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Families facing return of home tax

A RETURN to domestic rates for the first time in 30 years was raised last night by the man heading up the Government's new cost-cutting taskforce.

Householders could end up paying thousands of euro a year for the privilege of living in their own homes, if the Government moves forward with the plan.

Economist Colm McCarthy, who is at the helm of the Government taskforce dubbed An Bord Snip Nua, also raised the prospect of a firesale of key state assets, which would include Bord Gais, ESB and 25pc of Aer Lingus.

Mr McCarthy told a meeting of economists in Dublin yesterday that the Government should consider "biting the bullet and have a regular tax on residential property -- which would be a much more stable source of taxation".

He was speaking as Taoiseach Brian Cowen desperately seeks to bolster the Government's dwindling finances. Latest exchequer figures show the Government will have to borrow €55m a day just to balance its books.

The large tax revenues generated from property sales were now gone, and were likely "to stay gone for a considerable period of time", Mr McCarthy said.

If it wanted to offset these shortfalls, the Government could consider reintroducing rates on all homeowners, he added.

Irish homeowners have enjoyed a holiday on rates since 1977. A residential property tax introduced in the 1980s proved hugely unpopular and was swiftly scaled down, before being abolished in 1997.

Despised by voters, their reintroduction could seal the Government's political doom and is likely to considered as a last resort. In the UK, a poll tax, similar to rates, sparked prolonged rioting under Margaret Thatcher.

The possibility of a return to housing tax would threaten to demoralise a whole swathe of workers, particularly if it should apply to those on PAYE. The idea was greeted with alarm last night.

A Fine Gael spokesman said: "After 17 tax rises in the Budget, the re-introduction of domestic rates would only add salt to the wounds already inflicted by this Government."

SIPTU President Jack O'Connor said: "We are in favour of property tax which would be structured on the value of a property and people's income to a realistic threshold."

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But he added: "We didn't envisage a tax on the principal private residence. Our emphasis has been on second, third and subsequent homes. But if the main residence was a trophy house, we would see some level above which it wouldn't be regarded as untouchable."

Firesale

Mr McCarthy's firesale recommendation puts Bord Gais, the ESB, and other state and semi-state commercial bodies into the shop window.

"If the State is in a position to realise some of its commercial assets and property, it should consider doing so," he said.

Mr McCarthy is also suggesting that the Government consider land and property disposals, despite the severe downturn in the value of office accommodation, sites and landbanks.

Separately, Finance Minister Brian Lenihan insisted that most lump-sum redundancy payments, up to certain limits, will not be subject to the recently introduced income levy.

Mr Lenihan said that broadly, any lump sum which is exempt from income tax will also be exempt from the new levy, he said.


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