New property tax proposed

Dub13

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New property tax proposed
Friday, 18 July 2008 11:39


A proposal to replace stamp duty with a new property tax has been put forward by the National Economic and Social Council.

It says the idea should be considered by the Commission on Taxation.


The NESC also says Ireland has an obligation to focus spending on infrastructure, roads and training despite tight public finances.

Stamp duty is a levy on transactions but when property sales decline, as is happening now, it hits the Exchequer.

The council suggests a tax paid by all property owners continuously would be more equitable.

It would also mean the public finances would not be subject to such volatility.

This would be very unpopular,it will be interesting to see what the Government say about this.

astrofool

I'd say it would be very hard to implement, like VRT changes, except that basically everyone will be affected, rather than those who bought new before the changeover.

It's the fault of whoever thought up the bone headed tax system in the first place.

At best, I could see them decreasing stamp duty a small percentage at a time, and then introducing property tax at the same time on a "years since being bought" basis.

So at first, people who have had property for >40 years, then 35 etc. (with tax breaks for the elderly pensioners, the government will want to be re elected after all).

But yes, very very messy.

faceman

I cant see this happening. Didnt we eradicate similar council/poll taxes decades ago?

is_that_so

faceman wrote: »

I cant see this happening. Didnt we eradicate similar council/poll taxes decades ago?

No not eradicated , dumped in 1977 as an election promise, inequitable as they were, with no replacement source of income, an event that helped us along the road to financial crisis. The report is here, all 328 pages of it. See pages 55 & 285 for references to property tax. Very very general terms.

snubbleste

I agree with property taxes.
But this is Ireland, will not happen.

connundrum

Had this conversation with my o/h at the start of the week. Would this run along the same lines as a sort of council charge?

As in could they incorporate several services into the price of this tax i.e. €300 per year for 3 bed house includes water rates (which I believe are soon to be introduced), local council charge (incorporating cost of maintaining common garden areas etc) and property tax.

My folks pay €400 per year in local council charges in Cape Town including water rates, waste collection, common area upkeep etc. It is not a privately managed development they live in.

gurramok

Dismissed by Hanafin already http://www.breakingnews.ie/ireland/mhqlaucwcwid/rss2/

mikemac

We'll see water rates long before we see this. In fact, many companies pay water rates already so it's just a short step to start billing residental addresses

SimpleSam06

The NESC also says Ireland has an obligation to focus spending on infrastructure, roads and training despite tight public finances.

Stamp duty is a levy on transactions but when property sales decline, as is happening now, it hits the Exchequer.

Why are they focusing on raising new income, when it makes more sense to cut back the public sector and get the money that way?

In any case, I would be provisionally in favour of a property tax, but not on the first or family home. Instead I'd structure it so homes owned simultaneously after the first would be taxed on a sliding scale, with the first one at a certain amount X per year, the second 2X, the third 4x, etc., or something like that. That should free up a few empty properties in a hurry.

astrofool

SimpleSam06 wrote: »

Why are they focusing on raising new income, when it makes more sense to cut back the public sector and get the money that way?

In any case, I would be provisionally in favour of a property tax, but not on the first or family home. Instead I'd structure it so homes owned simultaneously after the first would be taxed on a sliding scale, with the first one at a certain amount X per year, the second 2X, the third 4x, etc., or something like that. That should free up a few empty properties in a hurry.

That's as short sighted as stamp duty. As the property market softens, and people owning second properties drops off, then taxes received would also drop. I would also doubt that it would be as punitive as to put people off owning second properties, they'd be as well to simply drop the tax breaks on properties.

SimpleSam06

astrofool wrote: »

As the property market softens, and people owning second properties drops off, then taxes received would also drop.

Ah but all those second properties would have to go somewhere, and they would likely become someone's first property, which albeit at a reduced price, will gain more in VAT or other taxes than a century of property taxes, and all at once, as well.

astrofool wrote: »

I would also doubt that it would be as punitive as to put people off owning second properties, they'd be as well to simply drop the tax breaks on properties.

The idea isn't to put people off owning second properties, its to put them off owning fourth and fifth properties and holding onto them until they feel like selling. It would make it uneconomical to even rent them. You might have a year free of this to allow developers to sell large apartment blocks and the like.

godtabh

This would be a double taxation on a lot of people who own apartment. They all ready pay a service charge.

The government would also make a fortune over the life time on any property unless the rate was set very low. €10 a year maybe?

techdiver

astrofool wrote: »

That's as short sighted as stamp duty. As the property market softens, and people owning second properties drops off, then taxes received would also drop. I would also doubt that it would be as punitive as to put people off owning second properties, they'd be as well to simply drop the tax breaks on properties.

People owning second and subsequent properties was the cause of our problem in the first place. They caused an over inflation of property prices through greed and profiteering.

If we had a second property tax in the first place we wouldn't be in the mess we are in now! In fact a second property tax should have been introduced in early 2006 to stave off the booming valuation of properties and free them up for first time buyers at a more affordable rate.

Stamp duty shouldn't have been adjusted at all as it did nothing to improve afford-ability at the time. Instead the developers and auctioneers who perpetrated this whole mess just adjusted the prices accordingly to line their own pockets. Hopefully many of these will get their just reward by being forced into bankruptcy quite soon when the banks finally stop covering for them and call in their debts.

I think this will happen in the next 6 months or so as the banks desperately need an injection of cash and even selling off seized developments at a loss will still give them enough of a shot in the arm in the cash flow front.

The_Conductor

kearnsr wrote: »

This would be a double taxation on a lot of people who own apartment. They all ready pay a service charge.

The government would also make a fortune over the life time on any property unless the rate was set very low. €10 a year maybe?

Yes- its a form of double taxation, but whats new. If they really wanted to address the double taxation issue (as Shane Ross et al suggest), a start would be to give owner occupiers of managed properties a tax credit of a reasonable level in recognition of the greater draw on the exchequer that all other property owners are (any that are buy-to-let properties already get their service charge wholly deductable against their rental income before determination of taxable income anyhow- so it more a levelling of the playing field).

Anyhow- another way of looking at the whole equation might be to re-introduce death taxes on property holdings (its how we managed to get so many of the old landlord estates into public hands in the first place!).

Re: Stamp duty- it was never intended to be the money spinner that the government turned it into. Originally it was simply a covercharge in recognition of the minor expenses incurred in filing and stamping deeds and archiving national records. It was a pittance. It was fair- it was equitable. They turned it into a monster- and are now ruing the death of their monster. If something is around long enough- no matter how horrible it is, you do get used to it........

Property tax- akin to the poll tax in the UK? It would be progressive- and providing the money raised was spent in a clear manner without any hint of improprieties- perhaps people might learn to accept it. Of course the easiest way to get people to accept it is to creep it up on them possibly over a number of years. People are like that- once you get them used to an unpalatable idea, they slowly come to accept it.

Will the government have the guts to do it? Probably not. They cave into the meekest yelps from whatever the flavour of the day industry group might be.

Its far easier to continue killing us with stealth taxes on just about everything.

Wonder how many people will use the M50 come September.......?

Victor

faceman wrote: »

I cant see this happening. Didnt we eradicate similar council/poll taxes decades ago?

Eradicate? A peculiar choice of words. Haughey abolished rates to win an election by giving the people their own money.

How will this be a poll tax? It would be payable based on the property, not the number of people.

kearnsr wrote: »

This would be a double taxation on a lot of people who own apartment. They all ready pay a service charge.

Which governemnt department collects this tax you call "service charge".
How is a service charge a tax? Sure there might be overlaps between what your managment company and a council do, but as a member of that company you have control over how much is spent and how. In any case the big ticket expenses are on things councils don't do - insurance, internal common spaces, refurbishment, etc.

SimpleSam06

smccarrick wrote: »

Anyhow- another way of looking at the whole equation might be to re-introduce death taxes on property holdings (its how we managed to get so many of the old landlord estates into public hands in the first place!)

If thats like the inheritance tax in the UK, it could solve a lot of problems for an increasingly bankrupt government, but I think a property tax on second and subsequent properties would be a lot more palatable to people than having to pay death tax and capital gains tax of six figures just because your parents died. It also doesn't slow the practice of buying and selling houses like sacks of spuds in the short or mid term, I would say.

Victor wrote: »

Sure there might be overlaps between what your managment company and a council do, but as a member of that company you have control over how much is spent and how.

The point could be made that they are paying the same taxes as anyone else, however, and receiving no services for them. Also if the councils stopped buying overpriced shoeboxes at market value they might find their budgets have plenty of leeway to maintain apartment complexes.

McSandwich

Each month I pay a large chunk of interest on the money borrowed to pay stamp duty on my house. I'd prefer to pay an annual property tax, though only if the stamp duty I have already paid paid was taken into account.

mikemac

Victor wrote: »

Eradicate? A peculiar choice of words. Haughey abolished rates to win an election by giving the people their own money.

Haughey? Where do you get your facts from?
Jack Lynch was the person responsible for this

Victor

You are correct. Sorry, I was about 5 at the time.

Regarding inheritence / death taxes - deaths are at a record low and would be a poor(er) source of income.

T-max

Mr Cowen seems to have given the idea a cool reception as reported on http://www.independent.ie/national-news/thinktanks-property-tax-plan-gets-cool-response-from-cowen-1435746.html

AARRRGH

Instead of introducing new taxes, they should first look at how they spend our tax money, e.g. should we computerise x instead of having 1000 civil servants doing it by hand, etc.

The_Conductor

dublindude wrote: »

Instead of introducing new taxes, they should first look at how they spend our tax money, e.g. should we computerise x instead of having 1000 civil servants doing it by hand, etc.

There are actually far fewer civil servants than everyone seems to think- and precious little work that is being done by hand in this day and age. The big problem is pet projects being dished out willy nilly around the place by politicians that make no sense whatsoever. It might not have mattered so much when there was so much money that the politicians couldn't even begin to dream up ways to spend it- unfortunately they will have to readjust to the straightened conditions that we all find ourselves in........ There are areas where massive saving could be made- look at FAS and the HSE for example. Some of the State Bodies really have utterly lost the run of themselves........

SimpleSam06

smccarrick wrote: »

There are actually far fewer civil servants than everyone seems to think- and precious little work that is being done by hand in this day and age. The big problem is pet projects being dished out willy nilly around the place

Possibly he means "public sector workers", I often use the terms interchangeably myself...

AARRRGH

SimpleSam06 wrote: »

Possibly he means "public sector workers", I often use the terms interchangeably myself...

Yep, that's exactly what I meant.