Is next years property tax merely a 'prop up the CPA tax'?

Ghandee

Stephen Donnelly seems to think so.

Riddled with inequalities, this proposed levy will fail even in its goal of paying for vital public services, writes Stephen Donnelly

THE property tax hit the Chamber with a bang on Friday. It won't be there long. The Government is forcing it through the Dail in just four days. The tax itself doesn't come into effect until next July, so why the rush?

Simple – they aim to quell debate. Gagging the Opposition is nothing new, but they're keen to gag their own too in this case. If Friday was anything to go by, they're right to be nervous. The Government backbenchers lined up to voice their criticism. This tax, affecting every homeowner, isn't going to get a full airing in the Dail. It's going to be quick – and it's going to be painful. So who's going to pay?

There are 1.7 million occupied houses in the State. The Government, egged on by the troika, has been eyeing the owners of these houses for some time – wondering how it can squeeze money out of them. Last year's household charge was the first attempt. It was ill-advised, poorly implemented and massively unpopular. We'll all be glad when it winks out of existence next year. But what's coming in its place? And what's so bad about it that the Government doesn't want TDs discussing it?

The Local Property Tax will apply to homeowners at 0.18 per cent of market value, and 0.25 per cent on any portion over €1m. So a house worth €300,000 will be taxed at €540 a year. It will not take account of income or ability to pay. It will not factor in negative equity, or the tens of thousands of euros paid by so many in stamp duty in recent years. It will not consider higher and lower property prices in different parts of the country. So people in Wicklow, in Dublin and other areas with higher property prices will pay multiples of what others will pay for living in exactly the same type of houses.

The proposed approach will create many inequalities. Let's take an example. Two teachers buy their first homes. One buys a three-bed semi in Roscommon in 2002. The second buys exactly the same house in Dublin in 2006. The first pays €200,000 for the house and €6,000 stamp duty. The Dublin-based teacher pays €400,000 for the house and €24,000 stamp duty. They are paid the same wage, so the one in Dublin already has a lower standard of living due to double the mortgage payments. Furthermore, the cost of providing local services in Dublin are less than they are in Roscommon.

Today, the house in Roscommon is still worth €200,000, having risen and fallen during the bubble. But the house in Dublin is now also €200,000, having halved in value. So really it's a debt of €200,000, assuming, for the sake of simplicity, that the full amount was borrowed.

Enter the property tax. Both teachers pay €360 a year – one for a house worth €200,000, the other for a debt of €200,000, having already paid €18,000 more in stamp duty. And for services which cost less to provide. Sound 'fair'?

So what is this tax? It's not a tax on wealth. If it were, the Dublin teacher would not have to pay. It's not a tax for provision of local services – if it were, the Dublin-based teacher would pay less. And if either of our teachers emigrate, as the owner of the houses, they still pay. Not the person renting the house, the one using the local services. It is not progressive. If it were, then the rate would rise further than the token jump over €1m. It's not fair. If it were, then the tens of thousands of euros paid in stamp duty would be taken into account. It's not necessarily affordable, as the ability of our teachers to pay is not considered.

And it's not required. I'm not going to bother addressing the Government's plea that the troika are making them do it. But I will address the money raised by the tax. The figure being used is €500m. But that doesn't account for reduced economic activity due to the tax (that's €500m that won't be used in the economy). Using the Government's multiplier, the net revenue take from the tax will be about €350m.

Let's put that in context. Next year's Government spending includes annual increments to public sector workers. Just taking the past four years, these amount to €700m for 2013. So the property tax will raise half the money needed for pay rises given out during an insolvency process. During Minister Noonan's opening speech he said the property tax will "pay for vital public services". So not really.

As well as those who should not pay, there is a growing number who cannot pay. July's What's Left Tracker survey by the League of Credit Unions, estimates that two in three adults now have less than €100 at the end of the month after essential bills are paid. That's before the cut to child benefit and increase in PRSI. We are told that one in 10 children in Ireland is now in food poverty. Add to that the one in five residential mortgages in arrears or being restructured. A lot of people don't have any more to give. Many of them are the same people who paid boom-time stamp duty.

So what's to be done? The Government plans to ram through the property tax next week. This should be stopped, with the Bill referred to both the Finance and Local Government committees for examination in 2013. The rate should be set by each local authority, to ensure that the minimum necessary is collected, that some don't pay multiples of what others pay due to geography lottery, and that there is a rock-solid link between the money and the services provided. The occupiers of the house should be charged, as they are the ones using the services. The net value of houses should be used – it is unconscionable to tax people in negative equity. There should be tax credits for stamp duty paid in recent years.

The Men In Charge have got this one badly wrong. Their backbenchers agree. Olivia Mitchell said: "We'll be lucky . . . to avoid a revolution." Mind you, she also said she'd vote for it. Government backbenchers often say it's better to be inside the tent, where they can influence their party leaders. This coming week we'll see what that influence is worth.

Stephen Donnelly is the independent TD for Wicklow and East Carlow

Might be coincadental that Stephen specifically mentions.

Let's put that in context. Next year's Government spending includes annual increments to public sector workers. Just taking the past four years, these amount to €700m for 2013. So the property tax will raise half the money needed for pay rises given out during an insolvency process. During Minister Noonan's opening speech he said the property tax will "pay for vital public services". So not really.

Like the HHC, this property tax has been poorly planned, and unfairly implemented.

Lets hope, like the HHC it can be defeated, and will be scrapped.

dvpower

Ghandee wrote: »

Lets hope, like the HHC it can be defeated, and will be scrapped.

The HHC was defeated?

I missed that memo.

ArmaniJeanss

Stephendonnelly wrote:

The proposed approach will create many inequalities. Let's take an example. Two teachers buy their first homes. One buys a three-bed semi in Roscommon in 2002. The second buys exactly the same house in Dublin in 2006. The first pays €200,000 for the house and €6,000 stamp duty. The Dublin-based teacher pays €400,000 for the house and €24,000 stamp duty. They are paid the same wage, so the one in Dublin already has a lower standard of living due to double the mortgage payments. Furthermore, the cost of providing local services in Dublin are less than they are in Roscommon.

Today, the house in Roscommon is still worth €200,000, having risen and fallen during the bubble. But the house in Dublin is now also €200,000, having halved in value. So really it's a debt of €200,000, assuming, for the sake of simplicity, that the full amount was borrowed.

I love that he gives examples like this, basically creating scenarios that can't possibly have happened.
I'm not sure why people see this guy as some kind of economic guru, his last few articles paint him as clueless.

Ghandee

dvpower wrote: »

The HHC was defeated?

I missed that memo.

Well I suppose 50% compliance rate (when you take out the landlords with a multitude of properties) the Govt could look at it as a glass half full scenario.

Ever optimistic DV.

dvpower

Ghandee wrote: »

Well I suppose 50% compliance rate (when you take out the landlords with a multitude of properties) the Govt could look at it as a glass half full scenario.

Ever optimistic DV.

Official compliance figures are over 60pc (but you're free to make up your own as you wish).
Any outstanding HHC charges will be automatically converted to outstanding property tax next year (and rounded off to €200), so I've got reason to be optimistic that the Revenue will achieve an even better collection figure.

Anyway, the point I was making was that the HHC hasn't been defeated.

woodoo

I'm not so sure he is really up to much good. He started with a bit of promise but wasn't his budget recommendations full of holes.

He proposes doing away with increments, what does he propose takes their place. How does he square it for the staff on the incremental scale working along side staff at the top of their scale. Both on the same contracts, terms and conditions.

Ghandee

dvpower wrote: »

Anyway, the point I was making was that the HHC hasn't been defeated.

So it was a rousing success, that what you're saying?

dvpower

Ghandee wrote: »

So it was a rousing success, that what you're saying?

No. I'm just saying it wasn't defeated.

Do you have some kind of difficulty understanding this?

Manach

Given how the latest government act on reducing the power and scope of the local authorites, show how little faith they have in democracy at a local level given both some councils resistance to collecting the HHC and others complete over-reaction the other way (ie Clare's penalising students whose parents who did not pay the HHC). This and the property tax will be foremost on peoples minds in the coming council elections and householders who have paid/not will show how much a success the HHC tax is then.

murphaph

woodoo wrote: »

How does he square it for the staff on the incremental scale working along side staff at the top of their scale. Both on the same contracts, terms and conditions.

Just reduce the pay of the staff on the top of the scale and get rid of scales completely, paying people by how effective they are, not by how long they've been hanging around the office.

Chips Lovell

I like the way he tries to have his cake and eat by first saying a Property Tax is "not required" and later arguing for a different type of Property Tax, i.e. tax on occupiers not owners, local authorities set rates (which is coming anyway) and exemptions for people in negative equity.

Ghandee

Vladimir Kurtains wrote: »

I like the way he tries to have his cake and eat by first saying a Property Tax is "not required" and later arguing for a different type of Property Tax, i.e. tax on occupiers not owners, local authorities set rates (which is coming anyway) and exemptions for people in negative equity.

Well, as he specifically mentioned that the property tax would bring in half of what ps increments will total. Perhaps his "not required" reference related to that?

Freeze increments, or even halve them?

The second part, he seems to be saying that if it must be introduced, introduce it in a fairer manner, ie recognition to the negative equity/high stamp duty generation, but the cherry on the top, the one that seems to put the fear of God into politicians is this part here.....

and that there is a rock-solid link between the money and the services provided.

Noonan himself said he couldn't say for certain that taxpayer money wasn't indirectly used to prop up bankers pension funds and salaries for example.

No accountability the way it stands now.

Fix the loop holes, tie services directly to the money being collected.

Chips Lovell

Well, the money is going to local authorities, so I'm not sure what is problem is with that. We've already seen some local authorities get their budgets cut in response to low rates of collection, so there is a link, albeit maybe not the kind of link Donnelly wants. I think Wicklow is one of those counties that's a net contributor to the Exchequer, so that would play well among his voters.

As for the increments thing, I don't think it makes much sense to go tearing up the Croke Park Agreement, as he's been advocating, given that we're about to launch another round of negotiations on its successor. Is it more or less likely to make public sector workers more amenable to a new deal?

Good loser

Donnelly is as big a hypocrite as any of them. Has this veneer of competence in economic matters. Doesn't impress me.

Pretends to favour all sorts of things in principle, and yet has these convoluted reasons why the time isn't right, or the measure proposed is 20 degrees removed from HIS WAY.

The example he gives above in the article is stupid; houses in Roscommon have fallen every bit as much as those in Dublin. If the Dublin house had a tracker the repayments could be a lot lower than the Roscommon house if it didn't have one.

CptMackey

Croke park should be done away with now. Leave the public sector strike. When they do they will have broken their time of service. When they come back in give them new contracts on dramatically reduced rates and fire the fat in there.

Then come and talk to me about property tax.

Godge

CptMackey wrote: »

Croke park should be done away with now. Leave the public sector strike. When they do they will have broken their time of service. When they come back in give them new contracts on dramatically reduced rates and fire the fat in there.

Then come and talk to me about property tax.

Have a read of the Industrial Relations Act to learn about the responses an employer can make to strike action.

jmayo

ArmaniJeanss wrote: »

The proposed approach will create many inequalities. Let's take an example. Two teachers buy their first homes. One buys a three-bed semi in Roscommon in 2002. The second buys exactly the same house in Dublin in 2006. The first pays €200,000 for the house and €6,000 stamp duty. The Dublin-based teacher pays €400,000 for the house and €24,000 stamp duty. They are paid the same wage, so the one in Dublin already has a lower standard of living due to double the mortgage payments. Furthermore, the cost of providing local services in Dublin are less than they are in Roscommon.

Today, the house in Roscommon is still worth €200,000, having risen and fallen during the bubble. But the house in Dublin is now also €200,000, having halved in value. So really it's a debt of €200,000, assuming, for the sake of simplicity, that the full amount was borrowed.

I love that he gives examples like this, basically creating scenarios that can't possibly have happened.
I'm not sure why people see this guy as some kind of economic guru, his last few articles paint him as clueless.

Ahh good old Stephen yet again fighting for the property owner.
Must be because a sh** load of his nieghbours and voters in Greystones paid way over the odds for craply build shoeboxes in the likes of Charlesland.
Anyone that paid over 300k for the cr** that was built in that area deserves sectioning.
5 minutes into a viewing in the showhouse I had managed to find that they couldn't be bothered using saws and 4 inch nails were used where a 2 inch nail was necessary.
Of course the champagne was nice and the address was to die for. :rolleyes:

For some reason with the amount of articles and episals issued by mr donnelly fighting for and worrying about property owners me thinks himself and most of his friends bought overpriced crud and are now in serious negative equity.

Can't wait to speak to him again and ask him how much he wants our taxes upped to bailout the property owners.