Prop­erty tax de­bate re­flects strangely con­fused world of Ir­ish pol­i­tics

The Irish Times - - Opinion & Analysis - Cliff Tay­lor

The lo­cal prop­erty tax was in­tro­duced in 2013 as part of the troika deal to widen the tax base and pro­vide new fund­ing for lo­cal au­thor­i­ties. It is now at risk of dy­ing from ne­glect

Your lo­cal au­thor­ity does not want your money. At least it doesn’t if you live in Dublin. It is the time of year when lo­cal au­thor­i­ties vote on the level of lo­cal prop­erty tax they want to im­pose for the year ahead. For the past three years the four big Dublin lo­cal au­thor­i­ties have voted to in­tro­duce the max­i­mum al­low­able cut of 15 per cent in house­hold bills.

It is part of a pat­tern of po­lit­i­cal ret­i­cence to­wards the tax which could see it col­lapse en­tirely over the next years, un­less ac­tion is taken. The lo­cal prop­erty tax was in­tro­duced in 2013 as part of the troika deal to widen the tax base and pro­vide new fund­ing for lo­cal au­thor­i­ties. It is now at risk of dy­ing from ne­glect.

Even the au­thor­i­ties them­selves are am­biva­lent about tak­ing the cash. Coun­cils can vote each year to in­crease or de­crease the bill by 15 per cent from the base level. Over the past three years, all four Dublin coun­cils opted for the max­i­mum al­lowed cut of 15 per cent, though the ex­pe­ri­ence across the coun­try was more mixed.

Votes taken so far this year have been in­ter­est­ing – and of­ten close. For ex­am­ple, for 2018 Fin­gal coun­cil­lors re­sponded to pleas for more fund­ing from coun­cil man­age­ment, but only by re­strict­ing the cut to 10 per cent, while Dún Laoghaire-Rath­down coun­cil­lors ig­nored their man­age­ment’s warn­ing com­pletely and again opted for the full 15 per cent re­duc­tion. The other two Dublin coun­cils – the city coun­cil and South Dublin – have yet to vote, as has Cork city.

In­ter­est­ingly Cork County Coun­cil, the next big­gest col­lec­tor af­ter the Dublin coun­cils, opted for a 5 per cent re­duc­tion in both 2016 and 2017, but voted to im­ple­ment the base tax level next year, mean­ing many house­holds will face an in­crease. In some coun­cils, at least, the bal­ance of opin­ion is that there may be more votes in bet­ter ser­vices.

Else­where across the coun­try the ex­pe­ri­ence varies, with the vote in Laois for a 10 per cent rise a no­table out­lier – though as this means a rise of just ¤9 a year for some 40 per cent of those af­fecte­dit is un­likely to spark a riot. In many coun­cils many of the par­ties of the left, in­clud­ing Sinn Féin, are lead­ing the charge call­ing for the max­i­mum re­duc­tion, of­ten, but not al­ways, sup­ported by Fianna Fáil. Labour, in con­trast, bro­kered the move to in­tro­duce a smaller cut in Dún Laoghaire-Rath­down.

‘Dublin tax’

It seems odd to see Sinn Féin and Peo­ple Be­fore Profit vot­ing for cuts in the tax on the pri­mary source of wealth held by most peo­ple. Their ar­gu­ment is that the tax is un­fair, a “Dublin tax” and an un­af­ford­able im­po­si­tion for many.With Fine Gael coun­cil­lors of­ten on the other side of the ar­gu­ment, it re­flects the strangely con­fused world of Ir­ish pol­i­tics, with no one quite cer­tain whether vot­ers put a higher pri­or­ity on bet­ter ser­vices or lower taxes and ev­ery­one loath to ex­plain to them that they can­not have both.

Pub­lic at­ten­tion is now turn­ing to the next reval­u­a­tion, due in 2019, which could, un­less the Gov­ern­ment de­cides oth­er­wise, lead to very sig­nif­i­cant in­creases for many. The last reval­u­a­tion, in 2106, was can­celled, so the tax is still based on 2013 val­ues. A house val­ued at ¤400,000 in 2013, the last val­u­a­tion date, would now be likely to be val­ued at more than ¤620,000. This would hike the an­nual bill from ¤765 to ¤1,125. Some­one with a house val­ued at ¤650,000 in 2013 could see their prop­erty val­ued at more than ¤1 mil­lion, with a tax bill ris­ing from ¤1,215 to more than ¤2,800 a year. And that is be­fore tak­ing ac­count of fur­ther house price rises likely over the next cou­ple of years.

There is no way this is go­ing to hap­pen po­lit­i­cally, nor should it. But it is up to the Gov­ern­ment to de­cide what does hap­pen. Dr Don Thorn­hill, who did a study for the gov­ern­ment in 2015, rec­om­mended one way for­ward, ba­si­cally re-en­gi­neer­ing the tax to pro­vide an agreed sum of rev­enue to lo­cal au­thor­i­ties. The house price bands could also be changed, to en­sure peo­ple don’t face a big hike in 2020, when the 2019 val­u­a­tions are due to feed through into tax bills.

Pub­lic cred­i­bil­ity

But do­ing noth­ing is not an op­tion. As the Thorn­hill re­port pointed out, the longer reval­u­a­tions are post­poned, the harder it be­comes to do them at all. And the tax is al­ready at risk of los­ing pub­lic cred­i­bil­ity. There are ob­vi­ous ex­am­ples of un­fair­ness – for ex­am­ple, any new house bought from a builder since 2013 is ex­empt. So is any prop­erty at all bought in 2013, pro­vided the pur­chaser is still liv­ing in it as their pri­mary res­i­dence.

The Thorn­hill re­port warned that all this, un­less tack­led, could un­der­mine the cred­i­bil­ity of the tax, as hap­pened to the old do­mes­tic rates sys­tem abol­ished in 1979. It could also leave it open to le­gal chal­lenge on fair­ness grounds. As Thorn­hill pointed out, the old sys­tem of agri­cul­tural rates was suc­cess­fully over­turned in the mid-1980s.

The prop­erty tax is only 1 per cent of tax rev­enue. The eco­nomic ar­gu­ment would be to let it drift up over the years and use the cash to cut in­come tax, or fund key projects. Tax­ing prop­erty is seen as more work friendly than tax­ing in­come, and also spreads the tax base and gives it a new sta­bil­ity. The tax could also un­der­pin lo­cal au­thor­ity fund­ing – pro­vided the coun­cil­lors would ac­tu­ally take the money. But in post-wa­ter-charge Ire­land, the risk now is that the tax is left to wither com­pletely, throw­ing yet more reliance back on the old favourite – in­come tax.

PHO­TO­GRAPH: ERIC LUKE

Richard Boyd Bar­rett, Paul Mur­phy and Joe Hig­gins at a 2013 march against the lo­cal prop­erty tax: in many coun­cils many of the par­ties of the left are lead­ing the charge call­ing for the max­i­mum re­duc­tion in the levy

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