Think-tank urges radical shake-up of property tax
PROPERTY taxes should be raised sharply to diversify tax revenue sources and to address rising wealth inequality, the Nevin Economic Research Institute (NERI) has said as the Government prepares its 2020 Budget.
The proposals from the trade union-affiliated thinktank would represent a major shift in the tax system and the Government has repeatedly shied away from changes to property taxes due to their political unpopularity.
At present, the State collects far less in tax revenue than other European Union countries at just 23.3pc of gross domestic product, versus 38.9pc in the EU. Of the taxes collected, Ireland is far more dependent on VAT and excise taxes that hit the less well off harder than the wealthy.
“These taxes are also the most difficult for the super wealthy to avoid because the underlying asset lacks mobility and is impossible to hide,” NERI senior economist Tom McDonnell said as the institute unveiled its tax proposals and economic forecasts.
The Institute’s proposals call for a steady increase in property tax rate over 10 years by 0.01pc or 0.02pc, from the existing 0.18pc, and for property valuations to be rebased at current levels and re-evaluated every three or four years.
One major objection to hiking property taxes has been older people on low incomes
who live in more valuable houses would be hit hard, something the NERI said could be dealt with by deferrals until the house was sold.
Apart from that, exemptions should be kept to a minimum, Dr McDonnell said, to reduce distortions and loopholes in the tax system.
The NERI estimates that Ireland collected €1.6bn less than its EU peers from residential property taxes in 2016.
Although a rise in property taxes would be politically unpopular, studies by the Organisation for Economic Co-operation and Development have shown they are more “growth friendly” than other taxes such as stamp duty, which can reduce social mobility and prevent people moving location to new jobs.
Rising revenues from property taxes could be used to replace stamp duty which is very volatile, as shown in the crash when receipts evaporated, punching a huge hole in government finances.
‘These taxes are the most difficult for the super wealthy to avoid’