News Martina Devlin

Thursday 21 August 2014

Martina Devlin: Fairness and transparency must be applied to end this property tax farce

Published 13/09/2012 | 17:00

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The silly season is over, says Enda -- without admitting that the pantomime season has replaced it. And so here we all are, thigh-high in pantoland, with the Government prancing about as the people's champions, standing up to those moustache-twirling villains in the IMF.

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Pretend battles are a convention in panto, and this week we were treated to the spectacle of a one-sided game of faux fisticuffs, fought over the rate at which the property tax will be set.

First, an IMF report suggests 0.5pc of value, which causes consternation. Boo, hiss! That would mean an annual charge of €1,000 on a home worth €200,000. Next, members of the Coalition puff out their chests and cry: "We'll defend our citizens from that half-a-percentage-point dragon." Hurrah!

"My hero," swoons Dark Rosaleen, rescued from the clutches of those absentee landlords who control Ireland's purse strings.

That's the plot, and a fairly threadbare one, too. Still, other elements of the panto formula have surfaced to pad it out. There has been a joke from principal boy Enda with his quip on reshuffles.

There has been a surfeit of slapstick: the latest is 'Mock' Wallace insisting the unvouched and untaxed €41,000 annual leader's allowance is "not for my personal use but will be used mostly for research into different issues that concern the people of Ireland''.

There has even been a panto horse bumbling about: James Reilly, busy making a donkey of himself for quite some time now. But the traditional, highly unlikely, plot resolution is absent. No happy ending expected -- no happy ending possible.

Like it or not, a property tax is on the way. Perhaps it will come in at 0.25pc or 0.3pc annually, a figure outlined by the 2009 Commission on Taxation Report.

Whatever amount is determined, this tax will cause hardship among some sectors of society. But what's generating unnecessary distress right now is the play-acting, with sums on a Big Bad Wolf scale bandied about.

The choice is not between a property tax versus no additional taxation. Remove the property tax and money will have to be drummed up elsewhere, possibly via tax-rate increases.

Most citizens accept that. Nevertheless, the uncertainty is causing anxiety. Homeowners -- and they are not Money Bags, but ordinary people -- are doing the maths, looking round their houses, which they bought as homes, not investments, and wondering why hard work is being penalised.

Oh, I know the reason, and we've heard it ad nauseam: every other developed country has a property tax. But every other developed country didn't have ginormous stamp duty levies. During the boom, home-buyers routinely paid bills of €40,000 to €60,000 in stamp duty -- windfalls for the Fianna Fail-led government. Residential property sales provided a stamp duty of €2.25bn in 2005 and 2006. Staggering, in hindsight.

This was property tax enough to last most homeowners a lifetime. Especially as some loaded that stamp duty on to their mortgage and face decades of paying it back.

The 2009 commission, incidentally, also proposed an exemption for seven years, to take account of stamp duty, as well as establishing a system of up-to-date valuations, broken into bands, which would allow homeowners to self-assess, subject to monitoring. We'll have to wait and see if these are implemented.

But don't tell us this property tax is intended to broaden the tax base and make tax fairer. We know it's to offset bailing out the banks -- which fuelled the property boom with reckless lending.

No genie is about to emerge from a lamp to reverse our dilemma. But let's apply the principle of fairness, at least.

There are at-risk groups who may go under unless waivers are agreed. Yet since each exception means an increased burden on those deemed eligible to pay, we must be selective.

THE most vulnerable sectors, in my view, are those in serious negative equity or without work. A property in negative equity is a millstone, not an asset, and such victims of the property madness shouldn't be obliged to pay all over again.

As for those on the live register, they are already punished by our inadequacies as a society and ought not to suffer this additional penalty.

You may be wondering why I haven't mentioned the elderly. That's because senior citizens can't be lumped into one category. Some are in a weak position financially and must be protected, while some are relatively comfortable; still others are affluent. Exceptions cannot be automatic because of age. But ability to pay ought to be considered. Someone of advanced years may live in a large house on a limited income. One possibility is to exempt them from the tax temporarily, while attaching a charge to the property. When it is sold, the money can be claimed by the State.

It seems unfair that those in rented properties are absolved. The assumption is that homeowners are wealthier, but this is debatable in an era of negative equity. And are owner-occupiers the only users of roads, parks and libraries, the putative beneficiaries of the tax?

As for the rest of us, we must have certainty. We need to know the rate, and we need an opportunity to pay in instalments. In addition, we are entitled to scrutinise how our money is spent, so full and transparent accounts must be produced annually.

This happens in other countries, so if Ireland is being brought into line on taxation, we should also be brought into line on accountability. Oh yes, we should.

www.martinadevlin.com

Irish Independent

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