More pain as households hit with new €100 ‘property’ tax
More pain as Coalition brings in new 'property' tax
Published 25/07/2011 | 05:00
ALMOST all households are set to be hit with a new €100 service charge to be announced this week, the Irish Independent has learned.
The Cabinet will sign off on the combined water and property tax tomorrow, despite the easing of the debt burden under the new EU bailout deal.
Environment Minister Phil Hogan is coming under pressure to exempt those on low incomes from the new tax, which will result in middle-income earners paying more.
The Government is expecting to bring in upwards of €150m from the charge.
The flat-rate levy, to be introduced next year, will be the first tough decision to be taken by the Coalition that will prove unpopular to the overwhelming majority of people.
The options for the annual charge range from €100 to €200 a year. The likely outcome is a sum at the lower range of €100, with a small number of exemptions -- the solution favoured by Mr Hogan. However, this will have to be approved by the Cabinet.
"If you go into massive numbers of exemptions, you won't raise the funds required. The idea is to have a small amount and a small number of waivers," a source said.
There are 1.8 million households in the country and only about 10pc of homes -- between 150,000 and 200,000 -- will not have to pay the new tax.
However, the tax will be payable by the property owner, meaning landlords will have to pay the bill and are therefore expected to pass on the costs to their tenants in higher rents. This provision will affect a host of social welfare recipients and low-income earners.
The collection of the household service charge is expected to follow the model of the tax on second homes, which is payable on the internet.
Failure to pay the household service charge will result in penalties being applied. The amount to be paid is being announced now to give ample warning before its introduction in January.
The funding will go directly to local authorities and the councils' grant from central government will be reduced by the same amount.
After promising to let people know how much they will be paying before the Dail summer break, there was some doubt cast last week over whether the decision would be kicked to touch again.
The charge will form part of the €3.6bn worth of additional taxes and spending cuts in next year's Budget.
The new tax will be greeted with hostility, particularly as it comes in the wake of the new EU deal resulting in a saving of about €1bn a year in bailout loan repayments.
Left-wing groups are already planning to oppose the tax.
However, Transport Minister Leo Varadkar said yesterday this year's Budget deficit of €18bn still had to be brought down -- regardless of the national debt or banking crisis.
The Cabinet will debate the new tax at its meeting tomorrow, with the details announced afterwards. Bringing in property and water charges was a condition of the bailout deal reached with the IMF/EU.
The Government will attempt to soften the blow by saying the new charge breaks down to just €1.92 a week and goes toward the provision of local council services, such as water, sewerage, road maintenance and fire brigades. It will argue this is the way local services should ideally be funded and is the system in place in most European countries.
The charges will be accompanied by a PR campaign to explain where the funds go.
The rollout of the new household service charge will be a precursor to a property tax.
The Cabinet is also due to discuss the installation of water meters in every house in the country. But this scheme will take several years to introduce.
Once houses are metered, water charges will be introduced.
Householders will be given a basic allowance of water for free and pay for anything they use over and above that amount.
The formal property tax will also come in once a valuation system is set up.
Rather than a flat-rate charge, the sum to be paid will be based upon the value of the house or its size.
Again, such a comprehensive valuation system will take several years to establish.