and announce the system by the summer.
The key elements of the equation to be considered for the site valuation property tax will be:
* The value of the property.
* Regional differences between property values.
* Methods of payment.
* Help for low income households.
* Alleviation for those who paid stamp duty by first-time buyers during the property boom.
* What waivers to apply for council tenants.
* What assistance there will be for those getting state help to pay their mortgage.
The expert group also has to work out how to audit the system to ensure householders are paying the right amount and how to enforce the system with penalties for failing to pay.
The expert group on the property tax is chaired by consultant and former top civil servant, Dr Don Thornhill.
He is chairman of the National Competitiveness Council of Ireland, a former Department of Education secretary general and former chairman of the Higher Education Authority.
Dr Thornhill outlined his ideas about how to bring in a property tax in a paper on tax reform he co-wrote four years ago.
"Measures such as waivers and deferrals for older and poorer people can be introduced to address some of the features of the tax which might be regarded as inequitable or harsh.
"In addition, the tax could be collected in instalments through the PAYE and ROS systems. "A variety of transitional measures can also be introduced to provide relief for individuals and households who have recently paid large amounts of stamp duty.
"Income tax credits, deductions or reliefs could also be introduced to address concerns about increasing the overall burden of taxation," he wrote in 2008.
The Coalition first has to push through the implementation of the €100 charge.
Mr Hogan yesterday warned anybody who hadn't paid the charge, they would not get away with it as fines would be imposed.
Government sources say a series of court cases will be put through the pipeline this year in every area of the country.
Every council in the country will be told to bring a number of cases to court before the end of the year.
The Coalition anticipates these cases will get substantial coverage locally and nationally and homeowners won't want to run the risk of ending up being named and shamed in court.
The household charge is being collected centrally, but it's up to local authorities to chase those who fail to pay.
"The instruction will be to go after them.
"The charge will be attached to the property and people will be brought to court. "You'd do a few in every local authority area before the year is out.
"And those cases will get a lot of coverage in the local papers. There's an anxiety that people understand the implications this year," a government source said.
A late payment fee of €10 will apply if the charge is not paid within six months of the due date, €20 between six and 12 months and €30 if the payment is 12 months late.
These penalties are similar to the rules that apply under Revenue Commissioners laws on the late filing and payment of certain taxes.
After two years of failing to pay, the penalty rises to €280 with the combination of the charges, the late payment fees and late payment interest.
However, councils will also have the power to take prosecutions against homeowners who fail to pay the charge.
The prosecution will be by way of summary proceedings and a court may impose a class C fine under the Fines Act 2010, which range from €1,000 to €2,500.
After that, if the homeowner then refuses to pay the fine, it will be up to the courts to decide what action to take, such as imposing a prison sentence.