Property tax: new trap brings fears that State pension hike will trigger first-time charges
Fears State pension hike will trigger first-time charges
A new property tax trap threatens to force pensioners on low and fixed incomes to pay the tax for the first time because an increase in the State pension has pushed their annual income beyond the threshold for deferring the payment, the Sunday Independent can reveal.
A much-anticipated review of the controversial tax on home ownership recommended that Finance Minister Paschal Donohoe increase the thresholds for deferring property tax to ensure pensioners were not excluded because of the rise in their weekly pension.
However, Mr Donohoe decided to delay making any changes to the property tax system for a year amid accusations that the Government feared making any decision ahead of the forthcoming local and European elections.
Yesterday, Fianna Fail’s finance spokesman, Michael McGrath, warned that a serious consequence of the minister’s inaction on property tax was that many low and fixed- income households would no longer be able to defer the charge.
Mr McGrath said a couple who are both on the maximum State pension of €248.30 per week, giving them a total annual income of €25,800, are now above the threshold to qualify for a deferral which is €25,000 for a couple.
When the deferral thresholds were introduced in 2013, pension payments were €18 less per week and all pensioners would be able to avail of deferrals. The latest increase came into effect at the end of last month.
“So basically the message from the Government to pensioners on low income is ‘tough luck, you have to pay up now’,” Mr McGrath told the Sunday Independent.
“I think this is a particularly mean approach by the Government because the truth is it doesn’t cost them anything to allow those on modest incomes to defer.”
Homeowners can currently defer their property tax charge if their income is below €15,000 for a single person or €25,000 for a couple. The property tax review recommended increasing this to €18,000 for a single person and €30,000 for a couple.
Mr Donohoe’s spokesperson said the minister was “likely” to increase the thresholds in line with the report’s recommendations.
The Sunday Independent can also reveal that the minister’s review of the controversial tax dismissed a number of proposals which would have made life less difficult for cash-strapped pensioners.
This included a submission from the Independent Alliance calling for waivers for homeowners on low fixed incomes and people with disabilities. However, both suggestions were shot down.
The cross-departmental review group also dismissed a proposal to give property tax relief to people over 80 with long-term illnesses despite this measure being previously recommended in a government report.
The report also ruled out cutting interest rates charged on property tax deferrals, which are mostly availed of by older people.
"We are still requiring that people on fixed income, specifically pensioners, are given waivers on property tax because they can't afford to pay the charge," Mr Ross told the Sunday Independent.
Meanwhile, it has also emerged that more than 328,000 mostly older people who are eligible for the deferral scheme are not taking up the option - with fears being expressed that they might not be aware there are entitled to put off the payment.
Latest figures show 56,300 homeowners chose to defer their property tax last year. This is a massive increase from the 29,800 who deferred the payment when it was first introduced in 2013.
The deferred payment incurs 4pc interest annually which is permanently fixed as a charge on the property and must be paid on the sale or transfer of the home.
Mr Ross added: "A lot of people don't know about it and a lot of people don't want to leave a debt to their children."
At a briefing at the Department of Finance last week, a senior Revenue official admitted some older people may not be aware of the deferral system because the property tax system is relatively new.
"It is a combination of it being a new tax and people getting used to it and getting aware of what the different parts are and Revenue trying to encourage uptake," the official said.
"In more recent years we have tried to encourage more people to take up deferrals and we identified some people who were eligible for deferrals based on their income returns and we offered them deferrals."
Another official said that because pensioners do not generally file returns with Revenue it is more difficult to make them aware of their entitlements.
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