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The household tax… December 20, 2012

Posted by WorldbyStorm in Uncategorized.
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I’m intrigued by the news that Councils who ‘failed to meet their collection targets for the household charge’ – that is those with collection rates below 60 to 65 per cent – are having funding cuts imposed on them. Intrigued for a number of reasons, not least that Councils, as distinct entities have a fairly nebulous standing in most peoples thoughts. It’s not as if there’s any great identification with them, or even much notice taken of them. They’re a layer of service provision that is generally regarded as yet another arm of the state, and not discrete entities in themselves. Of course there are exceptions, but the point is that there’s no great attachment to them.

So it is unclear what mechanism the Minister of Environment expects to operate in terms of pressure being brought to bear either by the Council itself or presumably enraged household charge payers, and on who that pressure would be directed. Would it be the non-payers? But that’s absurd because they’re scattered hither and yon. On the Councils themselves to step up efforts to claw back the charge from non-payers?

It’s also an odd tactic because it doesn’t benefit those who have paid. Indeed arguably it does entirely the opposite.
There’s more as well. It’s an useful metric to see where the campaigns have been (at least in part) successful.

…the largest funding cut has been imposed on Donegal, with €309,000 withheld from the county’s local government fund (LGF) allocation for the final quarter of this year.

Laois, Louth, Meath, Offaly, South Dublin and Cork county councils also saw their funding cut, with cuts ranging from €45,000 in Louth to €167,000 in Cork. Councils which collected less than 60 per cent of the charge faced a cut of 1 per cent in their total LGF for the year, while those which collected between 60 and 65 per cent faced a cut of 0.5 per cent. Cork and South Dublin narrowly missed the 65 per cent target, while Laois, Louth and Meath collected between 60 and 65 per cent.

And unsuccessful:

Householders in Dun Laoghaire-Rathdown were the most compliant in the country when it came to paying the new tax, with 85.1 per cent of them paid up by the end of November, the deadline for the LGF cuts to apply.
Nine further local authorities collected in excess of 70 per cent of the liable household charge – county councils in Mayo, Kerry, Clare, Wicklow, Sligo and North Tipperary, and city councils in Dublin, Galway and Waterford. Homeowners in Donegal were the least compliant in the country, with just 55.1 percent of all residential property owners paid up by the end of November.

Interesting to do something more in-depth than a back of the envelope calculation on median income levels in those parts various – no?

And the level of non-payment overall?

More than 31 per cent of all home-owners had still not registered to pay the €100 levy at the end of last month, according to Department of Environment data. Grants from the LGF were budgeted to provide 17 per cent, or €651 million, of the overall funding of local authorities this year.

Given that the CAHWT seems to have faded somewhat into the background, in part from the sheer pressure of other events that have crowded out the political agenda, what happens next?

Well, welcome to the property tax. The debate over the property tax is an interesting one. The property tax is – of course – not a proper property tax in that it is limited to one form of property, and nor is it genuinely proportional. The differentiation in terms of the percentages applied are quite minimal and hardly progressive in the technical sense of the term and the bands themselves seem intrinsically unfair if one is at either end of them.

How this operates in practice is of great interest and what the response will be. I’m probably not alone in thinking that a left campaign built around property and taxes is problematic from the off. But anyhow, we will see.

What is odd, though, is the feature built into the tax as regards deferrals.

As noted on Money Guide Ireland deferrals are available for those on low incomes and in particularly straitened circumstances, but what is genuinely strange is that interest of 4 per cent per annum will be charged on deferred amounts.

This seems almost gratuitous in that it builds up outstanding amounts across periods where people are in very very difficult circumstances. It would be interesting to hear an official rationale for same. But it seems to me to be of a piece with the cloth eared and clumsy introduction of the household charge. Which, it has to be said, doesn’t auger well for its smooth implementation over the next year or two.

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1. LeftAtTheCross - December 20, 2012

I don’t believe the Local Authorities are going to pursue anyone for unpaid Household Charges at this stage, because essentially this is not going to be their problem in 6 months time once the Property Tax kicks in under the remit of the Revenue Commissioners. The councils are reluctant to pursue businesses through the courts for Rate arrears, perhaps due to the capture of local authorities by business lobby interests and perhaps due to a recognition that the grief involved outweighs the likely returns. One might expect a similar lack of enthusiasm in pursuing the 40% of householders who will very soon be ‘not my problem’ to deal with, as the volume of court cases would necessiate a long-term process which stretches into years rather than months.

On the very unprogressive nature of the Property Tax as a ‘wealth tax’, it’s worthwhile having a read of this post over at NAMA Wine Lake which very clrealy shows how wriggle room has been provided to water down any remnants of progressiveness in the proposed tax.

http://namawinelake.wordpress.com/2012/12/19/five-reasons-why-the-new-property-tax-should-make-you-blow-your-top/

Personally I do have reservations about the principle of campaigning against progressive wealth taxation. It is clear that the elites are fighting this proposal, regardless of its minimal initial impact.

It is necessary in my view to continue the campaign against the Property Tax, but to very clearly distinguish between it and the flat Houshold Charge, and to emphasise that progressive wealth taxation _would_be_ something which the Left _would_ welcome, even though the Property Tax as currently constiututed is not that animal.

The difficulty with that stance is that it will alienate those in the audience who are simply strapped and are apolitically anti-more-tax in general, because it will be difficult to point to exactly what side of the threshold of ‘wealth’ people fall into, and people are genuinely and for good reason mistrustful of ‘politicians’ saying one thing and then doing another. A nuanced message will be difficult to convince with, although in the longer run it is esseantial to convince people of the difference betwee ‘good tax’ and ‘bad tax’, simply put. Where I think this strategy may come a cropper is that the purely oppositional Left may be hamstrung by the agitational motivation behind the campaign in terms of creating an honest and convincing case for ‘good tax’ that moves beyond the obvious targets of corporation tax, financial transaction tax, progressive income tax. When it comes to ‘wealth tax’ the difficulty is that most people consider themsolves to be middle class, to be ‘wealthy’ to some extent, conditioned as they are to ignore the vast inequalities in wealth. It’s a problem that people will switch off if the message is complicated but honest. And I’m not interested in campaigning on an essentially dishonest analysis of the issue.

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2. Jim Monaghan - December 20, 2012

My guess is that by August they will be ready to deduct from salaries or social welfare. This would include the existing tax. So why bother with a more expensive collection method. I will be selling my house and moving to something smaller and cheaper ( kids have flown the nest).There is only room in Dun Laoghaire for rich people not those who did without holidays to do up a ramshackle house. Perhaps I should move my residence officially to say Monaco or the Channel Islands and my accounts to the Caymen islands.
Given what they are doing to those dependent on carers, I should rate myself lucky.

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3. ringacoltig - December 20, 2012

Given that the new Property Tax will be based on the an estimated valuation of the property, it will be in the interests of the government to drive the cost of housing upwards again, as this will drive the income to the state from the tax ever upwards. It would seem that Ireland has learned nothing from the false boom of only a few years. It also shows how the property tax could rise significantly in a very short period of time without taking any account of people’s ability to pay.

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CL - December 20, 2012

The ‘recovery’ is dependent on house prices rising; if they don’t the banks will require more public, borrowed funds.

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4. Julian Assandwich - December 20, 2012

We’ve successfully made the link between the household charge and the new property tax,so we should stop calling it a “property” tax after the 12th of January. It is a home tax or a bank-bailout tax or both and that’s the narrative that we build, rather than re-enforcing the bourgeois media/establishment’s narrative(which is designed to undermine us).

Boycott still is a key strategy but mass mobilisations(national and regional/local) should be elevated to equal status with it.

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5. Bartley - December 21, 2012

The differentiation in terms of the percentages applied are quite minimal and hardly progressive in the technical sense of the term and the bands themselves seem intrinsically unfair if one is at either end of them.

Every workable progressive tax system known to man involves discontinuous step-functions with edge-effects. That is nothing new.

But the argument does reveal just how much the anti-tax campaign has painted itself into a corner with all the rhetoric last year around not objecting to paying taxes in general, just making a principled stand against the non-progressive nature of the flat €100 charge.

Now the flat charge has been replaced with a graduated charge, its very difficult to make another principled stand against the €50k bands being too wide and therefore intrinsically unjust. Given the uncertain nature of property valuations in the current market, how narrow could the bands even be before things turn ridiculous?

Once the campaign is reduced to nitpicking about the technical aspects of the tax (if only the bands were €10k wide and the percentage jump at €1 million was bigger, we`d all be happy to pay!) the game is up in a way.

Very soon the arguments become self-defeating, such as Michael Taft`s objection to the higher 0.25% rate only applying to the portion of the house value above €1 million, as opposed to the entire amount. It should be obvious to anyone with even passing familiarity with the old stamp duty regime that his point is beyond nonsensical.

Interesting to do something more in-depth than a back of the envelope calculation on median income levels in those parts various – no?

At a first look, the correlation seems weak enough.

Case in point: the latest figures available from the CSO estimate disposable income per person (excluding rent) in Kerry at 88.2% of the national average, whereas Donegal it is 84.2%. So both areas have significantly below average income, yet the compliance rate in Kerry was relatively high, whereas in Donegal it was abysmally low. This disparity is much more likely to be driven by local cultural and political factors, than by income.

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Julian Assandwich - December 21, 2012

CAHWT is not an anti-tax campaign, it is a tax justice campaign. Members of the campaign are happy to pay taxes to fund society, but these taxes are not intended to do that. The home tax can’t be tweaked enough to make it so the proceeds going towards bank bailouts and bondholders is progressive. It doesn’t exist in a vacuum – and it’s that which drives the “wont pay” aspect of the campaign. And the “cant pay” aspect is getting all the more real with each passing day.

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Bartley - December 21, 2012

The home tax can’t be tweaked enough to make it so the proceeds going towards bank bailouts and bondholders is progressive.

Is the CAHWT also going to start recommending that people withhold the portion of their VAT and income tax that would go to funding bank bailouts?

Thing is, folks round this parish never tire of pointing that tax-payers have no right to expect any direct control over what “their tax dollars” are spent on, however much they disagree with that use of state funds.

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Julian Assandwich - December 21, 2012

If it was possible, absolutely. The USC charge for example is massively unpopular. Imagine how unpopular a bank-bailout tax stolen directly from people’s wages by Revenue in conjunction with their employer would be. Using the new powers Revenue have been given is the last thing the government want. If they do go ahead with it, they might win the battle, but they’ll lose the war over it.

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Bartley - December 21, 2012

… tax stolen directly from people’s wages by Revenue in conjunction with their employer

Such a description could be just as easily be attached to the current mode of collecting PAYE and PRSI, which presumably you`re in favour of?

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Julian Assandwich - December 21, 2012

You’re not comprehending what “tax justice” entails.

Taxes for their own sake are not progressive – the use of the proceeds is what makes taxation progressive or not. A case could not be made for our tax revenues being used progressively. It is a system of legalized plunder by the wealthy.

The present Irish state functions as an ATM for the wealthy. It is beyond a taxhaven. Our taxes are being handed directly over to bankers and bondholders, hand over fist. Short of inflicting direct physical violence on the population, I’m not sure what else to describe the state as but as a tyranny.

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seedot - December 21, 2012

progressive taxes are those which are higher the more you earn / own – not that the funds are spent on ‘progressive’ purposes. So the new homes tax does have just enough in it to qualify as progressive which does not imply it is fair or just.

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6. sapteuq - December 21, 2012

True, this campaign will be more problematic than last year’s. This is because of the new powers they’ll have to collect the tax which makes a predominantly boycott campaign impossible.

But all this talk of the campaign being in a tough position because the property tax appears more progressive, I don’t buy it at all. These may be the issues some eejits in the media and politicians will try to highlight to cover themselves with.

But fundamentally people last year were asked to cough up 100. Now it’s 300 for the average house. Why would anyone possibly get paralyzed by taxation policy scruples over this?

As Julian above says it doesn’t exist in a vacuum. People by and large are not going to faff about worrying about the bands and I’m certain the campaign won’t. The vast majority of people will understand without anyone having to explain to them that fighting the property tax IS fighting bailouts and cutbacks.

Also those government non-payment figures have been notoriously inaccurate in the past so I wouldn’t take them at anywhere near face value

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Bartley - December 21, 2012

The vast majority of people will understand without anyone having to explain to them that fighting the property tax IS fighting bailouts and cutbacks.

The property tax is projected to yield only half a billion euro, a tiny proportion of government revenues, and certainly not enough to cover the bailout costs.

So would evading and avoiding other tax obligations also be the way to fight bailouts and cutbacks?

Are Denis O`Brien and U2 fighting bailouts and cutbacks by turning themselves into tax exiles?

Was the CAHWT`s own Mick Wallace fighting bailouts and cutbacks by evading VAT?

Is google`s double-Irish intended the fight bailouts and cutbacks?

The reason that this campaign will be more problematic than last year`s is just the sheer illogic involved in transferring rhetoric that was almost totally based on the progressivity argument onto an (albeit imperfectly) progressive tax.

“But it`s the wrong kind of progressivity! We wanted a different kind that involved us paying less not more!”

Not gonna win any debates with that line …

I`d expect that the CAHWT will collapse under it`s illogicality rather than any harsher enforcement measures.

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ejh - December 21, 2012

Are Denis O`Brien and U2 fighting bailouts and cutbacks by turning themselves into tax exiles?

Try harder eh

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7. Irish Left Review | On the Need to Wield the Political Crowbar - December 21, 2012

[...] The campaign against the household charge, and the concerns about how to extend it to a campaign against the property tax plays right into the hands of those who want to extend the privatisation of public services. As commented by WorldbyStorm on Cedar Lounge Revolution: [...]

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8. seedot - December 21, 2012

The 4% interest struck me as a bit strange as well WbS – although it occurred to me that this seems to be part of the process of financialization that has worked such wonders at the governmental level now being applied to individual tax payers. I spoke with my accountant (not personal, for the job) about how the revenue could collect the tax – he listed at least 5 different collection strategies but things such as the requirement for tax clearance certs for most self employed, a charge on your house at time of sale, the ability to affect tax credits and any form of assessment even for paye workers, the ability to involve the sheriff etc. This will be another debt that individual workers have to live under and the state is willing to tax you on the never never.

The 4% is also interesting as it allows the Irish state to claim that the tax has actually been marked as revenue in the year charged and is now earning interest at 4% until the state gets around to collecting.

I think the use of the funds has to be part of the discussion now – with the 31st March €3.1bn promissory note being the weak point for the government. The campaign has to move out of the trap set for it which means moving further than a focus on the new property tax and onto where the moneys going.

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Bartley - December 21, 2012

Well the state could hardly charge any less than that level of interest, given that it`s effectively a loan of indefinite duration, secured by property of declining value, with no intermediate pay-down.

In that sense the interest rate should be in excess of what is currently charged on a freshly-written interest-only mortgage. Otherwise the delta would be a gift to the deferers.

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RosencrantzisDead - December 21, 2012

Deferral of the household tax is means tested. People who avail of the deferral are those who the government has deemed would be put into hardship by forcing them to pay the tax.

The notion that the government are compelled to charge this class of persons interest because it would otherwise be ‘a gift’ is ludicrous.

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Bartley - December 21, 2012

Sure it’s means tested, but that doesn’t mean the state should extend an interest-free loan to such deserving cases.

The state freely gave up its ability to print money, so a liability to the state deferred will cost the state money in the form of interest on the additional borrowing required to plug the gap.

The interest rate charged seems to be a reasonable reflection of both the cost to the state and the potential cost to the deferrer if they were to independently finance their liability.

And for those with an extensive enough liability for the 4% to represent a significant cost, that would imply them living in a house of substantial value. There is always the option to trade down in such circumstances.

But in any case, it would be a hard sell to paint the 4% as an oppressive burden.

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9. Brian - December 21, 2012

Campaign Against Household [Home ] and Water Taxes

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10. Brian - December 21, 2012

Mayo man goes to High Court re Household Tax [Charge]

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