Taxes, cuts put squeeze on middle-income families
BOOMTIME home buyers are braced for a further blow, with severe doubt now hanging over the anticipated property tax relief for the negative equity generation.
The expert report on the property tax didn't draw a conclusion on whether to grant some relief to homeowners who bought during the peak years of the Celtic Tiger property market and paid large amounts of stamp duty.
The measure would be the latest squeeze on middle-income earners.
Since the economic downturn, the middle-classes have been hit by a range of new taxes and cutbacks on services.
Government sources say it has yet to be decided if a stamp duty rebate for the buyers at the top of the market will be included in the property tax package.
The so-called Thornhill Report, named after its chairman, former senior civil servant Don Thornhill, fails to make firm recommendations in a number of areas.
"There's a lot of analysis, without coming down one way or another," a coalition source said.
The Government has already boosted mortgage interest relief for homeowners who bought during the boom.
Many of the buyers who bought at the top of the market are now in negative equity and some are in mortgage distress.
It was expected the level of stamp duty paid at the time would be put forward as representing the payment of a property tax. But the matter is complicated because buyers of new houses didn't pay stamp duty. However, they did pay a large VAT bill.
Although there was never an explicit promise in the Programme for Government for property tax relief for those who paid large amounts of stamp duty, the Government has acknowledged the "particular problems faced by those that bought homes at the height of the property boom".
In the Programme for Government, the section on the introduction of a property tax, described as a "site valuation tax" refers to how the tax "must take into account the significant number of households in mortgage distress".
The coalition agreement between Fine Gael and the Labour Party also promised to increase mortgage interest relief to 30pc for first-time buyers in 2004-08.
In last year's Budget, Finance Minister Michael Noonan did implement this commitment.
But it now appears the Government is still weighing up whether to grant relief to house buyers who paid large amounts of stamp duty by getting into the market at the height of the property boom.
Mr Noonan is dealing with the finalisation of the plans for the property tax, which will be announced in the Budget.
A flat rate property tax of as little as €100 for pensioners and low income families is being considered by the Government.
And the future of the €200 second-home tax has to be decided upon, with the possibility it will be retained in some form when the property tax comes into effect.
The property tax is expected to be self-assessment and based upon the market value of the house.
Homeowners will get the property tax for half price next year as it will come into effect towards the middle of the year.