GOVERNMENT plans to introduce a "value-based" property tax have been attacked by leading figures across the political and economic spectrum, who warn of a looming "fiasco" that will penalise Dublin homeowners hardest.
Under the plan, the new property tax regime would see the owner of an average four bed semi-detached house in Dublin paying €897 a year while the owner of an equivalent house in the midlands would pay just €375.
Even within Dublin, the average southside householder will have to pay twice as much as the average northsider, based on current Myhome.ie property valuations and calculations applied by the ESRI.
The Government plans to introduce the tax in December's Budget, according to a submission to the EU/IMF/ECB troika, which was posted on the Department of Finance's website on Friday.
The tax will be "value-based", rather than based on the square footage of a property.
This means that middle-class Dublin homeowners, where average property values outstrip those in the rest of the country, will have to pay more than their share of the €500m that the Government intends to raise.
Last night Fianna Fail leader Micheal Martin said: "This has all the hallmarks of becoming another fiasco from those who brought us the household-charge mess."
The Government's agreement with the troika was announced in a week in which the full scale of the country's mortgage-arrears crisis was revealed.
New figures from the Central Bank show that 168,637 homeowners -- one in five -- are now struggling to meet their mortgage repayments.
According to the figures, which were released on Thursday, 128,416 borrowers were in arrears at the end of June.
A further 40,221 had to have their monthly repayments lowered with the agreement of the lender.
Mr Martin said: "The fact that the Government would go ahead and make such an agreement (with the troika) in a week when the full scale of the mortgage arrears crisis was revealed -- and at a time when no one in the country can say with any confidence how much their property is worth -- speaks volumes about how disconnected they have become in a very short period of time.
"One would have to wonder what advice the Government is getting that tells them the time is now right to land new charges of €700-€800 on middle-income earners."
In a recent paper, the ESRI also said that if a single tax rate was applied to property values nationwide, homeowners in Dublin would have to pay considerably more than those in the rest of the country.
Speaking in a personal capacity, Central Bank board member and former Bank of Ireland chief executive Mike Soden said yesterday that the proposal was unfair to those living in Dublin.
He said: "It becomes an unfair tax because what you're saying is that anybody who lives in those houses has money -- but they don't. They don't have the cash flow.
"It just takes more money out of the system for people who want to have a reasonable lifestyle.
"I don't know where the cash is going to come from. People are trying to survive."
Yesterday the Institute of Professional Auctioneers and Valuers said that the proposal was "crazy" and questioned how it would be implemented while the Society of Chartered Surveyors said the plan "will lead to perceptions of unfairness".
Ronan O'Driscoll, director of residential property with estate agents Savills Ireland, said a property tax based on valuation would hit Dublin hardest, and south Dublin in particular.
He added: "We don't know yet what the rate will be but if it is, say, half of one per cent of the value, then a very-good-quality home in Dublin, valued at €500,000, would mean an annual bill of €1,000."
In an example presented by the ESRI, most homeowners would pay property tax each year of about €2.50 for every €1,000 of house value.
This would raise around €500m for the Exchequer -- the amount the Government has indicated that it is seeking from the tax.
The former Dublin Lord Mayor, Labour's Andrew Montague, yesterday warned of the potential unfairness of the value-based tax. He said: "It's cheaper to provide the services for people living in Dublin and in the cities than it is to provide them for people living in the country.
"So why should Dubliners pay higher property tax when it is actually much cheaper to provide services for them? So why should they pay even more than people (in the country) who are actually costing more?"
Last night Fine Gael TD Peter Mathews, from Dublin South, the constituency expected to be among the hardest hit, said: "I think the approach to this property tax should be carefully calibrated. To avoid unfairness should be a priority."
Leading property economist, Ronan Lyons, of Daft.ie, recently voiced his reservations that the introduction of a valuation-based property tax could prove to be a blunt instrument, with insufficient attention paid to the range of factors that go to making up the value of a home.
He said: "The full value of the property you live in depends not just on site size and nearby amenities, but also on dozens of other mostly difficult-to-measure factors, such as building size, the number and size of bedrooms, of bathrooms and other rooms, ratio of front garden to back garden and energy efficiency.
"The value of all of these things may also vary by property type, by region and over time. And when someone does something useful -- like insulate their homes, convert their attic or extend into the back garden -- they are then landed with a larger property tax bill.
"Do we really want to tax people for making their homes more energy-efficient?"
Irish Mortgage Corporation Director Frank Conway said that while property taxes internationally were based on valuation, here this would mean Dublin residents in particular paying more.
"The IMF is stressing the valuation model and its rationale is that 'Well you live in a property worth €2m, so you must be able to afford that property and that tax.'
"The problem is that you will get some groups -- particularly elderly people -- who get forced out of their neighbourhoods because of it."
Kevin McNerney, a mortgage expert with the Trusted Advisor Group (TAG), said a valuation-based property tax would be biased against Dublin householders, and, depending on the rate, it could flatten any green shoots of recovery in their tracks.
He said that in South Dublin in particular, where there is a shortage of houses for sale, prices had increased recently but that this could be killed off by a property tax based on valuation, rather than square footage.
In a 2008 paper on the subject of taxation reform, Dr Thornhill argued that a property tax should be based on a combination of the size and location of a house -- not on its market value.
A spokesman from the Department of Finance said yesterday that a decision on the form the tax would take had yet to be made.
He added: "The commitment to introduce a value-based property tax contained in the troika document was included word for word in the earlier document."