Property tax: why city dwellers will pay more
Average rate to be €300 a year under self-assessed system
HOMEOWNERS in cities will be paying more property tax on their homes than their rural counterparts from next year, as the flat-rate tax will be based on the market value of the house.
Few exemptions will be available -- but homeowners who are unable to pay will be able to apply for a deferral, under plans to be announced in next week's Budget.
The fine details of the property tax can be revealed for the first time today by the Irish Independent.
The value of the home will go up in bands of €50,000 and it will be calculated by self-assessment.
Householders will pay the rate attached to the nearest €50,000 band, so a house worth €235,000 will pay the rate for all houses between €200,000 and €250,000 of €500.
The property tax is expected to range from €200 to €400 for most homeowners.
However, the format of the new property tax means that it will be a bigger burden for those in cities, where house prices are higher.
In the coming years, though, this urban-rural imbalance may be alleviated when councils set their own rates as services are cheaper to provide in cities.
Homeowners will pay just half the full amount next year, as the property tax will only apply for the second half of 2013.
The Cabinet yesterday discussed the property tax in detail for the first time and signed off on most of the details.
The rate of tax is expected to be set at 0.2pc of the value of the property, but the figure has not yet been finally signed off on by the Government.
Last night, a government source said that due to ongoing haggling over €200m worth of cuts and taxes, the rate has not yet been formally set.
At the moment, the tax rate is heading for 0.2pc, but it might end up at 0.25pc, depending on the finalisation of details. Only Finance Minister Michael Noonan will know the final rate, which he will then announce in next Wednesday's Budget.
Similar to the household charge, there will be few exemptions from the property tax.
But there will be a means-testing system in place for a deferral for homeowners such as: people in mortgage debt distress; pensioners living in valuable properties; or people solely dependent on social welfare for their income.
Finance Minister Michael Noonan has rejected a recommendation from the IMF on setting the tax at a higher level.
The IMF advised the Government to bring in a rate of 0.5pc of the house value, which would bring in €1bn a year. But the Finance Minister said it was not going to be this high.
The Revenue Commissioners will collect the property tax and will be in charge of collecting the arrears of the household charge.
It will issue guidelines on how to assess the value of your home and will warn of the penalties for not paying the right amount.
Revenue will begin collection in the summer and homeowners will have the option of paying it in full, in instalments or collected through their wage packets. Revenue will need until the summer to set up the collection system.
From 2015 onwards, local councils will be given the opportunity to set the tax. Following the next local elections in 2014, the handover to councils on setting the rates will begin.
The contentious issue of deducting the property tax direct from social welfare payments is still to be resolved.
Mr Noonan brought a memo to a special Cabinet meeting yesterday setting out the detail of the property tax. Although ministers discussed the proposals, they did not finally sign off on it. At their first formal Cabinet meeting on the Budget, ministers had a two-and-a-half hour discussion on the property tax and spending estimates.
Ministers will be back again at 8.30am for another meeting, where there is expected to be discussion on individual spending departments.
The details of the property tax will be announced next week by Mr Noonan in his Budget 2013 speech.The Government is targeting an income of up to €500m a year from the property tax in a full year. The law to bring it into effect will be passed in the New Year.