The current government – whoever is in charge – always takes the stick for implementing anything people don’t agree with.
The Household Charge – and the impending Property Tax are fairly unpopular – but whilst the current government introduced them – whose idea was it?

The suggestion of a property based tax being re-introduced in Ireland was mentioned as far back  in December 2010 in the Four Year Plan published by the Fianna Fail government.  See more about that here.

The IMF/EU seem to get the blame most of the time  though  – all the  government leaflets and speeches keep saying that the  Household Charge has been introduced on foot of the   “EU/IMF Agreement”.

The IMF are known to promote the use of property taxes – in a 2012  report titled – Revenue and Expenditure Policies – Advanced and Emerging Economies

they said that  “Property taxes are a promising source of increased revenue for some countries, but there are practical obstacles. They currently yield around 3 percent of GDP in Canada, the United Kingdom, and the United States, but well below 1 percent in other G-20 countries. Efficiency and fairness argue strongly for firm use of property taxes: they are relatively benign for growth; raise few issues of international coordination; and, while their incidence is still not fully understood  they seem to be borne mainly by the well-off. Obstacles to their wider use include administrative complexities and costs (including the development of efficient cadastre and valuation mechanisms), and the unpopularity that their transparency can bring “

The Minister for the Environment, Community and Local Government,  Phil Hogan  today announced that he has established an Expert Group to consider the  introduction of a  valuation-based property tax that will replace the current €100 Household Charge.
The Group is due to report back  by the end of April 2012.

The Property Tax expert group will be  chaired by Dr. Don Thornhill  and will be made up of  of senior officials from the Departments of Environment, Community and Local Government; Finance; Public Expenditure and Reform; Communications, Energy and Natural Resources, Social Protection and the Revenue Commissioners. The Group may also call on technical expertise from the Central Statistics Office, An Post/Ordnance Survey Ireland, Property Registration Authority, the Valuation Office, the Property Services Regulatory Authority.

The terms of reference for the group are :

“To consider the design of a property tax to be approved by Government to replace the Household Charge and that is equitable and is informed by previous work and international experience.”

The minister said that any new residential property tax will have to :

· Meet the immediate financial requirements of the EU/IMF programme;

· Provide a stable funding base for the local authority sector in the medium and longer terms incorporating an appropriate element of local authority responsibility subject to any national parameters;

· Ensure the maximum degree of fairness between and across both urban and rural areas

· Be collected centrally by the most cost efficient and effective means;

· Facilitate easy and/or phased payments by households;

· Be easily determined (e.g. on a self assessment basis), and having regard to the information currently available (or to be made available through registrations for the household charge) on residential property and/or house ownership details.

Earlier this month we wrote about How Much The Property Tax Could Be  – with figures of up to €675 a year for houses valued between €150k and €300k

The Chairman – Dr Don Thornhill seems to be involved in several other areas. His board memberships include the National Competitiveness Council (Chair), the Irish Payments Services Organisation (Chair), the Ageing Well Network (Chair), Hibernia College (Chair), the Irish Taxation Institute, the Chartered Accountants Regulatory Board (Deputy Chair), Forfás and the Irish Hospice Foundation.

Previously he was Executive Chairman of the Higher Education Authority, Secretary General of the Department of Education and Science and Assistant Secretary in the Office of the Revenue Commissioners. Don has a B.Sc. and Ph.D. in Chemistry from University College Dublin and a M.Sc. (Econ.) from Trinity College Dublin.

This year the government hopes that the new Household Tax  will  bring in €160 million extra income for the government – which they will pass on to local authorities.

We have dug out  some other interesting  figures to put the  €160m  figure into perspective ……..

€160 Million is the same amount as the losses made by Quinn Insurance  in 2012 .

€160 Million is the same amount as the State’s contribution to the  Rathcormac to Fermoy toll motorway on the M8.

Just under €160 million was wasted on the Metro North project – which has now been abandoned.

€160 million is equivalent to just o.1% (1/1000th) of the combined profits of AIB and BOI from 2004 to 2008 (approx 18 Billion)

€160 million is just one tenth of the 1.6 Billion that Sean Quinn was ordered by the Commercial Court in Dublin to pay back  to the former Anglo Irish Bank.

€160 million is less than half of the average annual  property related tax relief given to developers and owner occupiers in Ireland between 2004 and 2009 (€381 million a year )

€160m is the amount of asset transfers by developers (mainly to family members)  that were reversed by NAMA or were close to being overturned by Nov 2011. (To try and stop NAMA  getting at them)

€160 million is the estimated annual cost to the state of Diesel Laundering

€160 million is roughly twice what  Real Madrid paid  Manchester United for Ronaldo.

Hidden away in all the changes around Budget 2012 – are a couple of changes to the NPPR – Non Principal Private Residence  charge .

The Local Government Charges Act is being amended to bring in the new Household Charge  – so while they are doing that the  government are taking the opportunity to slip in a couple of changes that affect NPPR.

Firstly they are adding a €10 admin charge for payments made “over the counter”

Secondly  – they are removing the exemption for properties leased to a local authority under the rental accommodation scheme, RAS and for those leased to the HSE.

The exemptions will be removed from 2012.

The exemptions will not apply to the Household Charge either .

A new €100 a year Household Charge is to come into force in Ireland  from January 2012.
This new charge will be levied on the owner of every  property – and is a temporary measure until a full Property Tax can be implemented based on property values. (Probably in 2014).

The new household charge will have to be paid by an estimated 1.6 million householders in Ireland -  raising about €160 million in revenue in 2012.The charge may be payable in 4 installments – with  householders given three months to pay up. Late payment penalties are in place – of upto 30%

It is not payable on mobile homes..

It will be interesting to see how the Household Charge is levied – because there is no full property database of all the houses in the country. With the NPPR the onus was on the owner to register for the tax. Details of billing and liability have yet to be released.

It is understood that a comparatively small amount of  households – less than 250,000  will be exempt from the tax. Those getting exemptions will include  those in some unfinished estates and those getting mortgage interest supplement.

Update – Dec 6th 2011 – Nee Charge confirmed in Budget 2012 .
Full Details of the Household Charge Here

(HouseholdCharge.ie will be the website)

Residential property  owners who own a property that they don’t live in – will also be charged the NPPR ( Non Principal Private Residential Charge) which is currently €200 a year. This will bring the total “tax” to €300 a year for each property a landlord  owes.

A new “household charge” is planned to be introduced in Ireland from January 2012 – it was announced by Environment Minister Phil Hogan yesterday.
This Household Charge is an interim measure  until a fully working  Property Tax  system is put in place. The property tax can’t be fully implemented until the government have  put in place a  property valuation system .

See here for More Details of the new Household Charge in Ireland

The amount of this household charge will be the same for every property – but the actual amount is not yet known. There will be exemptions or reductions it seems – for those on very low incomes or on social welfare. It is not yet clear if the charge will apply only to home owners or if tenants will also be expected to pay it. Clarification on how second homes will be treated is also required – these non principal residences are already liable for the NPPR.

A property tax or Council Tax has been in operation in England for many  years.
In England the average annual Council Tax  in 2008 was £1,146.  The total Council Tax collected  in 2006/2007  in England amounted to £22.4 billion.
The cost of administering the council  tax was just over £600 million.

Ireland still doesn’t have a national property database or even a postcode system to help identify houses – so it is difficult to see how a property tax system could be fully  implemented  here without long delays and probably significant expense.

The Fine Gael – Labour program for government did mention both a property charge and a water charge being fast tracked.

Before the election – Fine Gael said they would  hand over the choice on property taxes to the local authorities. Local authorities could opt not to increase local taxes, increase local charges for waste and services or introduce a ‘‘site sale profits tax”.

The idea of a property tax was mentioned in the IMF/ECB agreed Four Year Plan -  where  Fianna Fail comitted to A ” site value tax” to be introduced  in 2012 – with a minimum charge of €100 per property.

After Labour party members voted overwhelmingly to enter into a coalition government with Fine Gael at the weekend – we look briefly at how the joint draft programme for government will impact on Irish people’s pockets

Property and water charges are set to be fast-tracked  – but no mention of amounts or dates yet.

Social welfare payments will be untouched .

Income Tax -  rates of income tax, together with bands and credits, are to be unchanged.

Universal Social Charge – to be reviewed

Minimum Wage - The €1 cut in the minimum wage is being reversed

PRSI -  jobs which pay a maximum of €356 a week will have the lower rate of PRSI of 8.5 per cent reduced by 50 per cent until the end of 2013.

VAT on services will fall from 13.5 per cent to 12 per cent until the end of 2013

Travel Tax is to be scrapped.

Universal Health Insurance is hoped to  be in place by the end of the new government’s term in 2016.  The privatisation of the VHI is being scrapped aUnder this “universal primary care” system, fees for GP care will be removed.

Property tax reliefs will be reduced, capped or abolished.

It is looking very  likely that Fine Gael will be in government after the 25th February election – either in a coalition or in sole power.

How will a Fine Gael government affect the money in your pocket?

These are some of the FG policies that could have a direct effect on your income and spending.

Income Tax
Fine Gael  is opposed to further tax rises and is also opposed to Fianna Fail’s  plan to reduce tax credits and rate bands .

USC – Fine Gael will make no immediate changes – but they say a review of the effect of the USC  is required before the next  Budget.

DIRT – FG plan to increase Dirt tax to 30 per cent .

Jobseekers – Fine Gael propose €3 a week cut in unemployment benefit in 2012 and a  €4 weekly reduction in 2013.

Property Tax :  Fine Gael will hand over the choice on property taxes to the local authorities. Local authorities could opt not to increase local taxes, increase local charges for waste and services or introduce a ‘‘site sale profits tax.

VAT :  Fine Gael will raise the standard 21 per cent rate of Vat to 23% over 2 years but will cut the lower VAT rate (curently 13.5%) by at least 1.5 per cent.

NPPR -  Fine Gael say they will increase NPPR from €200 to €300 per year.

Mortages :  Fine Gael are proposing to  increase mortgage interest relief to 30 % cent for first-time buyers who bought between 2004 and 2008 and abolish  relief for new buyers.
They are  also talking about a deferred interest scheme, and introducing  a universal mortgage indemnity insurance to protect against any  future risks of negative equity.