Local Property Tax: A Tax That's Definitely Taxing

Local Property Tax: A Tax That's Definitely Taxing

Isn’t it peculiar how the government we elected to replace Fianna Fáil keeps increasing taxes and taking away benefits? They really gave us a bashing in the budget last Christmas when car tax went up, DIRT went up, college registration went up, the PRSI allowance was removed… even child benefit (which I thought was untouchable) was reduced. And all of these were heaped on top of the previous year’s budget hikes.

Well, I’ve paid my increased car tax. I’ve sadly noted my decreased child benefit and I (ahem) have even noticed that wine costs more and the price of pint has gone back up over a fiver.

If Fine Gael had been honest with us two years ago, their campaign slogan would have been something like “We’ll tax you till you’re black and blue”. But that doesn’t get you elected does it? So instead they said “Let’s get Ireland working.”

And so we work to pay more tax... Then they give us a bit of time to get used to the new taxes and then they hit us with more new taxes. And so we work to pay more tax…

And the latest is the Local Property Tax. I just got my notice in the post. The estimate for six months is €202. It means that the Revenue reckons my property is worth somewhere between €200,000 and €250,000.

The Local Property Tax is supposed to be self-assessed though. The Revenue says I should use all available resources to see what my property is worth before paying this tax. The main tools they are talking about are the online Property Valuation Guide (which is not for the colour blind), and the Property Price Register.

So today I finally went through the indignity of finding out exactly what my property is really worth. I was hoping the Revenue was right in their assessment, but a check on the Property Valuation Guide says it’s lower. Somewhere between €150,000 and €200,000 in fact. Then a snoop on the Property Price Register says that the last three properties like mine that were sold in the same area went for between €160,000 and €197,000.

Having used the Revenue’s own resources to value my property at around €176,000, I wonder how they came up with their valuation of over €200,000? Even zooming in on the Property Valuation Guide’s map shows that everything similar in the area is valued by the Revenue themselves at the lower rate. Are they up-estimating in the hope that people will just pay the estimate and not do their homework?

It is important that we get this valuation business right though, because the market value that we assess now will form the basis for the tax we pay every year right through to 2016. And in the words of the Revenue, this tax will not be affected by “any general increase in property prices during this period.”

When the Revenue says our property tax will not go up in the next four years, it goes without saying that if property prices continue to fall, our tax burden will not go down either. And sadly, by its very nature, a property tax is likely to put downward pressure on house prices. Especially in a distressed market like ours. Then there’s the spectre of repossessions which will add to that downward pressure. The Revenue are simply hedging their bets and protecting their income.

Doing some quick and dirty calculations from Property Price Register numbers, we find that in 2012 there were nearly 25,000 residential properties sold in Ireland and the average sale price was €194,713. If we use that number as a base, and everyone pays their property tax, the Revenue could haul in around €581 million each year until 2016. Of course, not everyone will pay, prices have fallen since 2012, and there will be disputes over values and so on, but half a billion is a heck of a lot of extra money to squeeze out of an already weary public.

The Revenue certainly didn’t come down in the last shower. Freezing the tax at 2013 rates allows them see how much they’ll get this year, and accurately calculate what they can expect for the next three years without worrying about pesky property price fluctuations – which the Revenue knows are going in the wrong direction. Just consider that the average sale price in 2011 was €215,234 and in €2012 it was €194,713. A fall of 9.5%.

So what is the Revenue planning to do with this yearly half a billion euro haul? Well, there is nothing in the literature I received this week to say how it will be spent, and answers have been hard to come by and slippery at best when given.

The hard truth is that an average homeowner is going to have to come up with €157 by July 1st this year and €315 each year after that to pay their property tax. When Michael Noonan was asked by Robert Dowds if he would issue a receipt to every household outlining the way their money was spent, he responded with heap of needless reasons about why actual receipts were not a good idea and completely ignored the kernel of the Deputy’s question which was - how will our money be spent?

Even if the bulk of our property tax does go to local authorities, will it really make any difference to the services we receive? Probably not. It’ll just allow money raised from elsewhere to go elsewhere – namely into the bottomless pit.

Once we’re used to the Local Property Tax, it’ll be time for the Budget in October. They’re having it earlier this year so as not to ruin our Christmas altogether. And then it’ll be time for the Water Tax. That one’s sure to cost us a couple of hundred euro a year too. And so we work to pay more tax...

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