THE controversial new property tax -- expected to be a key recommendation of the Commission on Taxation's report this July -- could be set back by between two and five years. The delay will arise because the tax will most likely be linked to the value of homes rather than introduced as a flat-rate charge.
The Sunday Independent understands that the Commission, which is chaired by the former Revenue boss, Frank Daly, has moved towards recommending an annual property tax based on the value of homes. About two thirds of the Commission support this route, while the remainder largely support a tax based on the floor size of properties. The recommendation is being made on the condition that the government eliminates stamp duty.
A property tax based on the value of homes would initially involve compiling a database of each home in the country -- and then valuing each property. Some experts believe that it could take as long as five or six years to do this. The valuations could be done through self-assessment, where homeowners value their own properties, through the State's Valuation Office, which would need substantial additional resources to take the job on, or through contracts given to local agents.
"To get something like this up and running, even with self-assessment, you're looking at between 12 and 18 months at least by the time you get the forms out [to homeowners] and the legislation in place," said Declan Lavelle, managing valuer with the Valuation Office.
As a database of homes across the country would also need to be put in place, this could bring the wait up to at least two years.
"There's no database of individual properties in the Republic," said Lavelle. "It would take a few months to put a database like that together. One-off housing causes problems."
The Commission is expected to compile bands of property values and the amount of tax paid by each homeowner would depend on what band the property fell into. For example, a homeowner with a property worth less than €500,000 would pay a small percentage of the value of their home in property tax, while the owner of a property worth between €1m and €2m would pay a higher rate.
"It will be next to impossible to introduce a property tax [based on the value of homes]," said Brian Keegan, director of taxation with the Institute of Chartered Accountants in Ireland. Keegan said there had been a "huge amount" of disputes with the previous residential property tax, which was introduced in 1983 but abolished in 1997. It too was based on the value of homes. "Long after residential property tax was abolished, the Revenue Commissioners were still collecting the tax from homeowners because as homes were sold, it became obvious that the valuation had been underestimated," said Keegan. "Counties like Leitrim were paying a tiny fraction of the total residential property tax take, while Dubliners paid about 75 per cent."
As property prices in Dublin and other cities dwarf those in rural areas, any property tax would effectively be an urban tax.
The Commission is expected to recommend that those earning below a certain level of income, as well as those living in council houses, be exempt from the new tax.
Finance Minister Brian Lenihan, who has already admitted that he is examining a property tax, is expected to include the new tax in this December's budget so it can be introduced next year.