Property tax will be double whammy for many owners
THE proposals by the Commission on Taxation for a property tax could mean double taxation for those who bought at the top of the market and paid hefty stamp duty.
Most of these buyers are already vulnerable after finding themselves in negative equity.
So to put them in the nightmare position of having to watch buyers acquire similar properties at half the price they paid -- and without the added financial burden of stamp duty -- would, quite rightly, cause considerable dissent.
If stamp duty is to be removed, the Government must give some concessions to those who bought in the past five years.
The idea of property tax on all homes, with the relevant exemptions, is in itself not a bad idea. It has already been implemented successfully in other countries, many of whom also pay transactional taxes similar to stamp duty.
Property taxes generally fund systems and amenities such as roads, parks, etc, which can only add to the value and enjoyment of a home.
Many European countries such as Italy and France assess the tax by considering the notional rental value of the property -- a practical and relatively equitable way of assessing liability.
The problem with the commission's proposals revolves around the whole idea of their definition of the 'value' of a property.
Instead of considering the model of assessing the notional rental income, the Government seems to be looking at the market value of the property, ie, how much money you would get for it should you sell it.
Thus they are taxing your house as though it were a financial asset, as though having a home and living in it generates wealth. But isn't this mentality partly what got us into this whole mess?
That aside, this definition of value highlights a fundamental problem that has long plagued the Irish property market -- the lack of transparency in property house prices.
Under the data protection act, an estate agent must obtain the written consent of the buyer and the vendor involved in any house sale before the information can be released.
For one reason or another, this consent is either not being given or not being sought. As a result, there is no reliable indicator of house values.
If, as the commission proposes, homeowners have to self-assess the value of their property and file a tax return -- how are they supposed to arrive at such a figure without access to unbiased and reliable information?
The property industry has long campaigned for more transparency with regard to house prices, so maybe now the Government will have to amend legislation to provide us with an equivalent to the UK's Land Registry House Price Index (HPI), which measures changes in the value of residential properties by tracking all sales.
The estimated average payment per household, based on the commission's expectations that the measure should raise €1bn for the exchequer, is expected to be in the region of €600 to €800.
Since no one in the country knows exactly how much their house is worth from one day to the next, one would wonder how they arrived at the figure of €1bn.
