€100 Annual Charge - Rabble, Rabble

The same Plaintiff as in Blake tried his luck against the residential property tax.

http://www.justis.com/document.aspx?doc=cZadn5uJm3WIsjX0iXKdo0mcn0eZiXmsmXidmWeda&relpos=1

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THE SUPREME COURT

36/1984

O'Higgins C.J.
Henchy J.
Griffin J.
Hederman J.
McCarthy J.
20/11/1984

PATRICK J. MADIGAN and PATRICIA MADIGAN
v.
THE ATTORNEY GENERAL, THE REVENUE COMMISSIONERS and THE MINISTER FOR FINANCE
and

CATHERINE MARY GALLAGHER and GERARD GALLAGHER
v.
THE ATTORNEY GENERAL, THE REVENUE COMMISSIONERS and THE MINISTER FOR FINANCE
Subject Headings:
CONSTITUTION: statute
REVENUE: residential property tax
JUDGMENT OF THE COURT delivered the 20th day of November 1984 by O'HIGGINS C.J.

These appeals arise in two separate proceedings in which the same reliefs involving a declaration of unconstitutionality of Part VI of the Finance Act and consequential orders are claimed. As the claims are identical the actions were tried together in the High Court and, the claims having been refused, the consequent appeals were heard together in this Court. Although the relief claimed in each action is the same

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the circumstances of the Plaintiffs differ. This judgment which relates to and determines each of the claims made, takes such difference in circumstances into consideration.
Part VI of the Finance Act1983 created a new tax known as " residential property tax". This was done by Section 96 which provides as follows:

"96. Subject to the provisions of this Part and any regulations thereunder, with effect on and from the 5th day of April 1983 a tax to be called residential property tax, shall be charged, levied and paid annually upon the net market value of the relevant residential property on the valuation date in each year of every person, and the rate of tax shall be one and one half per cent of that net market value."

While the tax created by this Section is declared to be chargeable and leviable on all residential property other provisions of Part VI restrict its impact within narrow limits. The first restriction is contained in the definition of "net market value" in Section 95. This confines the operation of the new tax to residential properties which have a market value or an aggregate

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of market values in excess of £65,000. A second restriction arises from the definition of "relevant residential property" as meaning in relation to any person "any residential property of which he is the owner and which is occupied by him as a dwelling or dwellings". A further restriction arises from the provision made in Section 101 for an income exemption limit. This provision entitles a person assessable for tax to exemption if he claims and proves that the aggregate of his income for the year in question and that of every other person (other than an employee of his) who normally resides with him, does not exceed £20,000. The combined effect of these provisions is to make the new tax one which applies only to an owner who occupies residential property having a market value or an aggregate of market values in excess of £65,000 and who does not establish that the aggregate of his income with the incomes of those who normally reside with him (other than servants) does not exceed £20,000.
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Other provisions of Part VI also require to be noted. By Section 95(2) the term "owner" in relation to residential property includes any person who, beneficially, whether solely, jointly or in common, holds any freehold interest in property, or who holds under any lease, agreement or licence the duration of which exceeds fifty years, or who is the owner of the equity of redemption where the property is mortgaged or who holds under any arrangement whereby either no rent or a token rent only is payable. Section 98 requires the market value of any property to be estimated on "the price which the unencumbered fee simple of such property would fetch if sold for residential use in the open market on the valuation date in such manner and subject to such conditions as might reasonably be calculated to obtain for the vendor the best price for the property." In relation to the income exemption limit, "income" is defined in Section 95 in terms which mean total income from all sources without allowance for losses, retirement

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annuity premiums, pension contributions, personal interest or capital allowances in excess of basic rates. By Section 102 marginal relief in reduction of tax is provided where the aggregate relevant income does not exceed £25,000 and the assessable person has a dependent child or children resident with him. Part VI contains other provisions in relation to the delivery of returns, the assessment and payment of tax, provision for determination of market values and apportionment, the bringing of appeals and the imposition of penalties. It is not necessary, however, to refer to these provisions in any further detail.
The Plaintiffs in the first of these actions (hereinafter called "the Madigan action") are husband and wife. They own jointly a house in Foxrock, Co. Dublin, having an estimated market value of £250,000. The house is subject to a mortgage of £25,000. The husband is also the sole owner of a freehold property in Salthill, Co. Galway, with an estimated market value of £20,000. He has an income in excess of £25,000. His wife has no income. They

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have six children aged between 15 ½ and 3 years. It is clear that liability to the impugned tax in the case of these Plaintiffs arises both on the aggregate market values of the residential properties involved and on the personal income of the husband without aggregation with any other income. It is also clear that no question of marginal relief can arise in relation to liability although the couple have six dependent children. This is so because the husband's income is in excess of £25,000.
The Plaintiffs in the second action (hereinafter called "the Gallagher action") are mother and son. Mrs. Gallagher, the mother, lives with her husband and five of her six children at Hollybank House, Hollybank Avenue, Ranelagh, Co. Dublin. She is the owner of this house, having inherited it from her mother. Its market value is estimated to be £95,000. Mrs. Gallagher has an income of £1,400 per annum. Her husband is a gynaecologist but is semi-retired. Three of the children living in the house are solicitors, one

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is a barrister and one is a schoolboy. Mrs. Gallagher does not know the income of her husband or of the children but believes the aggregate of what they earn and of her own income would exceed £25,000. Gerard Gallagher, the other Plaintiff, is one of her sons. He is a solicitor and resides with his mother. He would not be willing to disclose his income to his mother and states that he would regard it as an invasion of privacy to be required to do so. Liability to tax on the market value of the property arises in this case because of the aggregation of incomes and the impossibility of proving that the total is less than £20,000.
The Finance Act 1983 , Part VI of which is impugned in these proceedings, was in its passage through the Oireachtas a Money Bill within the meaning assigned to that term by Article 21 of the Constitution. By Article 22 of the Constitution such a Bill can only be initiated in Dail Eireann. This Article also provides that while a Money Bill must be sent to Seanad Eireann,

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that house cannot amend it. It may only recommend changes to Dail Eireann and such recommendations must be made within twenty-one days. Further, such a Bill cannot be referred to the Supreme Court on a question of repugnancy under Article 26. This special and particular treatment of a Money Bill, however, does not survive its enactment into law. As an Act of the Oireachtas, such a legislative measure must be subject to the same test, scrutiny and examination as any other Act and, if on the question being raised, unconstitutionality is established, the High Court or this Court will be bound so to declare. On such examination as to constitutionality of a taxation law the Court does not enter into the area of taxation policy, nor concern itself with the effectiveness of the choices made by the Government and the Oireachtas; all such matters relating to the object and range of taxation are matters of national policy which cannot, as such, be considered by the Courts. The Courts' concern relates solely to the question whether
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what has been done affects, adversely, constitutional rights, obligations or guarantees.
It is now necessary to consider the issues which arise in these proceedings.

In their challenge to the constitutionality of Part VI Plaintiffs' Counsel have concentrated on two aspects of the scheme of taxation contained in the legislation. These are:

(1) The method by which the market value of the property is to be determined [Sections 98 to 100] and

(2) The method by which, in relation to exemption, income is assessed [Section 101].

In their examination of these two matters, Counsel have pointed to many anomalies which they regard as objectionable and upon which they rely to establish the claim of unconstitutionality. Apart from the basic objection to the determination of market value without regard to the existence of charges, encumbrances and mortgages and the method of assessing income by aggregation, reliance was placed on several other

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features of the taxation scheme which, it was said, could work injustice. Examples of such were the apportionment of market value equally between co-owners irrespective of their shares, the consequent discouragement of joint ownership of family homes, the danger of partial scattering of family to avoid income aggregation, the interference with privacy involved in the disclosure of the income of each resident in the house, the impossibility of claiming exemption where other residents refuse to give information or to vouch their incomes, the apparent injustice involved in treating a person for income purposes on the basis of his total or gross income without regard to losses or other deductions. These features of the legislative scheme together with those which were entirely relevant to the Plaintiffs in one or other of these actions were relied upon as indicating breaches of one or other of the following constitutional provisions, namely, Article 40.1 providing for equality Article 40.3 providing for protection of property rights
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and Article 41 providing for the family.
Faced with this broad attack, Counsel for the Defendants have submitted that the Plaintiffs in these actions should not be permitted to advance arguments based on assumptions or hypotheses outside the facts and circumstances of the two actions before the Court. They submitted that this was in accordance with the practice approved of by the Court inCahill v. Sutton . The learned trial Judge in his judgment accepted this submission. In the view of the Court he was correct in so doing. Accordingly this Court will only consider such submissions of unconstitutionality made on behalf of the Plaintiffs as are relevant to the circumstances of one or other of the Plaintiffs before the Court. This in effect means that the Court will confine its consideration to the basic objections relating to the manner of determination of market value, which is the basis for liability in the Madigan action, and to the aggregation of incomes for the purpose of income exemption, which is the decisive basis for liability in the Gallagher case.

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Market Value
In relation to the methods by which the market value of the property is determined the Plaintiffs complain that this introduces a totally artificial concept into the valuation of property and differentiates unfairly against the owners affected. They submit that to value a house on the estimated market value of the unencumbered fee simple is to ignore the true value of the owner's beneficial interest or property therein, and thereby unfairly and unjustly to tax him in relation to an interest in a property which he does not possess. In addition, the Plaintiffs complain that to impose this tax on houses with a notional market value of £65,000 or more is to expose the owners of such houses, alone amongst house owners, to this form of taxation and thereby to fail to treat them equally with those owners not so exposed. For these reasons it is submitted that this tax in so far as it is based on market value so determined is in breach of Article 40.1 of the Constitution because it fails to provide equality of

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treatment and of Article 40.3.2 of the Constitution because it constitutes an unjust attack on the property rights of the Plaintiffs and other affected citizens. In reply the Defendants contend that it is incorrect to describe the tax as a tax on the value of the owner's estate or interest in the property. It is, they submit, a tax, not on the owner's interest or equity in the property, but on his occupation and enjoyment thereof. The tax applies only to residential property with a high market value. The imposition of such a tax cannot be regarded as a breach of Article 40.1 since it applies equally to all persons who as owners occupy such properties. In support of these submissions reliance was placed on the decision of this Court in Brennan v. Attorney General and, in particular, on the following passages in the Court's judgment in that case:
"In the view of the Court a complaint that a system of taxation imposed on occupiers of land which has proved to be unfair, even arbitrary or unjust, is not cognisable under the provisions

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of Article 40.1. This section deals, and deals only, with the citizen as a human person and requires for each citizen as a human person, equality before the law."
and

"The inequality of which the Plaintiffs complain in this case does not concern their treatment as human persons. It concerns the manner in which as occupiers and owners of land their property is rated and taxed. Each person who owns or occupies the land in question will be treated in exactly the same way because the tax is related not to the person but to the land which, irrespective of who he may be, he occupies."

As to the complaint that the imposition of such a tax constitutes an unjust attack on property rights the Defendants say that this cannot be so. The right and duty of the State to impose such taxation as is judged to be necessary, is implicit in the Constitution. Such right can only be exercised against the property and associated rights of the citizen. This is authorised by Article 43.2 of the Constitution. What is so authorised cannot be regarded as an unjust attack on property rights.

The Court has come to the conclusion that the

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Defendants' contention on this aspect of the case is correct. This tax is correctly described as a tax on owners who occupy and enjoy their residential property. It does not relate to the treatment of citizens as human persons and is not cognisable under Article 41. As Counsel for the Defendants have submitted, the reasoning contained in this Court's decision in Brennan v. Attorney General and in the passage quoted from the judgment, apply to this case. Further, in the opinion of the Court, the decision to impose such a tax must be presumed to have been taken for the purpose of contributing to the revenue required by the State and for the purpose of exacting that contribution from the better off and the well-to-do who can be presumed to occupy the more valuable houses. This accords with the clear duty imposed on the Government and on Dail Eireann by Articles 28 and 17 of the Constitution. It is not for the Court to question the choice of imposition which has been made, nor to enquire into the extent to which the desired contribution to the revenues of the State will be
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achieved. These are matters which belong to the political arena and are for consideration and discussion in the National Parliament. So far as the Courts are concerned this is a tax measure. As such it necessarily interferes with the property rights of affected citizens. However, such interference cannot be challenged as being unjust on that account, if what has been done can be regarded as action by the State in accordance with the principles of social justice and having regard to the exigencies of the common good as envisaged by Article 43.2 of the Constitution. In the course of his judgment in the High Court Mr. Justice O'Hanlon described the tax in the following terms:
"The residential property tax created by Part VI of the Finance Act, 1983 , was described by Counsel for the defendants as ‘a tax on the occupation of property’, which I think is correct, and which I would regard as a fair description also of the rates which were payable on domestic premises until a few years ago.

I do not find it offensive to principles of justice or fair play that a tax should be imposed on occupiers of residential premises, or that it should

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be measured by reference to the market value of such premises rather than by reference to Poor Law Valuation, or that exemption from the tax should be given to occupiers of premises whose market value falls below a certain figure."
The Court regards these words as containing a careful appreciation of the description of this residential property tax based on market value. Accordingly, the imposition is not an unjust attack on property rights and the provisions of Article 40.3.2 of the Constitution have not been breached. In the view of the Court the challenge to the constitutionality of this tax, based on these grounds, fails.

Aggregation of income
The second challenge concerns the provisions in Part VI which relate to the income of the assessable person. The combined effect of Section 95 (see definition of "assessable person") and Section 100 is to make every person who owns and occupies a house with a market value in excess of £65,000 liable for the tax. Section 101, however, provides for an exemption based on the

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aggregate income of all those who reside in the house. Where this household income does not exceed £20,000 then on proof of this fact the occupying owner, although assessable, will be exempt from the tax and no tax will be payable. The Plaintiffs contend that this aggregation is unfair and unjust. They say that it amounts to the imposition of taxation based, not on the income or means of the person made liable, but on that of others over whom he has no rights or control, that such an imposition could not be authorised by Article 43 and must therefore be condemned as an unjust attack on the property rights of affected taxpayers contrary to the provisions of Article 40.3.2 of the Constitution.
The Court has considered carefully these submissions. In the first place it is to be noted that Section 101 does not impose a liability for tax. The occupying owner is already chargeable for the tax because he owns and occupies a house with a market value in excess of £65,000. As already stated the Court does not consider, on any of the grounds open to and relied on by the

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Plaintiff, that the imposition of such a tax lacks constitutional validity. Like any other tax it is bound to affect in varying degrees those who are made liable for its payment depending on the means and circumstances of each such person. For some, no problem may be caused. For others its imposition may have meant a choice between continuing to occupy a house which has become more expensive to reside in and selling or otherwise ceasing to reside therein. While people so affected might feel that they had genuine grounds for complaint against and opposition to the tax they could not challenge its validity merely because they had difficulty in paying. How then is one to view a measure which is designed and intended to give relief in such cases? It is clear that this is the purpose of Section 101. This Section recognises a threshhold income of £20,000 below which there is exemption irrespective of the market value of the house. The relevant income is to be the aggregate of the incomes of all specified persons who live in and enjoy the benefit of the house. It is suggested
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that in granting an exemption which thus depends for its operation on the total income of the household not exceeding the stated limit is in some way unfair, unreasonable and unjust to a person who does not qualify. The Court cannot agree. The Court is satisfied that this exemption is based on the common experience in society that members of families and households, to the extent that they can do so, contribute to the expenses and outgoings of the family home. To ignore this fact in framing an exemption to meet cases of hardship or inability to pay would be to act without regard to reality. While there may be situations where the assessable person does not recover a contribution from others who share in the enjoyment of the residence, such situations must be extremely rare and must depend for their continuance on a degree of tolerance by the assessable person which borders on foolishness. The Court is therefore of the opinion that the aggregation of income as provided for in Section 101 is not open to condemnation on any of the grounds alleged and that accordingly this challenge to the validity
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of Part VI of the Finance Act1983 also fails.
For these reasons the decision of the Court is that both these appeals be dismissed.

It does not necessarily follow that because the challenge to the constitutionality of Part VI of the Finance Act1963 fails another plaintiff with sufficient locus standi might not successfully attack its validity.

Approved



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