More on the property tax…

What a difference a week makes. Last week came news in the SBP that the Revenue Commissioners were to take on the challenge of collecting the property tax. As was noted, this is passing strange because it seems to fly in the face of the supposed logic put forward by proponents of local services paid for by local taxation. And it seems an uneasy half-way house between that and general income taxation.

So much to consider. Take what Niamh Connolly writes in the SBP this weekend.

Sources said that the new property tax system would work in a similar way to the collection of the pension levy. In the case of the property tax, the Revenue would contact employers to notify them of how much is to be charged.
Where the property is in the names of two people, the tax would be divided. Self-employed workers would declare their liabilities through their annual returns to Revenue, according to the proposals.

It all seems a bit – well, complex.
And what of this?

In his briefing, Hogan said he had not yet seen the Thornhill report and expected to receive it later this month or next month. Fine Gael backbenchers are anxious that the property tax will not increase the financial burden on the so-called “squeezed middle”. Hogan wants all property owners to contribute, sources said.

That, presumably, is a dog whistle for property owners both above and below the ‘squeezed middle’ (a concept in and of itself that is entirely suspect from the off).
And here’s an oddity. It’s the Labour Party which is raising another issue as to the property tax. Reported in the Irish Times this week:

Galway East TD Colm Keaveney [and LP Chairman] yesterday warned the tax to replace the contentious household charge will be resisted if it is not shown to be fair. Mr Keaveney said he interpreted the new property tax as an “incremental introduction of a wealth tax”.
“Not everybody’s a PAYE worker. If it’s a wealth tax, and it’s to be the first step into a fair and just wealth tax, I fail to see how PAYE would be the way into it,” he said.

That’s a very fair point indeed. No, no, wait a moment, it’s actually not. The property tax isn’t a wealth tax in the sense one presumes Keaveaney means, and nor has it ever purported to. Look at how even this proposal is scaring the horses.

Fianna Fáil environment spokesman Niall Collins last night said it would be impossible to achieve a property tax that was equitable at present. Referring to difficulties experienced collecting the household charge, he said: “People who have paid it are to the pin of their collars. There’s a sizable number of people who haven’t paid it.”

And:

He added: “Roll-out of a full property tax in this country will be highly contentious. To achieve equity in the current climate will be impossible.”

And consider the words of Phil Hogan quoted in the SBP:

This newspaper has also established that the minister for the environment, Phil Hogan, told his party that the property tax should apply to all households which benefited from local authority services. The minister told a meeting of the Fine Gael parliamentary party that, while the tax should be income-related, he believed that “everybody should pay something”, said a source.

It’s meant to cover costs of local authority services and be a revenue raising device. That’s what it is about and there’s no point in seeing it as a wealth tax. That it might, if it had a progressive element – and so far there’s no hint from what is leaking from the Thornhill group devising the report on the issue that this will be the case, have secondary effects as such is irrelevant.

What does all this demonstrate? That if one intends to implement a wealth tax it is essential to start from that point initially rather than hope that ‘incremental’ steps, or to be honest, near incidental effects of a property tax are equivalent. As Michael Taft and others have said, a genuine wealth tax will incorporate not just houses but all manifestations of property.

And if you expect clarity from our beloved Taoiseach… well… read on.

Meanwhile at the debate in the Dáil on SF’s bid to repeal it… well…

O’Dowd gave SF a torrid time, in relation to charges in the North, albeit SF got its retaliation in first with mention of a range of services – including refuse collection! – that those charges covered there that aren’t covered in the Republic but that said he didn’t necessarily do his own case any good.

Deputy Fergus O’Dowd: In common with all levels of Government, the financial position of local authorities remain under significant pressure. At the same time, as part of the efforts to close the gap between income and expenditure in the public finances, Exchequer funding of the day-to-day activities of local authorities cannot be immune and, accordingly, the 2012 Exchequer allocation was reduced by €164 million compared to 2011. Income from the household charge is, therefore, critical in ensuring that local authorities have the necessary resources to continue to deliver services to their communities. However, within the constraints of introducing a relatively modest charge of broad application, the household charge sought to be as equitable as possible through specific provisions for exemptions and waivers in order to exclude those households in particular difficulty from the ambit of the charge. I appreciate that even at €100, the charge is not welcome to people, especially those in difficult circumstances. Members on all sides of the House understand and appreciate the difficulty the charge causes for many. There is no doubt that it causes difficulty for people. However, it is a necessary contribution to the funding of the State, which is spending more than it is raising. Also, given the absence of a tax on residential property, it is a major gap with which we must deal.

It’s fascinating to see how the issue is dealt with further in terms of equity. The definition of equity appearing to be those who can’t pay at all get a waiver and everyone else pays the same… So much for progressive taxation.

Deputy Fergus O’Dowd: Exemptions also include a housing authority or the Health Service Executive, voluntary and co-operative housing, residential property subject to commercial rates and wholly used as a dwelling, residential property owned by certain charities or discretionary trusts and residential property which an owner has vacated due to long-term mental or physical infirmity, for example, when an elderly person moves into a nursing home.
In addition to these exemptions, two important waivers apply in respect of the charge. The programme for Government commits to giving consideration, in the context of introducing a property tax, to the impact that such a tax would have on the number of households in mortgage distress. Households in receipt of mortgage interest supplement from the Department of Social Protection have therefore been excluded from the scope of the charge. Mortgage interest supplement provides short-term support to help eligible households pay mortgage interest payments. In excess of 18,000 households are expected to benefit from the waiver.

And note that the term progressive doesn’t pass O’Dowd’s lips in relation to the future shape of the property tax.
He says the following:

Deputy Fergus O’Dowd:  Sinn Féin must accept that there has to be sustainable funding of local government. Notwithstanding the weaknesses in what we are doing now, when the property tax is introduced it will be fairer and I expect socialist parties to support it because it will be based on people’s wealth and their ability to pay.

But there’s not detail. And this doesn’t necessarily give one cause for optimism.

Deputy Fergus O’Dowd:  The household charge is an interim measure and will be replaced by a full valuation-based property tax in due course. However, time is required for that and the household charge was necessary as an immediate measure to meet the troika’s timeframe. This was the context in which the legislation was introduced.
In terms of the full property tax, an independently chaired interdepartmental group was established in February to consider the structures and modalities for a full property tax. Recently, the group completed its work and submitted its report to the Minister for the Environment, Community and Local Government. The approach to the report will be considered by the Government in due course.

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