A property tax that is centrally collected is a misnomer, with the councils being the biggest losers, writes
Within the next couple of months almost two million homeowners will get a letter from the Revenue Commissioners with an indicative valuation of their home and an estimate of the local property tax due based on that valuation. Charged with collecting the property tax following the fiasco of the household charge, Revenue is leaving nothing to chance.
Not known for their expertise in the area of property valuation, it is expected that Revenue will get some assistance from the State's Valuation Office in estimating the value of every home in the country.
This would be no mean achievement. The Valuation Office, which services all government departments and state bodies, is reported to have taken 12 years to value residential property in just three local authority areas (Fingal, Dun Laoghaire-Rathdown and South Dublin). It's a far cry from three areas in 12 years to two million homes in under six months.
In a dysfunctional property market Revenue is set to depend on information from the Property Services Regulatory Authority's new register of residential property sales, first published in autumn 2012, with some support from CSO and ESRI surveys. This register is compiled from Revenue's own records of stamp duty paid, but only since the start of 2010. That information is going to be a bit patchy.
Even though Revenue seems confident about valuing our homes for us by March, it doesn't expect to have a full database of homes in the country until July.
They are understood to be expecting a huge fallout from the issue of the March letters because of the potential for error in matching names and addresses and of events such as deaths and emigration. It seems that they are planning to pour scarce resources into staffing helplines and dealing with the correspondence that these mistakes are bound to create.
Revenue is due to issue guidelines on how to value your property. But we already have a hint from the budget papers about what to expect. Guidelines issued with the papers say that where you accept Revenue's valuation, it will not challenge it, which seems highly sensible; or where certain procedures are followed, such as engaging the services of a competent valuer, they will not challenge that valuation. Music to the ears of the valuers' profession, I would think.
If you insist on valuing your home yourself Revenue may challenge your valuation. I'd be very surprised if it challenges many in the first year or two. It's going to have its hands full managing the administration of the tax. Payment will be the goal, along with improving on the household charge payment level.
If it should challenge your valuation, you should know that it has the power under new legislation to authorise someone to enter your home to value it. This is an incredible power – the only other circumstance where Revenue can enter your home is on foot of a search warrant in a criminal case.
Accepting Revenue's valuation means accepting its estimate of the tax due. If you don't either pay the estimate or replace it with a figure based on your own valuation, Revenue's estimate becomes due on July 1, 2013 .
According to Revenue, it will collect the amount due in the "normal ways" but the methods it is proposing to use: deduction at source, attachment of salaries and wages, etc, are far from normal collection measures.
These are at the extreme end of collection enforcement. Attachment means that Revenue can go to your employers and instruct them to deduct the tax from your salary without having to get a court order.
A provision in the 2011 Finance Act which allows Revenue to seize arrears of income tax from wages and salaries caused outrage in the Seanad. Senator Eugene Regan ( Fine Gael) likened it to a police-state type provision and Indepen
dent Senator David Norris said it was a horrendous power to exercise against the citizen.
This is a power that Revenue is
now describing as normal and is planning to use as the first line of action in collecting unpaid property tax from PAYE workers.
The self-employed are not getting away too lightly either. If they don't pay the tax, Revenue will refuse to issue a tax clearance certificate, which is needed both for doing business with government and, in many cases, to carry on a business at all.
More sinister, however, is a suggestion that Revenue will make it part of your income tax return and that late payment of the property tax will result in a surcharge on income tax.
All of which makes the local property tax neither local nor a property tax. It is to be collected centrally by Revenue as if it was a tax on income with no input from local authorities (except a power in future years to vary the amount).
What is even weirder is that local authorities will have to pay the tax on social housing – if it really was a local tax, they would be paying it to themselves. As it is, they will have to apply scarce resources to handling the payment, presumably at the expense of badly needed local services.
Fiona O'Shea is a former principal officer for the Revenue Commissioners