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Dublin: 13 °C Saturday 1 November, 2014

Column: This property tax is callous and a breach in democratic norms

The Government has no democratic mandate from the electorate for a property tax. In fact, they were elected on the very opposite of commitments, writes Kieran Allen.

Kieran Allen

IRELAND HAS A very high rate of home ownership, with 70 per cent of people owning their own homes. But from July 2013, we are supposed to pay a tax just to live in our own homes. The government says this is necessary to broaden the tax base and claims the property tax state will bring in a guaranteed income stream of €500 million a year.

But why does the state have to levy the majority of the population to ‘broaden the tax base’? Could there not be extra taxes on profits or dividends or financial speculation to achieve same objective?

No relationship between the market value and ability to pay

The whole scheme is based ‘market value’ which means that the tax on a smaller house in Dublin will be higher than a mansion in Mayo. Moreover, the tax is only levied on the first acre of a property and not the rest.  This is particularly beneficial to wealthy individuals like the Health Minister, James Reilly, who owns the 12 bedroom Laughton House, situated on 150 acres of Offaly soil. He will be charged a property tax on just one of those acres while the other 149 will be exempt.

When this was pointed to the Taoiseach, Enda Kenny, he replied: “The deputy is entitled, given that Ireland is a country in which there is plenty of land, to have space to stand outside his house and stand back to see if it is painted properly.” He is either a very poor comedian or has spent too much time in the Big House.

There is no relationship between the market value and ability to pay. People may inherit a home but have limited incomes. Or they can live in an area that has a higher market value and be unemployed.  In other words, owning a high value property does not imply you can pay the high annual recurring charge.

There are vast numbers of people who are in mortgage distress. They are already terrified when they hear politicians set down criteria for what lifestyle they will be permitted. They have no idea how they can pay a property tax when they cannot even pay the full mortgage.

The aim is to levy the majority of the population, not tax an asset

The government’s callous approach is exemplified by their attitude to those living in ghost estates. Originally 43,000 people were to be made exempt but this has been reduced to 5,000. Phil Hogan has simply changed his definition of a ghost estate to extract more money.

The hollowness of the government argument is further evident in the decision to tax 125,000 local authority tenants. Local authority tenants do not own property yet the government made them subject to a ‘property’ tax.  This shows that the primary purpose is not taxing an asset which can be traded to accumulate wealth. The aim is to levy the majority of the population – rather than the tiny financial elite who caused the economic crisis.

Targeting the spending power of the vast majority through a €500 million annual levy can only lead to a greater decline in the domestic economy. Those on lower and middle incomes are more likely to spend within the domestic economy than the wealthier sections.

If the state’s concern was to both grow the economy and ensure a steady stream of revenue, it would introduce a wealth tax rather than a home tax. A wealth tax might target assets that are valued at over €1 million and would not be focused on the majority of family homes. There is currently €446.4 billion worth of net household assets in Ireland, when debts and liabilities are subtracted.

Local services will see no benefit

The argument that a property tax would help local democracy makes even less sense. The central funding for local government has been cut by cut by 20 percent between 2008 and 2012. This funding is made up primarily of a General Purpose Grant and Government Grants and Subsidies. These have been cut by €522 million and this just happens to be precisely the figure that the government hopes will be raised from the property taxes. In other words, property taxes will not lead to any improvement in local authority services. It will simply facilitate the diversion of money that previously went to local government to the bondholders.

The state, however, has not relied on intellectual arguments to promote a property tax. It has rushed through Finance (Local Property Tax) in 2012 which gave it draconian powers to collect this tax. This act represents a fundamental breach in democratic norms.  It allows the government to reach into pay packets, social welfare, pensions to take away our money. It also absolves the Revenue Commissioners of any requirement of confidentiality so that they can tell employers exactly what their employees own. It contains an informers’ provision which threatens people with fines if they do not reveal the owner of a property.

These draconian measures became necessary because the government has no democratic mandate from the electorate for such a property tax. In fact, they were elected on the very opposite of commitments. The Fine Gael manifesto stated that ‘a recurring, residential property tax on the family home is unfair’. The Labour Party favoured a ‘site value charge’ that implied a tax on the value of the land, regardless of the building on it. It also stated that there should be exemptions for those who recently paid large sums in stamp duty and those in negative equity. However, the Labour Party neither got a site value tax or its proposed exemptions.

Why no protests?

The government has no case but thinks it can get away with it because the Irish people have not been protesting. In Bulgaria, protestors  recently got rid of a government that had raised the electricity bill. It is high time we changed this because ‘giving out’ on Joe Duffy will not cut it anymore. We need to act.

Personally, I see no reason why I should help the government build up its database by filling out a self assessment form. But I would also urge people to get out on the streets and make their voices heard. There is a national demonstration against the property tax in Dublin on 13 April – be there to show that ‘people power’ can be stronger than a bullyboy government.

Kieran Allen is a Senior Lecturer in Sociology in University College Dublin. He is the author of Ireland’s Economic Crash (Dublin: Liffey Press 2009). He is also affiliated with the Socialist Workers Party and People Before Profit. To read more by Kieran Allen for TheJournal.ie click here. The protest organised on April 13 is leaving the Garden of Remembrance at 12.30pm.

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