THERE has been a lot of tax talk in the past week, specifically the €13 billion or so we may or may not be owed by the nice people who brought us the iPhone and other iconic products of the 21st century.
While the eventual outcome of the EU’s controversial Apple ruling will not be known until expensive and lengthy court appeals have been exhausted, the Government would be advised not to make too many plans for the dosh, which in an ideal world could cure the ills in our health service or solve our housing crisis.
But even if we did have access to the money, some pesky Eurocrat spoilsports are saying we’d have to use it to pay down debt.
So in the meantime, it might be best to stick with the lolly we can rely on, which brings me neatly back to one of my favourite topics – property tax (or to give its watered down name, LPT).
Introduced by the Fine Gael/Labour Government in 2013 but having its origins in the 2010 bailout agreement with the Troika, it has since been dressed up as a core source of funding for our local authorities. Collected by Revenue, it’s based on a householder’s initial self-assessment of their property’s value, with different bands determining how much we must pay every year.
Valuations were supposed to be up for review this year but, in a pre-election concession in the last budget, the Government decided to give us a further stay of execution until 2019. A number of local authorities have the power to reduce the property tax rate by up to 15 per cent in any given year.
A property tax in itself would possibly be a little easier to swallow in a properly functioning housing market. But with many householders mired in unsustainable debt and trapped in negative equity for the foreseeable future, there is something particularly immoral about Local Property Tax.
One homeowner I recently spoke to revealed how she bought her house at the height of the boom and is now saddled with an eye-watering mortgage on a property she will never be able to sell without the bank chasing her for the shortfall of what she borrowed and what it’s now worth. Surely an asset is only an asset if you make money from it, not if it’s a financial millstone around your neck until the day you retire.
In my view, any property in negative equity should be fully exempt from LPT. Similarly, our senior citizens – who have contributed to the exchequer for all of their working lives – should have been granted a blanket exemption.
Moreover, the tax applied should only relate to the estimated equity of a property, net of any outstanding mortgage owed.
It could also be argued that it’s the financial institutions – not the borrowers – that have most to gain or lose from the properties on their loan books. They are the ones who, in many cases, lent with the reckless abandon of a drunken stag party in Vegas. In effect, they own or have a significant interest in the bulk of the properties liable for LPT. Therefore, some type of ‘transaction tax’ should have been levied on them based on the value of the mortgages they approved or on the interest rates charged.
It will never happen, of course, as we will be told that our banks are still in recovery mode, not to mention the fact that the State is now an investor in some of these institutions.
The irony is that every cent paid in property tax is money not spent in local shops, restaurants, pubs or on services, which directly impacts on the State’s VAT take and the ability of businesses to sustain employment.
Property tax may well be here to stay but it’s time we had an honest conversation about making it fairer.
t.mccullagh@dublinpeople.com