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Saturday 30 August 2014

Fionnan Sheahan: Taxing time ahead for property-levy advisers

Fionnan Sheahan

Published 19/03/2012 | 05:00

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"There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things" -- 'The Prince', Niccolo Machiavelli.

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This Machiavellian quotation was applied to the difficulty of bringing in a property tax by the consultant in charge of coming up with a formula for the new system.

In a joint paper to the Dublin Economic Workshop in Kenmare in October 2008, Dr Don Thornhill and Dr Donal de Buitleir recommended the phasing out of stamp duty on property transactions -- to be replaced by an annual property tax.

"Proposals for tax reform are potentially unpopular -- this is certainly the case for the proposals we make for a recurring property tax.

"We are concerned that the nature of the public policy making space, which includes easy media access by interest groups (and very often domination of media commentary by some of these groups), allied to the dynamics of an adversarial political system, makes it impossible to carry out far-reaching and desirable structural reform, especially where powerful interest groups perceive the reforms as adversely affecting their interests," they wrote.

And the pair included the quote from Machiavelli as a footnote to explain their worries about public reaction.

Unfortunately, the government of the day paid little enough attention to tax reform.

Unfortunately, there has been no change in public discourse of unpopular measures.

And unfortunately, a property tax is now needed as the stamp-duty golden eggs have dried up.

Dr Thornhill, a consultant and former top civil servant, is now the chairman of the expert group on the property tax, charged with coming up with a way to implement it.

He has the opportunity to put what he wrote about from the academic perspective four years ago into practice in the new system.

From his paper, it's clear Dr Thornhill does place a great deal of importance on the social impact of the introduction of the property tax, to address "features of the tax which might be regarded as inequitable or harsh".

He mentioned waivers and deferrals for older and poorer people being put in place, how to collect the tax in instalments and relief for those who paid stamp duty in recent years.

All of these elements will now have to be added into the equation by the expert group before it reports back to Environment Minister Phil Hogan by the end of next month.

The confusing experience with the household charge -- a relatively straightforward, flat-rate €100 -- means the Government will have to make a decision early on the property tax to allow plenty of time to educate the public.

The system is expected to be self-assessed and will be based upon the value of the site, rather than the house.

Explaining all that in time for a 2013 introduction will take some work.

Irish Independent

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