A Property Tax for Ireland

30 August, 2012

Incredibly, the Government has not yet decided how the looming domestic property tax (to be levied in 2013) is to be calculated.  Talk about sticking one’s head in the sand. It’s not going away, you know.

One of the big issues is that a straight value-based tax on the whole property would impact severely on urban residents, particularly those in Dublin.  I can imagine a heated urban-rural divide in the cabinet on this point, and that government TDs for Dublin constituencies are scared silly of the retribution that would follow on doorsteps and in the next election.

Back in 2010, I suggested  that the best way to structure a self-assessed annual property tax would be to use the aggregate of two measures:  (a)  based on house size, at a rate of €5 per square metre plus  (b) based on site value, at a rate of 0.2%; against the total calculated in this manner allow a credit for each property of €500.

This theme has been taken up by a letter-writer in today’s Irish Times.  A Mr Neil McDonnell writes that “Assuming the last Central Statistics Office national average house price of €247,000, the average property tax would be €1,235 per year. Reducing the valuation element of the tax to a quarter of a per cent, and levying a tax of three to four euro per square metre of floor area, would yield roughly the same revenue, without discrimination between rural and urban housing”

This approach has the advantage of not disproportionately taxing urban dwellers while, as another letter-writer today points out, discouraging “the building of houses larger than needed by normal families at a time when we are being pressured to reduce our carbon footprints”.

My suggestion of a credit of €500 against the calculated aggregate tax reflects my feeling that a high degree of progressivity is required to make the tax politically and socially acceptable.  It also recognises that people are already paying waste and water charges which are (or will be) largely fixed.  The credit can always be whittled away over the course of time, yielding extra revenue.

I just wish the government would show itself capable of making a decision and getting on with it.   It’s over three years since John McManus wrote the following (about the Government’s reaction to the publication of the McCarthy Report): “… despite the hard lessons of the recent past, we are engaging in the same sort of gutless dysfunction politics that got us into this mess….We still have a political class that is by and large congenitally unwilling and unable to devise and implement policy, and bizarrely doesn’t really think that such is the job of Government.”

Plus ça change….