THE taxman will be given new powers to claw back property tax from those who underestimate the value of their homes in the self- assessment system that will come into force next year.
And the Revenue Commissioners will be carrying out random spot checks to assess the value of properties from day one of the new tax regime to ensure householders don't deliberately undervalue property to reduce their bill.
Householders will be asked to put a value on their home and will then pay the property tax based on that value for the next three years until 2016, the Sunday Independent has learnt.
The three-year timeframe would allow homeowners to carry out home improvements without increasing the market value of their home and subsequently their property tax bill during that period.
But estimating property values accurately may prove problematic, given volatility in the market that is set to worsen as thousands of distressed buy-to-let homes are expected to be put up for sale in the New Year.
According to house price data, around 90 per cent of householders live in properties valued at below €300,000, which means a large majority of people who own houses rather than apartments will pay €450 or €550 a year based on market value.
But figures compiled by the Sunday Independent from a range of CSO property price data show there will be significant regional variations.
It means the owner of a home in Dublin (average value €334,204) will pay €650 a year, while a householder with a home in Waterford (average value €169,572) will pay €350.
The new property tax will be at the rate of 0.2 per cent based on self-assessment, with the bands starting at €50,000 and increasing in increments of €50,000.
It means someone with a house valued at €101,000 will pay €250 a year based on the midpoint between €100,000 and €150,000 (€125,000). Another householder with a house valued at €149,000 will also pay €250 a year because their tax will also be calculated at the midpoint of €125,000.
Apartment owners will pay less – based on analysis of the current market value of second-hand apartments around the country.
In Dublin, the average price of an apartment sold in the second quarter of last year was €181,397, which means an annual tax bill of €350.
In Galway an apartment sold between April and June this year achieved an average of €122,527, which means a property tax bill of €250.
Full details of the powers to be given to Revenue to clamp down on those who do not put a realistic value on their homes have not been fully finalised.
But senior sources confirmed that if someone sells a house in years to come and the price achieved is in excess of the value put on the property for tax purposes, the revenue will be able to not only get the outstanding tax owed but also impose penalties at a level that will act as a deterrent.
The same clawback will apply in the event of property going to probate after the death of the property owner – again with penalties. Separately, there will be provision to safeguard those elderly people who may be asset-rich in terms of property but cash poor and unable to meet a hefty annual tax bill of €1,750 in the case of a house valued at €855,000.
Those people will be able to apply for a means test. If they pass that test they will be able, for a limited number of years, to defer the property tax until they sell their home or are deceased.
In the latter case the deferred tax will be deducted from their estate without penalties.
In certain parts of north and south Dublin, both property prices and the age profile of residents, many now living on meagre pensions, are comparatively high.
All householders are expected to have the option of having the property tax deducted at source from pay packets.
There is also speculation that there will be a means test for a property tax deferral for lower paid homeowners and those in mortgage debt distress or solely dependent on social welfare. According to unconfirmed reports, single people with a yearly income of €20,000 and couples on €30,000 may be able to qualify for a deferral until the property is sold or personal circumstances improve.
While Finance Minister Michael Noonan is adamant that he will not extend the deadline on mortgage interest relief for first-time buyers, due to expire at the end of the month, it is understood he is considering other incentives including a VAT refund and a property tax holiday for first-time buyers.