Friday 28 November 2014

Property tax is now a ticking timebomb for the Coalition parties

Published 06/12/2012 | 17:00

INEVITABLY with any coalition, even a self proclaimed "national government", the political attention turns to which party fared best or worst in the budgetary arm-wrestle.

At first glance, it would seem that Fine Gael largely got its way in Budget 2012. No Universal Social Charge increase for those on over €100,000, the cut in child benefit, and the wholly regressive abolition of the PRSI allowance. Combined, they make this a particularly tough budget to stomach for Labour deputies.

The hostages to fortune given by Labour during opposition are increasingly coming back to haunt the party.

Not least the 'Fine Gael ... every little hurts' poster, which it brought out during the last general election campaign.

The poster was the talk of Twitter yesterday. With good reason. On the poster, Labour listed six measures that would happen if Fine Gael got power on its own – a hike in car tax; a two point rise in VAT, €1 on a bottle of wine; a €10 cut in child benefit, an increase in DIRT tax and water taxes.

Five of the six have now happened, and water charges are but a year or two away. Every little does indeed hurt.

But the smarter Fine Gael deputies, particularly the Dublin-based ones, will know that there are also reasons to be fearful about yesterday's Budget.

Last weekend's fall in Fine Gael's poll rating has put paid to the theory that Labour solely would take the rap for the unpalatable decisions the Coalition have to take.

And worse may yet lie ahead because the real stinger in this Budget isn't likely to be felt until the middle of next year. Come the summer – long after many of the budgetary issues causing controversy this week are forgotten – home owners will have to dig deep to pay a property tax.

In Dublin Fine Gael deputies are privately reporting that constituents are up in arms about the proposed tax, particularly in the leafier southside constituencies where many voters are facing property taxes of €1,000-€1,500.

New taxes are notoriously difficult to sell. Look at the outrage over the €100 household charge.

That was perceived to be deeply inequitable. The property tax is obviously more progressive, but it will be perceived by many voters in the capital as an anti-Dublin tax.

The point has been made in recent days that the actual cost of local authority services per capita is the same in Dun Laoghaire Rathdown as it is in Donegal. Yet the reality is home owners in Dun Laoghaire/Rathdown will pay a multiple of the property tax paid in Donegal.

That causes a political problem for the Government and particularly for Fine Gael. "It's either a local tax or it's not a local tax," one Dublin deputy complained this week.

The move in the Budget to allow local authorities increase or cut it by 15pc in their areas won't assuage those concerns.

Comparisons are also being made within Fine Gael with the old residential property tax from the 1980s and 1990s. It caused huge controversy despite affecting a relatively small group of wealthier homeowners.

Three-quarters of the revenue came from Dublin. And there is a view in Fine Gael that it was a contributory factor in the party's steep decline in the capital, which culminated in it winning just three seats in Dublin in 2002.

The Government can quite legitimately argue it has no choice but to introduce a property tax – the hole in public finances means a broadening of the tax base is unavoidable.

But such arguments are unlikely to impress voters, many of whom paid tens of thousands in stamp duty and are in negative equity.

Fianna Fail and the Greens made equally legitimate and logical arguments introducing the universal social charge in 2010. Voters were totally unforgiving.

The fear for Fine Gael, and to a lesser extent Labour, is that property tax will be to this Government what the USC was to the last.

Irish Independent Supplement

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