Property: Tax piles the pain on struggling homeowners
HOUSEHOLDERS will be hit with a new property tax based on the value of the site the home is built on. The tax will be hugely unpopular with homeowners who are already struggling to pay off their mortgages.
However, the Government is set to keep the initial cost of the new tax low, possibly in a bid to stymie protests. The new site valuation tax will not come on stream until 2013.
When it is introduced, the average will be €200 per house. The is considerably lower than previous estimates from the Commission on Taxation and the Economic and Social Research Institute (ESRI), both of which put the average tax at around €1,000 a year.
Before the new site tax is put in place, there will be a €100 levy on each household from 2013. The new site tax is to fund local government.
According to the four-year plan, some 1.8m households will be hit by the new charge, while the tax will also apply to land zoned for an estimated 700,000 additional houses.
The measures are expected to raise €530m. Once the tax is fully implemented, commercial rates will change, so that they will also be based on a site valuation basis.
There is no mention in the plan of exemptions for lower-paid people or those who have paid stamp duty.
The ESRI said recently that homeowners who had bought their house and paid stamp duty in recent years would need to be given a waiver, as they should be regarded as having already paid a property tax.
Those on low incomes and people who are in receipt of social welfare benefits would also be exempted from the payment.
Exempting those two groups would mean that the lion’s share of the property tax would be paid by middleincome people. Experts said last night that the move to base the new tax on the value of sites, as opposed to the value of the houses themselves, would mean that it would be more evenly spread around the country.
The ESRI said basing the tax on property values would mean that most of the tax would be paid in Dublin. In the 1990s, the Government was forced to abolish a residential property tax as most of the tax was being paid by Dublin homeowners.
Jim Ryan, a partner at accountants Ernst & Young, said: “Not surprisingly, the plan contains provisions for the introduction of a wide property charge.
“However, to ease the burden of administration and perhaps give the Government time to construct a valuation- based charge, they have instead opted for a fixed site-value charge of €100 per residence.”
Mr Ryan said this was likely to be a first step on the ladder to a universal valuation-based charge across the economy.
He added: “There is no provision for a credit for stamp duty paid in recent years against the site charge.
“Its introduction in this form may be no more than the gradual reintroduction of the culture of residential property tax, albeit closer in nature to the old-style rates.”