# Property tax to replace stamp duty?



## z106 (18 Jul 2008)

Just heard this as a headline on the news as a recommendation to the government.

Does anyone kniow the ins and outs of this one?


----------



## dewdrop (18 Jul 2008)

Where there may be some merit in trying to avoid the uneven flow of revenue  from stamp duty this proposal is a non runner as it is political  dynamite for any party to endorse it


----------



## webtax (18 Jul 2008)

It might be political dynamite, but so will any decisions to cut the health/education budgets or raise taxes next year to cover the budget deficit. 
If it only applied to the value of a property in excess of say €500k and to investment porperties it would take the sting out of it for most ordinary workers.
Ireland already has among the lowest property taxes in the world, and it would be less of a drain on enterprise and competitiveness than most other solutions to our problems.
Makes a big change from section 23, doesn't it?


----------



## Afuera (18 Jul 2008)

I wouldn't go so far as to call this idea a non-runner. If a 1% tax was applied to vacant property and holiday homes alone it would generate an extra 1B for the government. Applying it across the board to people's PPR would be asking for trouble though.


----------



## ubiquitous (18 Jul 2008)

Like the proposal to curtail the minimum wage, this would have been a good idea in order to dampen the economy 7 or 8 years ago but at this stage in the cycle it would be counter-productive, unjust and impractical.


----------



## redo (18 Jul 2008)

A tax based on any non PPR would be welcomed.


----------



## ButtermilkJa (18 Jul 2008)

ubiquitous said:


> Like the proposal to curtail the minimum wage, this would have been a good idea in order to dampen the economy 7 or 8 years ago but at this stage in the cycle it would be counter-productive, unjust and impractical.


I agree, these measures would have been great to help create a stable economy when the boom times kicked-off but would be worthless and counter-productive now when the economy is in nose-dive and everyone is stretched as it is.

Typical. Why is it always the clever people looking on from outside while we leave the idiots run the country


----------



## ClubMan (18 Jul 2008)

qwertyuiop said:


> Just heard this as a headline on the news as a recommendation to the government.
> 
> Does anyone kniow the ins and outs of this one?


Well don't look for more info on the NESC website anyway! 


> *Latest News*
> 
> 
> 
> ...


----------



## ClubMan (18 Jul 2008)

redo said:


> A tax based on any non PPR would be welcomed.


Tax take in this context could (presumably more easily) be increased by rolling back on stuff like allowing certain expenses (including 100% of mortgage interest) against rental income? Not saying that this would be a good idea (I have no idea to be honest) but just mentioning it.


----------



## ButtermilkJa (18 Jul 2008)

redo said:


> A tax based on any non PPR would be welcomed.


Yes it would. Many people suggested years ago that they should increase the SD on investors and those buying second or holiday homes, and reduce it for FTB. This would have made homes affordable for FTB and more restrictive for investors/speculators and so we would not have had the crazy bubble (and now crash) that has all but destroyed the good times we had.

But like I said, they didn't listen then and now they want to apply new rules to the game when it's over. Really amazes me what goes on in these peoples heads.


----------



## ubiquitous (18 Jul 2008)

ButtermilkJa said:


> Yes it would. Many people suggested years ago that they should increase the SD on investors and those buying second or holiday homes, and reduce it for FTB. This would have made homes affordable for FTB and more restrictive for investors/speculators and so we would not have had the crazy bubble (and now crash) that has all but destroyed the good times we had.
> .



The Bacon report of 1998 proposed similar measures designed to screw investors in the hope that owner-occupiers would gain correspondingly. The govt implemented these measures. They were a disaster, leading to a shortage of rental properties and sharp increases in rents (which, surprise surprise led to big wage demands on employers). They were abolished in Dec 2001 and within months there was a fall in rents.

The last thing we need now is another bubble in the rental market.


----------



## Afuera (18 Jul 2008)

ubiquitous said:


> Like the proposal to curtail the minimum wage, this would have been a good idea in order to dampen the economy 7 or 8 years ago but at this stage in the cycle it would be counter-productive, unjust and impractical.


What is so unjust about applying a tax on vacant properties or those with holiday homes? Vacant properties especially are a gross misallocation of resources and should be discouraged by the government.


----------



## webtax (18 Jul 2008)

ubiquitous said:


> Like the proposal to curtail the minimum wage, this would have been a good idea in order to dampen the economy 7 or 8 years ago but at this stage in the cycle it would be counter-productive, unjust and impractical.


 
I wouldn't agree with this. The budget deficit will have to be made up somehow:
1. It wouldn't be as counterproductive as raising income tax or cutting investment in education/infrastructure since it will have much less direct effect on our competitiveness.
2. Unfair in my view would be paying for it through cutbacks which would affect the most vunerable in our society, or through tax hikes which will place the burden on production & enterprise. As Vincent Browne says on his show almost nightly, why should those who benefitted most from the boom not pay to get us out of the bust?
3. While there might be practical difficulties in valuing houses, many other countries levy property taxes, as we had here until those affected (the well off) lobbied to have then scrapped.


----------



## ubiquitous (18 Jul 2008)

Vincent Browne as usual is talking through his behind. The people who now face negative equity as a result of being suckered into buying property at inflated prices during the past 5-6 years, were not "those who benefitted most from the boom". They were the ones who paid dearly for the boom, basically lining the pockets of others - the generation game as David McWilliams called it.

Applying taxes on vacant properties or holiday homes is imho a fair policy in normal circumstances but would have disastrous effects if done now. Whatever limited liquidity and confidence remaining in the property market would disappear overnight, leading to widespread bankruptcies and possibly a crisis among our banks.


----------



## elefantfresh (18 Jul 2008)

If this comes in does that mean only for new purchases? I paid my SD already so they're not going to hassle me for more money now every year are they?


----------



## ButtermilkJa (18 Jul 2008)

ubiquitous said:


> The Bacon report of 1998 proposed similar measures designed to screw investors in the hope that owner-occupiers would gain correspondingly. The govt implemented these measures. They were a disaster, leading to a shortage of rental properties and sharp increases in rents (which, surprise surprise led to big wage demands on employers). They were abolished in Dec 2001 and within months there was a fall in rents.
> 
> The last thing we need now is another bubble in the rental market.


I agree with that in general. We don't want to 'screw' investors as they are needed to supply rental properties in all economies regardless. What I would like to see however, are measures brought in that make it difficult or expensive for speculators to buy and flip properties short-term, therefore inflating prices for everyone. Taxing these people heavily would be a good move.

It may not be the answer we're looking for to make up the shortfall in taxes, as most likely it will deter speculators, but at least it might control radical fluctuations in property prices next time the boom comes around. Better have these policies in place now rather than waiting until we're in the thick of it again.


----------



## ubiquitous (18 Jul 2008)

elefantfresh said:


> If this comes in does that mean only for new purchases? I paid my SD already so they're not going to hassle me for more money now every year are they?



Of course they will. The whole idea of the property tax, as espoused by Rory O'Donnell of the ERSI on radio this morning, is to spread the tax burden over all properties. The problem they see is that stamp duty is only collected on new purchases, a very small subset of the entire sector.

Effectively those who bought recently will be double-taxed. Hence the injustice.


----------



## ButtermilkJa (18 Jul 2008)

elefantfresh said:


> If this comes in does that mean only for new purchases? I paid my SD already so they're not going to hassle me for more money now every year are they?


Well, the latest from the Government is that they don't see this as being a viable solution. However, if it did come in I would imagine there would be some kind of equalisation for those who have already paid heavily.


----------



## webtax (18 Jul 2008)

ubiquitous said:


> The people who now face negative equity as a result of being suckered into buying property at inflated prices during the past 5-6 years, were not "those who benefitted most from the boom".


 
This issue could be resolved by exempting the first €500k from the tax and placing other safeguards in to deal with any inequities that arise - these issues shouldn't distract from whether a property tax is a justified revenue generator in principle.

No one likes paying more taxes, but our deficit is looking like rising towards €5bn next year and money will have to be got from somewhere. The key question for me is whether a property tax is preferable to income tax hikes/expenditure cuts which will do more to harm our competitiveness and prolong the recession. 
We need to get beyond worrying about whether it will damage the property market and recognise that it was the property market which damaged our economy in the first place.


----------



## mercman (18 Jul 2008)

_*Vacant properties especially are a gross misallocation of resources and should be discouraged by the government.*_

This is a ridiculous statement. Communism is dead and uried

If a person wishes to purchase a property and leave it empty so be it. The idea of a property Tax for Investment properties seems like a good idea and should have been introduced years ago. If an Investment property can be afforded then an Investment Tax of 0.75% should be imposed across the board, including Land which is not farmed.


----------



## ubiquitous (18 Jul 2008)

webtax said:


> This issue could be resolved by exempting the first €500k from the tax .



This wouldn't make a whole lot of sense. What percentage of properties in Ireland are worth more than €500k? What would this percentage be if a property tax of say €10,000 per year was levied? You would end up with a small subset of the national property stock being levied with a high property tax and the bulk of properties being levied zero.


----------



## webtax (18 Jul 2008)

I should have added that it would apply only to PPRs, so all investment properties & second homes would be chargeable. As for the €500k & the % tax to be leived, these figures could be worked out by government to balance income generation & equity.


----------



## Afuera (18 Jul 2008)

mercman said:


> If a person wishes to purchase a property and leave it empty so be it.


An empty property still has to be connected to the sewage system, road network, water system etc. All of this requires a lot of funding to maintain. At least if someone is living in a property they bring something to the area by buying things, running businesses or working locally. Vacant properties on the otherhand do nothing more than cost an area.



mercman said:


> The idea of a property Tax for Investment properties seems like a good idea and should have been introduced years ago. If an Investment property can be afforded then an Investment Tax of 0.75% should be imposed across the board, including Land which is not farmed.


This discouragement of investment could end up causing a shortage in rental properties.


----------



## minion (19 Jul 2008)

ButtermilkJa said:


> Well, the latest from the Government is that they don't see this as being a viable solution.



I remember hearing sililar when the idea of a congestion charge was first suggested.  Watch that one fly in asap.

FF playing with property tax will be a disaster as it always has been before.


----------



## mercman (19 Jul 2008)

Afuera, In a modern Democratic society, no person or entity should be allowed to tell persons how or how not to spend their money. Sure this has been a well voiced argument against Wicklow County Council and also against Galway County Council who try and stop English speakers purchasing in a Gaelteacht area.

A property Tax would have less of an impact on the rental investment market than interst rates fluctuating. Which is better - Rates which are variable or a fixed percentage property Tax based on the type, size and room quantum ?


----------



## Afuera (21 Jul 2008)

mercman said:


> Afuera, In a modern Democratic society, no person or entity should be allowed to tell persons how or how not to spend their money.


Try telling that to the 20 year old in the US who wants to buy a bottle of beer. I think you may be confusing democracy with uncontrolled capitalism.

Essentially democracy only allows citizens to have a say in who gets to run things for them. If the people feel that they should control and protect certain resources (train lines, water supply, housing, etc) then it's likely that's what they will get. It's not a question of money, it's about upholding and protecting the values of a particular society.



mercman said:


> A property Tax would have less of an impact on the rental investment market than interst rates fluctuating. Which is better - Rates which are variable or a fixed percentage property Tax based on the type, size and room quantum ?


Neither are desirable to be honest. Investors are free to look for fixed rates if they deem the risk to be too great with the variable option. Punishing them for providing a badly needed service does not seem to be very forward thinking though.


----------



## z106 (21 Jul 2008)

Well going by the vibes in teh sunday newspapers this property tax looks unlikely to be introduced.


----------



## Cityliving (21 Jul 2008)

The funny thing is that people who own homes say it should only be applied to investors which is laughable. 

ok a FTB buys a home not as an investment but as a home. The tax especially if its small will be an inconvenient and an extra cost but it wont stop a homeseeker from buying. 

It will however stop an investor as their yield is directly affected and seeing as investors are a significant proportion of what drives the housing market it may generate lots of income from existing investors but it will kill what is left of a dying housing market.

A tax like this would ahve been a great idea 5 -10 years ago, now it is too late and will only cripple homeowners and investors alike.

By the way for the older people here you will remember that it was Finna Fail who cancelled the Rates system that existed not too many decades ago to win an election!


----------



## teachai (21 Jul 2008)

The problem with a property tax is that it is not based on someone's ability to pay, but the perceived value of the property. 

It will also be expensive to administer.   There will have to be exemptions for x, y, and z depending on their individual circumstances. It will be the local county councils who will have to do all the administration and they will then require extra funding form the government.  

It seems the stamp duty system was perfectly ok, when house prices were going through the roof, but now they are falling, its not a fair system.


----------



## ButtermilkJa (21 Jul 2008)

teachai said:


> ...
> It seems the stamp duty system was perfectly ok, when house prices were going through the roof, but now they are falling, its not a fair system.


Yep, it was perfectly fine for FF for the last 10 years when they got their generous donations from builders at the Galway Races and their brown envelopes for rezoning, but now the boom is over, the tent is gone and there's no more builders around – so they have the nerve to turnaround and start reaching into our pockets.


----------



## mercman (23 Jul 2008)

Buttermilk,  is this a Taxation or a Political Topic ?? Well we all know who you support and there is little point in apportioning all the blame to FF. Who for years refused to rezone lands around the cities which created the shortage over the past ten years ?


----------



## Bronte (24 Jul 2008)

There was a property tax, about 15 or 20 years ago and it was so unpopular I think it lasted only for 2 years.  That's why FF will not introduce it again.  They have a similar thing based on house value in the UK and it causes people's blood to boil.


----------



## mercman (24 Jul 2008)

Bronte, not dissagreeing with you, but on Investment properties it would be quite different. They had Residential Property Tax here which was a nightmare and as far as I know contined to be charged when houses were sold and the Revenue took their slice even tough it had ceased. The Tax take is so low at present that it must be supplemented in some manner. In vestors should not crib as we are talking a small amount on the overall scheme of things.


----------



## ButtermilkJa (24 Jul 2008)

mercman said:


> Buttermilk,  is this a Taxation or a Political Topic ?? Well we all know who you support and there is little point in apportioning all the blame to FF. Who for years refused to rezone lands around the cities which created the shortage over the past ten years ?


It's a topic about the advantages/disadvantages of introducing a new property tax. I chose to remark on why I believe that the timing of this is wrong. If you read my earlier post in this thread you would know my thoughts on the tax itself. My later remarks were a reaction to someone elses mention of timing.

As for your political remarks, I don't support anybody (but you knew that already ), but if you want to turn it into a political debate by singing the praises of FF then we can start a new thread.


----------



## Bronte (24 Jul 2008)

Mercman I forgot the name of the tax and you are correct you had to have a certificate that the tax had been paid or was not due for some years after it was abolished.  As an investor who lived through Bacon and which stopped me investing at that time if they introduced a property tax of any significant amount I could see it reducing the value of investment properties and people like me would have to consider getting out of the business and that would reduce the availability of rental properties.   I believe I've paid plenty in stamp duty and CGT already.


----------



## Complainer (31 Jul 2008)

Bronte said:


> people like me would have to consider getting out of the business and that would reduce the availability of rental properties.   I believe I've paid plenty in stamp duty and CGT already.


Any reduction in the availability of rental properties wold be balanced out by the increase in properties for sale.


----------



## Bronte (31 Jul 2008)

Complainer said:


> Any reduction in the availability of rental properties wold be balanced out by the increase in properties for sale.


 And who would buy them?


----------



## webtax (31 Jul 2008)

Bronte said:


> And who would buy them?


 
The people who are currently renting, having been priced out of housing for the last number of years (largely due to the better tax breaks available to investors). 
As for it triggering a further decline in house prices, low costs make a country competitive and that includes housing.


----------



## Bronte (31 Jul 2008)

webtax said:


> The people who are currently renting, having been priced out of housing for the last number of years (largely due to the better tax breaks available to investors).
> As for it triggering a further decline in house prices, low costs make a country competitive and that includes housing.


Well amazingly enough the people who are currently renting are not buying even though they are no longer priced out of the market.  Why do you think that is?


----------



## webtax (31 Jul 2008)

Bronte said:


> Well amazingly enough the people who are currently renting are not buying even though they are no longer priced out of the market. Why do you think that is?


 
I would imagine they are waiting for prices to finish falling or saving their deposit now that 100% mortgages are finished.


----------



## MrMan (31 Jul 2008)

> We need to get beyond worrying about whether it will damage the property market and recognise that it was the property market which damaged our economy in the first place.



Makes no sense whatsoever, the economy flourished during the long boom years with many knock on effects in different job sectors. The property market is on a downward slope now but you cannot deduce from that that the property market has screwed us all! If you take the property market out of the equation from the last 15 years then we wouldn't have progressed as far as nation. And because of it we should be in a better position to deal with this recession that so far has been wildly blown out of proportion.


----------



## shnaek (31 Jul 2008)

Bronte said:


> Well amazingly enough the people who are currently renting are not buying even though they are no longer priced out of the market.  Why do you think that is?


No access to capital. Banks have clammed up. Also most people believe houses will continue to fall in price for a while, and there is no point in taking risk at this point in time. Some may be considering leaving the country if they work in areas where their jobs are at risk.


----------



## webtax (31 Jul 2008)

MrMan said:


> Makes no sense whatsoever


 
The celtic tiger growth was the result of a strong export-based economy in a low-cost country with a highly educated workforce.The next logical step in our development would have been to develop an indigenous hi-tech base using the skills & expertise gained from the multi-nationals. 

Instead, the property boom took over and we had young men turning their backs on third level education to chase the quick buck through an apprenticeship. Investment capital moved to feed at the property development trough when it could have been used to develop innovative exportable products which would have delivered long term benefits.

So yes, I believe the propery boom did damage our economy by providing a temporary boom & bust which has left a highly indebted generation of young people.


----------



## MrMan (31 Jul 2008)

I don't think these young men turned their backs on third level education. to my knowledge there has been a steady growth in 3rd level take up and the construction sector actually requires 3rd level education for many areas. What we have seen is tradesmen making huge sums of money which is great for them and they have also pumped alot of it back into the economy through greater spending habits etc. 

Trades and high tech skills are very different and suit different skill sets so I don't think we can simply say that 1,000s of guys ended up in construction when they should have been developing their technology skills. 
Would we not have faced a recession no matter which route we took?


----------



## webtax (31 Jul 2008)

MrMan said:


> to my knowledge there has been a steady growth in 3rd level take up


The various think tanks all say there is a shortage of skilled science & technology graduates in the country. Look at any of the multinationals - how many recruits do they have to source from abroad?



MrMan said:


> the construction sector actually requires 3rd level education for many areas.


But can these qualification be used to generate exportable products?



MrMan said:


> What we have seen is tradesmen making huge sums of money which is great for them and they have also pumped alot of it back into the economy through greater spending habits etc.


Huge sums of money that house buyers had to borrow to - which will have to be paid back for the next 20/30 years.


----------



## Bronte (1 Aug 2008)

shnaek said:


> No access to capital. Banks have clammed up. Also most people believe houses will continue to fall in price for a while, and there is no point in taking risk at this point in time. Some may be considering leaving the country if they work in areas where their jobs are at risk.


 And what about the possibility that even if they got a mortgage that interest rates rising are making it impossible for them to afford the repayments plus the possibility that rates may go higher and they may lose their jobs.


----------



## MrMan (1 Aug 2008)

Bronte said:


> And what about the possibility that even if they got a mortgage that interest rates rising are making it impossible for them to afford the repayments plus the possibility that rates may go higher and they may lose their jobs.



and the sky might fall. Why are all the what ifs so negative?


----------



## mercman (1 Aug 2008)

The current state of the Irish Property market is the biggest blame game show in town. What if -- if people had used their loaf and not been so keen to buy property. When the Government tried to slow the market down with the Bacon report there was Public Outcry. Now there is a Tax shortfall and money will have to be found. Property is a Long Term Business not just a couple of months and profits start rolling in.  A property Tax on Investment properties both residential and commercial is the most sensible way forward.


----------



## teachai (1 Aug 2008)

"A property Tax on Investment properties both residential and commercial"

Well, that makes more sense, but what was being proposed was a property tax on all properties.  

I still believe that the only fair system is based on ability to pay, and that is done at point of purchase, whether it be property, cars, clothing, etc. 

This is why stamp duty worked. People bought property they could afford, taking into account any stamp duty they had to pay.  If they didn't want to pay stamp duty, they could purchase stamp duty exempt properties.


----------



## Bronte (1 Aug 2008)

MrMan said:


> and the sky might fall. Why are all the what ifs so negative?


 As everything is so positive one should go out now and buy that dream house and interest rates will probably go down and sure the property is bound to rise in the long term and your salary is going up in any case, and if you don't have the money for the furniture you can buy it on credit, and you can buy that brand new lexus on HP.  Would you prefer it this way MrMan, I do believe that's why a lot of people are in a mess right now and with no way out.   The negative and the positives should have been pointed out to people not just the positives.  A property tax right now would only make things worse.


----------



## MrMan (1 Aug 2008)

Bronte said:


> As everything is so positive one should go out now and buy that dream house and interest rates will probably go down and sure the property is bound to rise in the long term and your salary is going up in any case, and if you don't have the money for the furniture you can buy it on credit, and you can buy that brand new lexus on HP.  Would you prefer it this way MrMan, I do believe that's why a lot of people are in a mess right now and with no way out.   The negative and the positives should have been pointed out to people not just the positives.  A property tax right now would only make things worse.



I don't see the connection with not having a gloomy disposition or negative outlook with going out and putting things on credit or hp which is a mistake in any economic climate in my opinion. You would be foolish to base any major financial decisions on what might or might not happen. So if you can reel yourself back in there a bit you might understand that I was saying that all is not quite so negative a rather than everything is super duper.


----------

