Sunday 22 October 2017

Marc Coleman: Labour finds itself stuck in property tax threesome

The latest levy is a way of putting off the radical reform people voted for in 2011

Marc Coleman

Marc Coleman

Sometimes questions politicians aren't asked are more important than the ones they are. "Minister, did your party's support for a second property tax hurt you in this by-election?" Had I interviewed Minister Alex White last Thursday on the outcome of the Meath East by-election, that is the question I would have asked. Instead, Alex was asked if his party had suffered from the Croke Park deal being reworked. But then in a week that exposed the still eye-popping level of its own stars' salaries, RTE seemed more concerned about its comrades in the public sector than with the greater number of property owners.

As recent property price data shows, the tax is not just about fairness, but competence. Between July and November property prices were improving steadily. Not back to the insane highs of 2006 but to a reasonable middle ground. Up 2 per cent in four months, prices rose – according to CSO data – at an annualised rate of over 5 per cent. Just enough to take tens of thousands out of negative equity between now and 2020. As data from the Irish Banking Federation shows, mortgage drawdowns were starting to pick up in the final quarter of last year. Then came the property tax. Between November and February prices fell by 2.6 per cent, or at an annualised rate of 8 per cent. Before December the property market was beginning to enter a period of recovering prices, confidence and activity. Now we are back to a vicious circle of negative equity, falling confidence and mortgage arrears.

So why was the tax imposed? Contrary to popular belief, the Troika didn't force the tax on us exactly. As shown in Cyprus, it can be flexible when workable alternatives to its bailout terms are proposed. But Ireland's alternative to a second tax – real, radical cost-cutting reforms – is not sufficiently supported by Labour or Fianna Fail. So, without compensation for those who paid stamp duty, we got a property tax. And with none of the consultation that accompanies constitutional issues beloved of Labour.

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