Property tax is on its way but what is the best way to implement it?

Property tax is on its way but what is the best way to implement it?

Benjamin Franklin perhaps said it best when he said there was nothing certain in life apart from death and taxes.

With that in mind, it appears inevitable that a new tax will be upon us next year – namely the property tax.

Whether you agree with it or not, the new tax’s introduction is only a matter of when and how rather than if.

Of course, the need for it can be debated. Is it fair to change the goal posts midway through a game? After all when you bought your home there was no property tax and stumping up for it was certainly not in your budget.

Many people also paid stamp duty in the last number of years, while many more are in arrears and an extra charge is just not feasible given their current financial state.

Pat Rabbitte said that the property tax was an alternative to going back to the worker looking for more money but, in many ways, this is a hollow excuse as very few people will get a mortgage without a job and even fewer will be able to repay one without some form of regular income.

The government, while required to make savings, must heed the warning that you can only make so many cuts before a person bleeds to death.

Since the boom ended there has been a Universal Social Charge brought in, VAT has gone up, a private health insurance levy and a private pension levy have been introduced, pensions have been taxed and a household charge has been brought in.

Many people are also earning a lot less than they were three or four years ago.

That being said, the property tax is on its way and the only major question hanging over it is how exactly it will be implemented.

The two main options being bandied about are based on the value of a home and the site value.

Both are complicated, firstly because who exactly determines what a piece of land or a home is worth? Sure, estate agents can provide valuations but they can change almost at the drop of a hat (how many people wish their home was worth what it was five years ago?).

The major problem with a tax based on the value of your home is that it also discourages people from maintaining and extending their homes. If you build an extension, the value of your home will rise but so too will the amount of tax you pay on it.

Similarly if you put solar panels on the roof, your home value will rise. A recent study showed that improving a property’s energy rating from C to B boosts its value by 3% but under a value tax this would also add 3% to whatever property tax payment you make per year.

Equally the site value tax poses a fear for those in urban areas. A three acre site in Foxrock in Dublin is currently for sale on MyHome for €5 million. However, a similar sized site in a rural area wouldn’t cost a tenth of that.

Either way, there are some interesting times ahead.

Today we ask which option you would prefer and what your thoughts are on the property tax.

Vote in our poll below and have your say…

[poll id=”78″] [poll id=”79″] [poll id=”80″]

There are 40 comments for this article
  1. Pingback: Property tax set to be 0.25% of house value – MyHome.ie Blog
  2. Konrad Dechant at 10:42 am

    I thank Mike Hawes for clearly demonstrating the advantages of SVT/LVT over any other properly tax. It is astonishing how difficult it appears to be for the Irish public not to act against its own interest!!!
    Site Value Tax is the only tax that cannot be passed on in higher rent or prices; cannot be avoided; zero rated marginal land will ensure competitive rents, and hardship cases will be accommodated. SVT/LVT is not a penal tax – it is a fair method of funding public services and infrastructure improvements from the land value created by the community. By collecting the annual rental value of land, taxes on wages, production, sales, profits and savings could be rapidly reduced with the intention to abolish, along with rates. The immediate effect would be an increase in take-home pay and demand for goods and services. Landlords and developers would benefit from the immediate demand for modern homes, retail, office and commercial premises with best facilities. Is there anyone who wants to go on working for 6 months of the year just to pay taxes while a change in the system will provide higher, tax free wages, lower rents and prices and an incentive to invest in research and production?

  3. Claire at 10:34 am

    Suggest the property tax is related to BER.

  4. dave at 10:10 pm

    Tax’s are the scourge of the earth once government get the taste for it it never goes down. If one has paid stamp duty they have paid there fair share for years to come . the question is what is fair. Most other countries are heavy with taxes because there society is top heavy with government like Greece cut government and introduce a wealth tax to claw back some of the millions of euros business and developers have made over the years. Poor can;t pay it and the middle class is shrinking.

  5. Stephen at 8:53 pm

    No to Property Tax; we have paid for our house;we have paid our stamp duty. Now this government wants to impose a cromwellian tax or perhaps remove the roof from over our heads. Ireland may be out of step with the rest of Europe but so what!People or countries who are out of step are not easily led and very often change the course of events.
    We are now expected to subsidise the Banks because of the incompetence of our political masters.

  6. kenny byrnes at 6:11 pm

    Absoluty no way, they would not stand up to anyone in Europe but will take money off their own
    A collegue who works for NTMA told that the contries in debt repayment are making a profit eitheir directly or indirectly to the banks of 100 BILLION, yes 100 billion a year. Our economy is irreversibly damaged by the last goverment and are now in the same situation as absentee landlords were 150 years, sending the rent of the peasants to London. Now its pensions of the retired FF and their lackey civil servants sent to Florida or Spain.
    Yours with contempt for you even giving credence to regularizing the idea of the inevitability of such a tax.
    Kenny Byrnes

  7. simon at 5:34 pm

    Fix the bucket before you pour the last of the water into it , governments made up of teachers and still can’t even comprehend that

  8. mysocialspidersphere.blogspot.com at 9:05 pm

    Spidertap here. I agree with Paddy the Prophet, bad decision should not be rewarded – nor should the Country be bent over sideways now to try accommodate a poor investment model.

    Move on and dispense with any notion of the past…

    It’s time for a site tax in my view. This is what I proposed 2 weeks ago on RTE blog and I still think it’s the way forward.

    Site tax: 3 bands.

    # Band 1 (R) derelict/ residential. This is a rate based on the potential value of the site if brought to full residential use. The value is based on the price register minus 80% average building costs for the size of the dwelling e.g. 30 euros per sq foot. Derelict site owners are thus encouraged to make full use of the site. Reductions offered for upkeep costs of the home, for example, insulation, painting where growth in the economy is supported via jobs and sales of building materials.

    # Band 2 Income generating (Y). The site value tax is based on the potential rental yield for the street and location i.e., what is the expected income yield. The tax is set as a per cent of this level. It is for the landlord to provide documents to revenue to prove periods where the property is not rented out, improvements can be deducted against the cost of maintaining the property also. Crucially, the landlord is charged a premium rate and (s)he must provide documentation to reduce the tax exposure. Tenancy agreements must be provided and are to form the basis of proving income with the rent amount and lent of tenancy stated.

    # Band 3 (Z) sleeper band for small income generating homes where the public visit occasionally for example a consulting room, therapy room, counsellor session…
    This rate is set higher than band 1 and the owner provides tax returns as a means to reduce the amount paid. Again maintaining the property can be offset against site.

    Crucially in this, wealth, income, local economy needs, and tenancy agreements are tied together. Tenants that rent are to be provided with tax breaks for rental income against the present social charge. It is made compulsory for tenants to send in a copy of their rent agreement and any additional costs associated with the renting of a property.

    I think this will tie things nicely together with no wriggle room for anyone to flee the spiders web.

  9. joe malone at 6:04 pm

    I wonder will james reilly have to pay property tax on the house he has in Moneygall,the one he got 4,000,000 from the irish taxpayers to renovate and then had the cheek to charge the public 5.00 a head to go see it during heritage week.I did not run up these bills to Europe,why shuld I have to pay for something I did not do??What sort of message is that sending to our children,..if you don’t do wrong,you will still be punished,regardless……..

  10. patrick murphy at 5:38 pm

    the best way to implyment property tax is by the total area of the house , the bigger the house the higher the tax band..say rate A for property up to 1500 sq,ft ..rate B will for house,s up 2900 sq ft ..and so on up to a max rate .??…lets start rate A @ 20 cents per sqft …

  11. Anthony Nagle at 3:28 pm

    The property tax is ludicrous, the economy is on it’s knees, people are forced to travel abroad to work. The government should clean up it’s own act and the local council also, get value for money. I get nothing from the council as I live in the country, I pay for refuse, maintain my own water well. I pay road tax for road’s like swiss cheese. We pay tolls to pay for roads that are paid for. The Irish people are getting screwed by all to pay for the robbery by the banks, developers and the politicians. I have no problem paying for something that is going to give me or my family some benefit but I won’t pay for someone else’s screw up. Nobody came and asked me if I wanted to bail out the banks. If I asked my own taoiseach tomorrow for money because I blew what I had on drink, do you think that he would give me a penny ? Where is the accountability ? Consultants, expenses, old boys club same old same old

  12. peter at 3:21 pm

    IN a society where the vast majority of each and every adults personal ” wealth/debt” is tied up in their property “Asset/liability”, in circumstances where there has been the greatest financial calamity in the history of economics, where the one asset class that must recover to allow a collapsed banking system and record levels of personal insolvency recover, only someone with the intelligence of an amoeba would impose a tax on the devastated asset class. Property tax at this point in time is catastrophic to each and every property owner and by extension each and every bank and the economy as whole…is guaranteed to help reduce and depress this market for a generation…..and therefore this national economy

    HELP

  13. Anne at 2:24 pm

    There should be a household charge of €100.00 per house to include council and rental properties this would be fairer. Here in Donegal most of the council work goes to the North of Ireland so the money is going out of the country and I will not be paying

  14. anthony jenkins at 2:08 pm

    why should i pay property tax.they screwed me
    for 9% stamp duty over 111,000 euros, which i
    needed badly for house renovations,now they want
    to screw me again,they had there slice of the cake.

  15. Paddy the Prophet at 2:02 pm

    People in negative equity who now don’t want to pay for council services. You made an investment decision to buy, no one forced your hand, you could have used your common sense and rented for a fraction of the cost, but you chose to buy at the top of the market. I personally advised several colleagues, relations and friends not to pay crazy prices for unattractive properties in bad locations, not one listened. Now you want me to pay even more tax and bail you out. No chance of that, I’m planning to rent a beautiful repossessed villa (at a very low cost) and live by the sunny Mediterranean rather pay a penny more to subsidise people who are very happy to take a profit but expect others to absorb their gambling losses!
    You might say “Paddy has a bad attitude” but if house prices and rent had continued to rise putting the boot on the other foot would you subsidse my rent? I think we all know the answer to that question.

  16. Paul at 1:47 pm

    This property tax should be vehemently opposed. The fairer way to raise revenue would be to forego bank bond payments. Investors in the bonds of small regional banks during times of historically high-lending rates anticipated possible losses. It is foolish of us to deny this.

  17. ZZ at 1:18 pm

    I am against Property Taxes, and have seen bad implementations of it over the years. In essence what could happen is that after implementing it, the Government will review it in a year as a means to increase revenue and will modify it as such.

    1) Houses in the poor or low income areas, and not “well to do” areas will either stay the same, or be reduced, and;

    2) the “well to do” areas will see a significant increase as it is often felt that if you can afford a home in a “well to do” area that you can also afford higher property taxes.

    just my thoughts,and hope I am wrong.

  18. Ann O’Keeffe at 1:16 pm

    The tax if implemented should be based on the income of the household

  19. Dave at 12:30 pm

    Also to add. With so many people struggling at the moment to pay a mortgage, the EXTRA property tax could well be the last nail in the coffin. I think going on the dole and applying for a corporation house is looking more appealing. No wonder there is such a long housing list.

  20. Dave at 12:21 pm

    I don’t have a problem with property tax but I have spent thousands on Stamp duty recently when we bought our house and that wasn’t taken into consideration. Introducing a property tax will not jump start the housing market which it so desperately needs. Irish people are again forking out for others mistakes and no wonder they are leaving the country in droves. No point in having a rant without a solution so:
    The government should look at cutting costs elsewhere. Reclaiming tax from tax dodgers, increase tax on petrol but remove the road tax. This would mean no more road tax dodgers, no motor tax offices, if you use the roads more than others you will pay more, etc.
    This country needs to look into being a LEAN country (more efficient, reduce costs, etc)

  21. Pat Monks at 12:07 pm

    The Government want to get money from all angles and property is just another target. If we were to go along with a property tax I think we would all agree that it should be applied in as fair a manner as possible therefore to my mind household income related as opposed to site valuation – and if it’s income based then why not apply it to income tax and forget about the complexity of analysing and dissecting the property market with all it’s variations and inequities. We have a system already in place for the collection of income tax so why create another far less efficient one.

  22. Chris Scott at 12:04 pm

    As a resident who also owns a property in N Ireland I currently pay rates to the local council a typical 3 bed semi in Derry City has a rateable value (£700) which is calculated on the basis of Social Economic Location sq ft of property detatched or semi etc. On top of the rateable value the local council sets it rate each year based on the cost of running the area. This is made up of the shortfall between what central Gov provides the administration and the actual cost of bin collection Street Lighting etc etc. This system could raise other issues in Ireland as the ratio of public service staff per local council area will perhaps result in the rateable value being higher for example if Fingal Council has a higher ratio of Council Public Sector staff per head of population than say South Dublin would this mean the rates would be lower !! as the admin costs are lower.

  23. Rita at 12:02 pm

    As it is a foregone conclusion that this tax is to be implemented, then the fairest way would be via income tax this way everyone pays based on their income. If it’s introduced based on the property, then only owners will have to pay, persons renting privately or from local authorities will be excempt as they currently are from the household charge.

    If the tax is introduced then it should include waste and water, it’s unfair to have a property tax + bin charges + water. There is only so much net income left after mortgage, food, electricity, heating, etc, this well is almost dry.

    I would put money on it though that our Government will as usual find the most complicated and unfair method and impose it on us + it will increase every year because they will fail to tackle the issue of too many councils, too many councillers, etc.

    We have paid our household charge, we have paid to register our septic tank which is already registered but on an on it will go, why? because they can!!!!

  24. BD at 11:45 am

    I built a house in the country in 2007. I paid approx €7000 council contribution. If the council’s work was priced for my house I think €500 would cover the little drainage they completed. This council fee has nothing to do with connection for water/esb/telecoms. What it was for I will never know (probably paid for local councillors & wives hotel expenses on foreign junkets). This council contribution is another example of the corruption that was and still is all over this country. I wouldn’t dream of paying the €100 household charge this year but I will obviously have little choice when the property tax arrives next year. The time is fast approaching when people will have to stand up to this. ‘Death by a thousand cuts’ -> Property tax 999, Water Charges 1,000.

  25. sean at 11:39 am

    if you are 65+ no charge ,5 rooms pays more than
    3, so if you have 3 you pay more than 2.

  26. James keeley at 11:31 am

    Hi
    i agree with cillian , i have also paid
    60,000 stamp duty in 2008 not only has the house
    devalued but im also paying the 60K stamp duty plus intrest for the next 25 years which equates to 140 K aprx , property tax must be paid but all situation’s need to be taken into account , as cillian said the stamp duty you have already paid must be recognized respectively , you cannot keep lumping taxes on huge debts especially if your family home is in massive negative equity and you have already paid a once off lump sum to the state .:(

  27. CMC at 11:24 am

    Pay, pay, Pay.. The rip off culture of Ireland raising it’s head again and licks the hand of the troika. Except this time it’s official.. Every penny earned is taxed before you get to pay the mortgage. Waste disposal costs in the region of 350 a year now. Vat on everything is more tax. We have the highest motor tax in Europe and fuel tax is high. And I have paid huge stamp duty in the past.. Some dictatorships are less punitive. ..It’s time to cut “official” pensions and grubby handouts for the lowlives and politicians still taking advantage.. Enough is enough.. I’m not paying any more.

  28. Geraldine at 11:24 am

    The tax should be based on the current value of a property. However, I agree with Cillian that people who are now in negative equity and have paid large amounts in stamp duty should be exempted from the tax (at least until the value of their property rises again). They have already overpaid and should not be taxed again – if anything they should be reimbursed….
    I am not in a negative equity situation, but have many friends who are and who are struggling to survive as it is….

  29. JJ Toner at 11:20 am

    A value-based property tax is the only feasible option, but the government should charge each homeowner on the equity they have in the home, reducing the charge by the percentage of the value that is owed to the bank/building soc. Anyone in negative equity would then be exempt.

  30. Ann at 11:20 am

    I agree that we need a property tax. However
    I would be concerned about ability of some
    people to tax such a tax, particularly the
    retired or unemployed who might be on reduced
    income. I think the tax should be related to the
    value of the house, plus the income of the
    occupier.

  31. Ciaran at 11:12 am

    I live abroad so I can step back a bit and try to look at Ireland’s situation based on my own experience in Belgium where I live now. The first point to make, however unpalatable it may be, is that Ireland is fundamentally out of line with normal practice through not having a property tax. The first reaction of, say, a Belgian on hearing that Ireland has no property tax would probably be “Alors, so how do they raise enough revenue to pay for local services?” and the simple answer is that we don’t! Second, every country that has a property tax also has some kind of registration tax equivalent to Irish stamp duty (in Belgium it is 12.5 % in most cases) and there is no exemption from property tax just because you have already paid registration tax (in Belgium property tax applies from the month you sign your sale contract). Third, it is not necessarily the case that countries with property tax take less in other taxes (income, VAT) in order to “compensate” (believe it or not, Ireland is still a relatively low tax economy overall and the property tax will rather compensate for our excessive public spending). Finally, I think what Pat Rabbitte was trying to say was that the alternative to property tax is to increase general taxation which would hit all wage earners, regardless of whether they are property owners.

  32. Pingback: Property tax is on its way but what is the best way to implement it? – MyHome.ie Blog | Land & Site Value Tax | Scoop.it
  33. Brian Buckley at 11:05 am

    The only fair local tax is what most other countries do including the UK where I lived for 10 years – a council tax on the OCCUPIER – not necessarily the owner. Why should renters get free local services subsidised by owners?

  34. Mark at 11:00 am

    Why isn’t site area being considered as a basis for calculating a person’s property tax liability? Wouldn’t it be fairer to pay tax based on the square-footage of in-use residential-zoned property, possibly weighted for value to balance rural/urban situations?

  35. Paul Clan at 10:57 am

    If you were (hypothetically),living in a modest dwelling near Bono,in Killiney, and an Old Age Pensioner(OAP) with little other means of support,the proposed system would need to take account of this scenario, by way of waiver,to avoid the OAP having to move away due to inability to pay.

  36. Rhona McGrath at 10:52 am

    Alternative tax would be to combine Motor Tax and Property Tax as a Local Service Tax via annual payment to local authority. No property/site valuations. No matter what the size of the house or property there is the same requirement for local services. Both are service charges needed by local authorities as revenue.

    For those (trying) to rent properties, particularly if they are mortgaged, there should not be NPPR tax and household/property tax – double tax – or triple as most people are also paying private residence property/household tax.

  37. Cillian at 10:48 am

    I purchased my home in Dublin in 2005. It cost me €400k plus another €80k for renovations. I have a 35 year (€450k) mortgage. My house is very small (2 bed) and completely inadequate for our expanding family.

    We had our house valued late last year and at that stage, based on the estate agents valuations, we were almost €250k in negative equity. On the basis that house prices have decreased since then i suspect we are now in negative equity to the tune of €320k. The main upshot of this is that our mortage provider will not allow us to sell the house (except if we can make up the cash difference in the price we get for the house and the amount left on the mortgage).

    When we bought our house we paid around €20k in stamp duty. If you consider this €20k as part of our (35 year) mortgage then over the course of the mortage it would amount to almost €60k.

    It is worth noting that if we built a new house down the country (i’m from Monaghan so had that option) then we would have avoided the stamp duty and our mortgage would probaly be much samller and only 15 years. Also, we could have built a large 4 or 5 nedroom house.

    I am both angry and disappointed that the government will now impose a property tax on us. We are being taxed on what is ensentially a very large debt. We can’t even sell the house if we wanted to avoid paying the tax. I’ve paid €20k – the government must show some fairness and include a waiver for people in our situation. for example €20k should cover our property tax for at least the duration of our mortgage.

  38. Ann Jocelyn at 10:46 am

    In some European countries, an extra few per cent are added to each person’s income tax as a local tax which goes directly to local authorities to pay for local services. That means the local tax is related to each person’s ability to pay, which seems a fair way of doing it, as long as everyone is made to pay what is reasonable for their income level

  39. andrew at 10:43 am

    i dont have a problem paying some sort of fee but when i have a management company lumping their €850 service fees on top its more or less impossible to cope. i have informed my management company that they wont be getting paid. Am i double paying for services here as my local county council have no control over the services in my area. Anyone know

  40. Paddy the Prophet at 10:41 am

    The tax should be a services charge based on the usage of everything provided to the resident by the council including water, bin collection, street cleaning, street lighting, etc. A property consuming a lot of water or occupying a lot of street frontage would pay a higher charge, and those who make more modest use of the council’s services would pay less. That is fair. Anything else is an arbitrary charge based on envy and jealousy of those who have probably paid through the nose to live in nice houses.

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