Tuesday 12 December 2017

New 'super property tax' plan for wealthy homeowners

Fionnan Sheahan Political Editor

THE Government is considering a 'super property tax' for owners of large, expensive homes.

Under the proposals, the rate of tax levied would rise with the value of the property, the Irish Independent has learned.

Similar to income tax, the property tax rate would go up in bands linked to the value of the house.

That means owners of such houses would pay a higher percentage rate of tax due to its greater value.

This 'super tax' would help the Government to sell the property tax to the public as homeowners would clearly see the rich paying more.

A coalition source said: "You would need bands . . . the millionaire's house would proportionately cost more."

It will spark concern among those who already stretched themselves to buy a relatively expensive property, and have already paid stamp duty.

But no decision has yet been made on the proposals -- or on the levels at which a higher rate of property tax might kick in.

The Government is trying to devise a system that is as easy as possible to understand.

"Taxes that are complicated are not publicly accepted," a coalition source said.

The coalition is moving toward a pure market value model for the property tax.

This measures the home in terms of its price if it was being sold on the current market.

The Government is moving away from a site-value tax because it would throw up anomalies.

For example, two houses -- one rundown and one modern -- on the same-sized site would have the same property tax bill.

In urban areas, houses on the same road tend to be more uniform -- with the site and the house being, more or less, the same size and value.

But in rural areas there are often houses of different sizes and values built side-by-side.

Although the site-value tax is favoured by economists, the Government is finding it difficult to identify a country in Europe where it is used effectively.

"Market value picks up everything. It picks up on your house size, location, level of amenities and access to facilities," a source said.

The Coalition is also trying to develop a system that factors in the household income to protect those on low income or already in mortgage difficulty.

However, this is regarded as extremely difficult to develop.

The model of property tax chosen is expected to be the permanent formula with any interim charge being ruled out.

The Revenue Commissioner is expected to work closely with the body collecting the household charge for the rest of the year.

Revenue will be in charge of collecting the property tax, so it's in the taxman's interest for a full and accurate database to be in place for the handover.

The Coalition is still mulling over an expert report on the property tax, but a final decision may not be known until December's Budget.

Then the property tax probably won't come into effect until the middle of next year. The tax will be brought into effect by the Finance Bill.

After that, there will be an implementation period and a deadline for payment. In the meantime, the expert report has been circulated amongst senior ministers in the Coalition.

The report goes into a handful of different options for setting the tax and sets out how it would be achieved.

The group, headed by former civil servant Don Thornhill, issued the report to Environment Minister Phil Hogan last month.

Although it has yet to be discussed at Cabinet, it has been studied by the Economic Management Council (EMC).

The EMC is the high-powered Cabinet sub-committee on the economy made up of Taoiseach Enda Kenny, Tanaiste Eamon Gilmore, Finance Minister Michael Noonan and Public Spending Minister Brendan Howlin, plus their advisers.

Last week, the Government handed over responsibility for collecting the property tax to Revenue.

The move is expected to dramatically reduce the amount of evasion of the tax. The decision follows the difficulties with collecting the €100 household charge this year.

Three months after the deadline for payment of the charge, only 60pc of homeowners have registered for the charge.

The slow level of payment has been a source of acute embarrassment to the Coalition.

The Government said handing over the responsibility to Revenue was "deemed the most efficient way to collect it".

Irish Independent

Promoted Links

Today's news headlines, directly to your inbox every morning.

Promoted Links

Editor's Choice

Also in Irish News