Before food or heat or light, your property tax must be paid

The outsourcing of collection to Revenue means homeowners will have to comply, writes Ronald Quinlan

WHEN it came to the non-payment of the €100 household charge, we were told by a succession of government ministers that there needed to be a distinction drawn between those who couldn't pay and those who wouldn't pay.

As of last Friday evening, some 494,708 of the 1.62 million household charge payments the State has been trying to collect remained unpaid, according to the latest figures released by the Local Government Management Agency (LGMA).

That statistic alone goes a long way to explaining why Finance Minister Michael Noonan has outsourced the collection of the property tax to the Revenue Commissioners. The taxman will use a variety of methods, up to and including direct deductions from salary, pension and even social welfare payments, to ensure 100 per cent compliance from homeowners, regardless of their personal financial circumstances.

Addressing the Dail debate on the Local Property Tax Bill last Tuesday night, Dublin South TD Shane Ross captured the mood of Ireland's squeezed middle with his observation that: “I do not want to be overdramatic but I think it is true that those who have had it docked from their pay or social welfare will have to make hard choices. They must decide whether they can eat properly, what they will feed their children and whether they will live in the cold. The one thing that will happen is that they must pay their property tax. This is an unforgivable way to govern. It is inhuman. It is saying we are desperate and the people will be more desperate.”

But just how desperate are the homeowners of Ireland and how difficult will be it be for them to shoulder the added burden of the property tax which comes into effect officially on July 1, 2013?

For those with mortgages, the imposition of the new tax — which will be levied at 0.18 per cent of the value of the property — could hardly come at a worse time, especially in cases where that mortgage is already in arrears.

According to the latest figures released by the Central Bank on December 13 last, some 86,146 or 11.3 per cent of mortgages on family homes were in arrears by over 90 days at the end of last September, up from the 81,035 or 10.6 per cent recorded at the end of last June.

Add to that the 49,482 mortgages on family homes in arrears of less than 90 days, the 26,770 buy-to-let properties in arrears of more than 90 days and the 22,553 rental properties where the mortgages have been restructured and it’s clear that a substantial number of the country’s homeowners will be viewing the arrival of the property tax with trepidation.

Elsewhere among the 1.6 million properties for which the tax will have to be paid are some 130,000 local authority units where local councils and corporations will be required to foot the bill. Whether or not those local authorities recover the money through raising rents for their tenants remains to be seen. In the event that rents remain static, the costs will have to be recovered somewhere else, either through a reduction in local services or an increase in the tax levied on those who actually own their homes. With local authorities set in the coming years to be given the discretion to raise property taxes in their respective areas to the tune of 15 per cent, few would be surprised to see homeowners forced by stealth to pay for the share of local authority tenants.

The Government's decision to apply a general rate across the country of 0.18 per cent to the value of every residential property up to a value of €1m, and 0.25 per cent on the portion of values above €1m is patently unfair to those living in Dublin, Cork, Galway and Limerick where house prices are typically higher than the rest of the country.

Referring to that unfairness in the course of the Dail debate on the property tax on December 14 last, Fine Gael TD for Dublin South Olivia

‘Every euro will be taken from income that has already been taxed at source’

Mitchell compared the situation of a homeowner in the capital to a homeowner in Donegal, warning that a person living in south Dublin could in certain cases end up paying five times more than their equivalent in Donegal.

Quite apart from the possibility that the property tax will create a new urban-rural divide, the Government's contention that the monies it raises will be used by local authorities to deliver local services surely sticks in the craw of most homeowners given the range of services already contracted to — or at least due to be contracted to — private companies, from the collection of bins to the supply of water.

A final point worth considering is the fact that every euro the Government will collect in property tax will be a ‘net' euro, ie, it will be taken from income that has already been taxed at source. Put simply, if your house is, for example, valued at €375,000 giving you a property tax liability of €675, you will need to earn a gross amount of roughly €1,350 to cover it.