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Property Tax: Where do the political parties stand?

We know it’s on the way but which parties are in favour of it and which parties are not? Here is what they told us…

Image: Julien Behal/PA Wire/Press Association Images

LAST MONTH WE asked all political parties for their exact position on the contentious and divisive Croke Park Agreement on public sector pay and reform.

We put a series of specific questions to each of the parties and two independent TDs in an attempt to determine their exact views on the issue. The property tax is arguably an even more contentious issue given that it is likely to affect many more people in the coming months.

So ahead of December’s Budget and with much debate about the tax already taking place we decided to ask the parties and a number of independents for their view on the tax.

We wanted to know whether they agree with the principle of it, the specific policy on it that the government is pursuing and if not what alternative they would propose for raising revenue to close the deficit.

We sent the following questions to all political parties represented in the Dáil and two independent deputies in a bid to ascertain their exact views:

1. Is your party in favour of the principle of a property tax?

2. Under the EU-IMF agreement, the government is committed to the introduction of a property tax. Does your party agree with this policy?

  • If yes,

Briefly (in 100 words or less) explain why…

What metric would you use to calculate the property tax – land value, property value, or another method?

What exemptions, if any, should there be for the payment of a property tax?

  • If no,

Briefly (in 100 words or less) explain why…

The property tax is being introduced as a measure aimed at raising €500m annually, can you offer an alternative measure to raise this amount if you are against the property tax?

Here is what they each said in response in order of the size of their Dáil numbers:

FINE GAEL

Fine Gael said that it would be “inappropriate” for it to answer the questionnaire given that the measure will not be properly announced until December’s Budget. It pointed out that:

At this point in time, the only things we know for certain are that: There will definitely be one introduced; it will be introduced mid-way through next year – effective July 1, 2013; and it will be collected by the Revenue Commissioners.

Adding:

Beyond this, the criteria on which the tax will be based has not been finalised, and this is unlikely to be confirmed fully until Budget Day (December 5, 2012). Consequently, we have no wish to pre-empt the Minister for Finance in this.

LABOUR PARTY

In response to our questionnaire, the Labour Party sent this statement:

The Labour Party supports the introduction of a fair and equitable property tax as a means to broaden our tax base.  The EU/IMF Programme of Financial Support, as negotiated by the previous FF led Government, committed Ireland to the introduction of a property tax.  This is a binding agreement that is funding our day to day State funding.

The Programme for Government stated that we would consider various options for a site valuation tax.  A property tax is a progressive tax that will provide local government with a reliable (and much needed) stream of revenue.

There are a number of options in the administration of a property tax. However, there has been no final decision on what type of tax will be administered or whether a system of deferrals or exemptions will be part of its introduction.

FIANNA FÁIL

1. Is your party in favour of the principle of a property tax?

The introduction of a property tax has to be seen in the context of the current state of the economy. We will not be supporting the introduction of a property tax in 2013. This reflects a number of stark realities:

  • 10.9% of owner occupied properties are in arrears of 90 days or more. However when the data is examined in more detail it shows that by value 27% of residential mortgages are either in arrears or have been restructured.
  • According to a recent report by Davy stockbrokers, over 50% of residential mortgages are in negative equity, including the majority of those taken out since 2000.
  • This domestic economy is in a very weak state, retail sales continue to show a year on year decline.
  • The introduction of a property tax is likely to delay any recovery in the housing market further damaging the domestic economy.

Fianna Fáil has carefully considered the arguments about the appropriate design and implementation of a recurring residential property tax.

  • Taking account of the point outlined it is out conclusion is that now is not the right time to introduce a property tax. It risks damaging an already weak domestic economy and would fall disproportionately hard on families already struggling to meet mortgage payments.

2. Under the EU-IMF agreement, the government is committed to the introduction of a property tax. Does your party agree with this policy?

  • If yes,

Briefly (in 100 words or less) explain why…

As noted the introduction of a property has to be considered in the context of the current state of the economy. The Troika have repeatedly pointed out that budgetary decisions are a matter for the Government and any one taxation or expenditure decision can be substituted for another of equal value so long as the overall adjustment is achieved.

We believe a property tax would be disproportionately damaging to the economy and the Government have been negligent in failing to pursue the option of substituting it for other measures.

What metric would you use to calculate the property tax – land value, property value, or another method?

Theoretically a site value tax is preferable as it does not punish homeowners for improving their property. For example in the case of a market value based tax a homeowner would end up paying more if they make their home energy efficient.

A site value tax would be levied on speculators who hoard land and in so doing broaden the potential base. The Government’s property tax as currently envisaged would appear to exempt up to 700,000 zoned sites which would be included under a site tax.

What exemptions, if any, should there be for the payment of a property tax?

We would re-emphasise our opposition to a property tax in 2013.

Fianna Fáil opposed the Household Charge due to the government’s failure to provide sufficient exemptions for those struggling to make ends meet, such as those with high level of mortgage arrears, negative equity, welfare dependency and persons who paid large amounts of stamp duty.

We will table similar amendment should the Government go ahead with its property tax.

  • If no,

Briefly (in 100 words or less) explain why…

The property tax is being introduced as a measure aimed at raising €500m annually, can you offer an alternative measure to raise this amount if you are against the property tax?

In our pre-budget submission Fianna Fáil will propose a range of fully costed alternative measures to achieve the necessary budget adjustment for 2013. This will be published prior to the budget on December 5th.

SINN FÉIN

1. Is your party in favour of the principle of a property tax?
We are in favour of a wealth tax that would tax property above a certain value – all property, not just houses or other building assets but financial as well.

2. Under the EU-IMF agreement, the government is committed to the introduction of a property tax. Does your party agree with this policy?

No

  • If yes,

Briefly (in 100 words or less) explain why…

What metric would you use to calculate the property tax – land value, property value, or another method?

We don’t support a property tax. Our wealth tax looks at property over the market – value of €1 million, with the first 20% of Principle Private Residences written off. We’re currently drafting legislation for publication.

What exemptions, if any, should there be for the payment of a property tax?

We don’t support a property tax.

  • If no,

Briefly (in 100 words or less) explain why…

The property tax is being introduced as a measure aimed at raising €500m annually, can you offer an alternative measure to raise this amount if you are against the property tax?

The obvious answer is our wealth tax, but in each alternative budget we have published, and again in the one we publish this year, we list a range of taxation and public saving measures which would be eminently more fair than this notional tax. Our wealth tax has the capacity to bring in more than the €500 million. A third tax rate of 48% on income in excess of €100,000 would raise €365 million. Increasing CGT by 10% would raise €160 million.

SOCIALIST PARTY

1. Is your party in favour of the principle of a property tax?

The Socialist Party opposes a property tax on the family home which is what this government is proposing. A property tax on earnings somebody receives on properties they rent out to others is a different matter

2. Under the EU-IMF agreement, the government is committed to the introduction of a property tax. Does your party agree with this policy?

No

  • If no,

Briefly (in 100 words or less) explain why…

This is a bailout tax. No new services are being offered in return for the property tax so the often made comparison with continental Europe doesn’t apply. Many have paid stamp duty on their property. Many properties are in negative equity and in no sense can be considered an asset.

The property tax is being introduced as a measure aimed at raising €500m annually, can you offer an alternative measure to raise this amount if you are against the property tax?

As with the overall deficit the only way to resolve the problem lies in a combination of radical policy measures that can but summed up briefly as non payment of the bondholder debt, tax the unearned and underinvested wealth of the rich and the corporations and a publiclly (sic) funded programme of public works and an expansion of public enterprise to put hundreds of thousands back to work. The austerity approach is the polar opposite of this and is making the situation worse.

PEOPLE BEFORE PROFIT/UNITED LEFT ALLIANCE

In response to our questionnaire, People Before Profit/United Left Alliance TD for Dublin South Central, Joan Collins, sent this:

1.The United Left Alliance is opposed to the property tax and is actively involved in the campaign against the Household, Water and Septic tank tax campaign.The Troika want a billion euro from a property tax that would mean a tax of point 5 % of the value of your home. The Government want to introduce a point 25% as I believe they are playing a game here. If they bring it in in July next year and they base it on point 25% for a half a year it will appear to be quite low. Then in 2014 it will be the full whack and potentially in 2015 it will be up to point 5% to appease the Troika.

This money will not be going to local Authorities it will be going to the exchequer. This is a family home tax not a tax on the wealthy. We believe an asset base wealth tax would bring in multiples of the Property tax. Over 21,000 people earning on average€ 470,000 per year only pay 23% of tax . Approx 10,000 earn €620,000 and only pay 29% tax. That should be increased. A financial asset tax and an increase in the corporation tax and close the loopholes that allow major corporations to pay practically no corporation tax should be closed off. These measures would go much further than €500 million or the 1 billion the Troika wants. Austerity is not working, it is breaking the backs of our society both physically and economically.

SHANE ROSS

1. Are you in favour of the principle of a property tax?

NO.

2. Under the EU-IMF agreement, the government is committed to the introduction of a property tax. Do you agree with this policy?

  • If no,

Briefly (in 100 words or less) explain why…

Answer: The property tax is directed at many of the same people who will be paying increased mortgage rates ( scandalously raised by AIB last week) . Many of them will also be targeted by the December Budget’s cuts in child benefit. Middle Ireland is at the end of the line, unable to pay the financial demands of the government. Property tax will not ” broaden the tax base”, it will return to the emptying well of lower and middle income Ireland. The coping classes will no longer be able to cope.

Whatever way the property tax is introduced it will be unfair. Those in negative equity must not be crucified, nor should those with lower incomes. Neighbours with identical houses will be paying different amounts. Some in an estate will pay heavy tax while others will pay nothing.

The property tax is being introduced as a measure aimed at raising €500m annually, can you offer an alternative measure to raise this amount if you are against the property tax?

Answer : Yes. Waste in the public service remains rampant. Whatever happened to the quango cull, promised in the Fine Gael manifesto? Where does the €300m subsidy to CIE go? Why do the semi states and government departments still employ an army of consultants and public relations spinners? The FAS budget remains bloated , making no dent in the unemployment spike. Top civil servants should take salary cuts. A scalpel should be taken to Enterprise Ireland, to the HSE and Udaras. Brendan Howlin should be sent back to his desk and told to make more determined cuts the €1.5billion public sector allowances.

CATHERINE MURPHY

In response to our questionnaire we were sent this from the independent TD for Kildare North:

1. Are you in favour of a Property Tax?

As it is currently proposed, No I am not.

2. Why?

Until Local Government reform happens we cannot ask people to pay more for what is essentially a dysfunctional system. We don’t have a system of Local Government in this Country; we have a system of local administration.

We are an extremely centralised country in terms of decision making. In other Countries where poll taxes are collected, local services are provided to match.  Essentially what it collected locally is utilised locally rather than going into one central melting pot to be used as central Government sees fit.

Introducing a property tax before re-designing Local Government is akin to putting the cart before the horse.

Another issue which needs to be addressed is the amount of negative equity mortgages in existence.  A vast number of people own a debt not a property. You cannot ask these people to pay a tax on this debt.

There are many other factors to be considered before we can even consider its introduction, things like ability to pay; those who have paid stamp duty during the boom etc.

Essentially it cannot be introduced in a fair and equitable way without first addressing all of the above factors.

3. Alternative Measures:

I believe we should be looking at introducing a third rate of income tax on those with incomes over €100,000 and I would also favour the introduction of a wealth tax.

Read: Report on property tax to be brought to Cabinet ‘shortly’

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