There is some debate over who is responsible for the famous line “nothing in life is certain save for death and taxes” but whether it is Daniel Defoe, Benjamin Franklin or Margaret Mitchell in ‘Gone with the Wind’, there is no doubt that it is a saying that is particularly accurate. There are other general truths about taxes; once introduced they very seldom go away and they generally only go in one direction – up. So it would appear to be with the a proposal to introduce a new property tax to accompany the newly introduced ‘second property tax’. The Irish government is, however, just one year on, starting to put the boot in. The reaction to its very public reliance on taxing property transactions for its income during the boom times has now shifted to making those currently owning property assets bear the brunt of these poor decisions. Expect this one to run and run.
Those reading today’s Irish Independent will probably be totally unsurprised that another self-assessed property tax is being considered in the budget. This one, is set to encompass all property owners, rather than just second home owners, and is to be based on the value and size of the property, according to the Indo. It is claimed that homeowners could pay from €250 a year for lower-valued houses to more than €3,000 a year for pricier houses in more sought-after areas.
The Government is, of course, reacting to the fact that the €200 Second Property Tax raised revenues over the past two years, and did so very quickly, but it didn’t apply to most people in the country, whereas the new one will be all encompassing.
To add insult to injury it is also believed that this tax may well involve self-assessment, which is of course a complete misnomer as it will involve hiring expensive property professionals, who currently have little else to do, to value these properties in anticipation of the honour of being taxed on them.
It is estimated that the introduction of a property tax would have the potential to generate between €1.5bn and €2bn per annum to prop up the country’s ailing finances. It is also thought that the introduction of any property tax could be offset by continuing mortgage interest relief, with exemptions for those who could not afford such a tax, including some ‘chosen candidates’ in negative equity – who are, ironically, in this position because of the government’s refusal to dampen the property bubble when it was reaching its zenith.
Over in the UK they’re not faring that much better on the tax front as Capital Gains Tax (CGT) on property transactions has been increased to 28%. It could have been a lot worse as it was widely expected that it could be increased to 40% or even 50%. CGT has been left at 18% for basic rate tax payers.
One surprise here was the decision to scrap proposals by the previous Government to remove tax benefits of furnished holiday properties. This should allow for the extension of the tax advantages for UK citizens to properties outside the UK but within the EU.