# Varadkar proposes a tax on empty buildings



## Sarenco (23 May 2017)

The Journal are reporting that Leo Varadkar stated at a party meeting in Wicklow yesterday evening that _"he would like to impose a property tax on vacant properties in high demand areas, while discussing the “punitive costs” landlords experience, stating they should be treated like any other business and permitted to offset any loss"._


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## T McGibney (23 May 2017)

Sarenco said:


> The Journal are reporting that Leo Varadkar stated at a party meeting in Wicklow yesterday evening that _"he would like to impose a property tax on vacant properties in high demand areas, while discussing the “punitive costs” landlords experience, stating they should be treated like any other business and permitted to offset any loss"._


Politician in speaking out of both sides of his mouth shocker.


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## Sarenco (23 May 2017)

In principle, I wouldn't have a particular problem with a vacant dwelling levy, although it would be very difficult to frame and police.  Of course, it would be unnecessary if we had introduced a proper site value tax instead of the LPT in the first place.

In any event, it surely has to be positive that the unfair tax treatment of residential letting profits is on the political agenda.  No?


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## The Horseman (24 May 2017)

We will wait and see if the tax treatment does indeed change. I would have a problem with a vacant dwelling levy. it is bad enough that you are liable for property tax.

We need to treat residential landlords as a business rather than the social agenda. it is a business pure and simple and should be treated as any other business. What's next because I choose to use public transport and leave my car in my driveway should I be charged a tax for not using my car although I already pay car tax.


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## Delboy (24 May 2017)

The Horseman said:


> We will wait and see if the tax treatment does indeed change. I would have a problem with a vacant dwelling levy. it is bad enough that you are liable for property tax.
> 
> We need to treat residential landlords as a business rather than the social agenda. it is a business pure and simple and should be treated as any other business. What's next because I choose to use public transport and leave my car in my driveway should I be charged a tax for not using my car although I already pay car tax.


I don't think there's a shortage of cars in the country whereas there is a dire need for housing.

I know of a house near me in an area of Dublin close to town. It's been empty 3 years since the landlord asked the Phillipino family there to move out after they had the temerity to ask for some new furniture (they lived there 3 years without any issues and the furniture was in bits when they moved in). Landlord said he wanted the gaff for an extended family member who hasn't appeared yet!
I was talking to that landlord last Summer who was looking for info about some of the neighbours off of me. I asked about their own gaff and they said they were going to sell it...but it's still empty today.

I just think they are wealthy enough to not be bothered with tenants and the issues that come with being a landlord. They're also tight enough to not want an agency to manage it for them. 
They should be taxed into making a decision one way or another


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## cremeegg (24 May 2017)

Sophrosyne said:


> It may be useful to summarize how rental income is not treated the same as any other business.



It is a popular notion that rental income is not treated the same as any other business, but it is not entirely true.

If you borrow money to buy shares, the interest cost is not tax deductible. The reasoning being that you should not get a tax break to acquire an asset.

If you are engaged in a business and borrow money to buy an asset for use in the business, say a van, the interest cost is tax deductible. The interest cost being seen as similar to any other operating cost. 

The distinction is that vans have a limited lifetime, they are used up in the business, (in fact if they are not used up and are sold a balancing charge applies).

A property is not used up in the business. Shares still exist after any loan is paid off.

The law seeks to support business and the creation of capital, it does not seek to support the purchase of existing capital.


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## The Horseman (24 May 2017)

Land and buildings in a business perspective are treated differently. There is no depreciation charge for land there is however a deprecation charge for buildings. Properties purchased for business are normally depreciated over a 25 yr life span.

From a business perspective the tax on rental income should be charged on a fig net of a depreciation charge for the property (not the land element) in the same way it is in a business perspective.

Like any business if there is a capital appreciation on a property be it a residential property or business property within the business environment then the Capital Gains will be charged on its disposal.


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## T McGibney (24 May 2017)

Delboy said:


> I don't think there's a shortage of cars in the country whereas there is a dire need for housing.
> 
> I know of a house near me in an area of Dublin close to town.
> 
> ...



No tax policy should ever be based on such sweeping and ill-informed generalisations.



The Horseman said:


> Land and buildings in a business perspective are treated differently. There is no depreciation charge for land there is however a deprecation charge for buildings. Properties purchased for business are normally depreciated over a 25 yr life span.



Not for tax purposes they ain't.


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## The Horseman (24 May 2017)

Depreciation is a deductible expense in arriving at taxable income.


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## T McGibney (24 May 2017)

The Horseman said:


> Depreciation is a deductible expense in arriving at taxable income.


Not of almost all buildings it ain't


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## Sarenco (24 May 2017)

cremeegg said:


> It is a popular notion that rental income is not treated the same as any other business, but it is not entirely true.



It is entirely true!

The taxation of residential letting income is subject to a separate and differentiated tax regime to any other trading business.  Different rules apply with regard to allowable deductions, capital allowances and the treatment of losses.

Contrast with the tax treatment of a short-term letting business/B&B/hotel. 

There is no logical reason why the tax treatment should be any different - it's purely a quirk of history.


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## The Horseman (24 May 2017)

I am interested in your understanding of what elements of the buildings are not allowed be depreciated (assuming the business owns the property and is not leasing same) and are therefore not deductible from income to arrive at taxable income.


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## T McGibney (24 May 2017)

The Horseman said:


> I am interested in your understanding of what elements of the buildings are not allowed be depreciated (assuming the business owns the property and is not leasing same) and are therefore not deductible from income to arrive at taxable income.



(shakes head) 

The tax treatment of buildings used in a business is very basic stuff. 

Apart from designated qualifying industrial buildings and farm buildings, and occasional temporary incentives over the years for hotels etc, there are no capital allowances for such buildings.


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## Delboy (24 May 2017)

T McGibney said:


> No tax policy should ever be based on such sweeping and ill-informed generalisations.


It wasn't a generalisation. It was a specific example of a house being left empty in a sought after area of Dublin for 3+ years and for no good reason. And I'm sure there's many many more like that around Dublin and the other cities in Ireland.
The lack of a real stick in current tax policy allows for that.

Anyways, this is off topic as such. So I apologise for that


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## T McGibney (24 May 2017)

Delboy said:


> It wasn't a generalisation. It was a specific example of a house being left empty in a sought after area of Dublin for 3+ years and for no good reason.





> I just think they are wealthy enough to not be bothered with tenants and the issues that come with being a landlord. They're also tight enough to not want an agency to manage it for them.
> They should be taxed into making a decision one way or another


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## Leo (24 May 2017)

Delboy said:


> It wasn't a generalisation. It was a specific example of a house being left empty in a sought after area of Dublin for 3+ years and for no good reason. And I'm sure there's many many more like that around Dublin and the other cities in Ireland.
> The lack of a real stick in current tax policy allows for that.



~200,000 empty properties across the state according to official figures. For many, the onerous responsibilities and risks are good enough reason not to get into the letting game. 

Rather than taking the stick approach (which no doubt they'd mess up anyway), we need to understand why the carrot isn't attractive enough, or in many cases the short-term let or Airbnb markets are so much more attractive. What other line of business faces a taxation stick should they choose not to make their products available?


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## The Horseman (24 May 2017)

The carrot isn't attractive for two reasons. The tax treatment of the landlords and the unwillingness of the state via the RTB to deal with troublesome tenants. I am conscious this thread relates to the tax aspect so will focus on that issue.

The Govt has by introducing the rent caps and the tax treatment of landlords is discouraging investment in residential buy to lets. If it is so easy and profitable being a landlord why are so many small landlords leaving the sector.

Maybe by working in consultation with the landlords and their representative bodies a joint approach to dealing with the issue might be beneficial for all stakeholders rather than none of them.


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## Sarenco (24 May 2017)

Leo said:


> ~200,000 empty properties across the state according to official figures. For many, the onerous responsibilities and risks are good enough reason not to get into the letting game.



True but there is now an even more compelling reason to leave a property vacant, at least in an RPZ - its value will be materially reduced on the creation of a tenancy as a direct result of Minister Coveney's nutty rent  control legislation.


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## The Horseman (24 May 2017)

The tax treatment of buildings used in a business is very basic stuff.

Apart from designated qualifying industrial buildings and farm buildings, and occasional temporary incentives over the years for hotels etc, there are no capital allowances for such buildings.[/QUOTE]

I am aware of the Capital nature of tax and the various incentives offered over recent times. The question I asked is about the depreciation charge and its affect on taxable income (Rental income) not the tax on disposal etc.


T McGibney said:


> (shakes head)


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## T McGibney (24 May 2017)

The Horseman said:


> I am aware of the Capital nature of tax and the various incentives offered over recent times. The question I asked is about the depreciation charge and its affect on taxable income (Rental income) not the tax on disposal etc.



The depreciation allowance for income tax and corporation tax purposes (technically termed capital allowances or the wear and tear allowance) is restricted generally to plant and machinery, equipment, fittings and vehicles.
In respect specifically to income tax as it applies to rental income, it is restricted to fittings, eg furniture, fittings such as white goods and contents provided in the property by the landlord.


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## SoylentGreen (24 May 2017)

So long as this doesn't extend to unused rooms in homes. I would not like to be forced to downsize, because I am older, and to make way for someone younger.


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## T McGibney (24 May 2017)

SoylentGreen said:


> So long as this doesn't extend to unused rooms in homes.



If we accept that the State has a right to tax homes that are wholly unused, it clearly follows that they've a corresponding right to tax homes that are only partly used.

Meanwhile, the actual solution to the housing problem - the building of an adequate volume of new homes - remains as elusive as ever.


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## Sarenco (24 May 2017)

T McGibney said:


> If we accept that the State has a right to tax homes that are wholly unused, it clearly follows that they've a corresponding right to tax homes that are only partly used.



To be fair, I don't think there is any doubt that the State has a right to tax dwellings, whether they are fully or partly occupied or entirely vacant.  We actually already have such a tax - LPT.

LPT is a very modest property tax by international standards (a point recently emphasised by the Commission) and is probably insufficient to incentivise anybody to "right-size" their accommodation needs.

http://www.independent.ie/business/...n-warning-over-volatile-revenue-35744373.html


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## T McGibney (24 May 2017)

Sarenco said:


> To be fair, I don't think there is any doubt that the State has a right to tax dwellings, whether they are fully or partly occupied or entirely vacant.  We actually already have such a tax - LPT.
> 
> LPT is a very modest property tax by international standards (a point recently emphasised by the Commission) and is probably insufficient to incentivise anybody to "right-size" their accommodation needs.
> 
> http://www.independent.ie/business/...n-warning-over-volatile-revenue-35744373.html



Okay:

If we accept that the State has a right to tax homes on the specific basis that they are wholly unused, it clearly follows that they've a corresponding right to tax homes on the specific basis that they are only partly used.


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## Andy836 (24 May 2017)

T McGibney said:


> Okay:
> 
> If we accept that the State has a right to tax homes on the specific basis that they are wholly unused, it clearly follows that they've a corresponding right to tax homes on the specific basis that they are only partly used.



No it doesn't. That is a bizarre claim. To extend the hypothesis further you could argue that the state has an obligation to provide tax credits for homes which are over occupied.

Your point on the LPT is valid. It is set way to low.


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## Sarenco (24 May 2017)

Is a dwelling a "home" if nobody lives there?

I certainly agree that it would be difficult to frame and police a vacant dwelling levy and there are far better ways to address this issue.


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## T McGibney (24 May 2017)

Andy836 said:


> No it doesn't. That is a bizarre claim. To extend the hypothesis further you could argue that the state has an obligation to provide tax credits for homes which are over occupied.



Except that the State doesn't provide tax credits for homes, so your extension makes no sense.




Andy836 said:


> Your point on the LPT is valid. It is set way to low.


I have made no point, good bad or indifferent, on the LPT.


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## cremeegg (24 May 2017)

SoylentGreen said:


> So long as this doesn't extend to unused rooms in homes. I would not like to be forced to downsize, because I am older, and to make way for someone younger.



In fact there is something like this in existence in the UK already. A council house deemed larger than the tenants needs, where for example, a child of the tenant has moved out, causes a reduction in housing benefit. Although it is a reduction in benefit, it is widely called the "Bedroom Tax"

Something similar exists in Australia.


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## delfio (24 May 2017)

cremeegg said:


> In fact there is something like this in existence in the UK already. A council house deemed larger than the tenants needs, where for example, a child of the tenant has moved out, causes a reduction in housing benefit. Although it is a reduction in benefit, it is widely called the "Bedroom Tax"
> 
> Something similar exists in Australia.



This relates to council/ housing association properties in the UK.  
There is no way people who own their own homes will ever be penalised for under occupancy


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## cremeegg (24 May 2017)

delfio said:


> There is no way people who own their own homes will ever be penalised for under occupancy



No way !


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## Sarenco (24 May 2017)

delfio said:


> There is no way people who own their own homes will ever be penalised for under occupancy


Well, you could argue that LPT already penalises under-occupancy but it's set at such a low level that it probably doesn't incentivises anybody to "right-size" their accommodation needs.

Imagine an annual property tax that equates to 2% of the assessed value of your home?  Not at all uncommon in the US.


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## delfio (24 May 2017)

cremeegg said:


> No way !



Never!


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## Gordon Gekko (24 May 2017)

Sarenco said:


> Imagine an annual property tax that equates to 2% of the assessed value of your home?  Not at all uncommon in the US.



Yes, but to be fair only in places where other taxes are lower than they are here.

52% on any incremental income, 33% on gains, and 2% on one's home would be perverse.


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## Sarenco (24 May 2017)

Gordon Gekko said:


> 52% on any incremental income, 33% on gains, and 2% on one's home would be perverse.


Well, I doubt very many "empty nesters" pay tax at a rate of 52% on any material portion of their income.


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## T McGibney (24 May 2017)

Sarenco said:


> Well, I doubt very many "empty nesters" pay tax at a rate of 52% on any material portion of their income.



Really? Any retired Garda, teacher or mid ranking public servant will.


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## Sarenco (24 May 2017)

T McGibney said:


> Really? Any retired Garda, teacher or mid ranking public servant will.



Yes, really! 

The average retired garda, for example, receives an (exceptionally generous) annual pension in the region of €25k.  None of that income would be taxed @52%.


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## Andy836 (25 May 2017)

T McGibney said:


> Except that the State doesn't provide tax credits for homes, so your extension makes no sense.
> 
> 
> 
> I have made no point, good bad or indifferent, on the LPT.



Ah I see, that was Sarenco on the LPT not being high enough.

Yes, my tax credit point makes no sense, in the same way your contention that half occupied properties being subject to a % of the vacant property tax makes no sense.


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## T McGibney (25 May 2017)

Andy836 said:


> Yes, my tax credit point makes no sense, in the same way your contention that half occupied properties being subject to a % of the vacant property tax makes no sense.


Except that mine was clearly made in jest.  My views on the folly of government attempting to micromanage the residential property sector are well known.


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## Andy836 (25 May 2017)

T McGibney said:


> Except that mine was clearly made in jest.  My views on the folly of government attempting to micromanage the residential property sector are well known.



That was not clear to me! Touche


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