Tuesday 25 October 2016

Paul Melia: The property tax is far more unfair than water charges

Published 28/04/2016 | 02:30

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Two months of squabbling over water and what are we left with?

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A temporary suspension of charges, which is likely to remain a permanent state of affairs; the introduction of an external advisory board to oversee accountability in Irish Water and a commitment to establish an independent commission to review the best way to fund the necessary upgrades, which may or may not be accepted by the Oireachtas.

The dogs on the street have known for weeks there was no way that Fianna Fáil or Fine Gael would go back to the country on the water issue. So instead, they have agreed the classic fudge - suspend the charges, and tell the 900,000-plus homeowners who have already paid that they were mugs, and establish another review to kick the issue down the road.

We don't do vision in this country. Whatever about the need to upgrade the network, politics comes first.

This cobbled-together minority government, if it sees the light of day, will come at a cost. Instead of collecting €260m a year from those who drink water, and rightly demand that their effluent is treated, the money will have to come from general taxation. Those who can afford the charge will escape. Those on group water schemes will continue to pay.

The public will ultimately pay anyway, but no-one in the parties are setting out what budgets they intend cutting to make up the shortfall.

It's argued we have always paid, which is correct. But we also know that the amount spent was far short of that needed to keep the system operating at the required level. If the investment was sufficient, we wouldn't be facing a €13bn bill to bring the network up to standard.

The cost of power is, therefore, €260m a year. There is no winner, only losers. Fianna Fáil did not abolish Irish Water as it promised, but did scrap the charge for now. Fine Gael held the utility, but rolled-over on continuing to ask people to pay.

But if the parties really wanted to show their statesmanlike credentials, there were other taxes and levies which could have been considered for reform or abolition.

The inheritance tax, motor tax and Local Property Tax (LPT) spring to mind.

Motor tax receipts amounted to more than €1.1bn last year, and the money is used to fund day-to-day services offered by local authorities. Despite a backlog of repairs needed across the roads network, which are at least €3bn, that money isn't ringfenced. Drivers correctly point out that the proceeds of this tax, which is only levied at road-users, does not go back into improving our roads.

The inheritance tax is a source of huge concern for older people, especially as their families will be lumped with a bill merely by inheriting the family home. It affects people living in the cities disproportionately, and could easily be rectified by increasing the threshold further.

And the LPT is the biggest nonsense of them all. Spun as being a new source of funding for city and county councils, it was no such thing. The Government simply reduced Exchequer funding to local authorities, and replaced it with a charge on households.

It also hits those in urban areas hardest, where property values are highest, and the Government has been told that it is in urgent need of reform, has "serious shortcomings".

But the crucial difference between it and water, is that the LPT is collected by the Revenue Commissioners and the money is flowing in.

Nothing focuses the mind like an envelope emblazoned with the harp dropping through the letter box. Some 97pc of households pay, unlike 61pc who meet their Irish Water bills.

Water charges may have been a tax too far, but the LPT and other taxes are in most need of reform. If the parties were serious about offering fairness, and vision, they're the ones they should be focusing on.

Irish Independent

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