CBI: increase tax on property and savings

[odyssey06]

Surely you're not arguing for a flat property tax regardless of the value of a property? Seriously?!
Bear in mind that I'm arguing in favour of a site-value tax in place of a property tax such as LPT. But even LPT is based on the value of a dwelling. Do you object to that? Should LPT be applied at a standard rate to every dwelling regardless of the value of the dwelling?
That logic seems totally bizarre to me.

I think LPT should be set by the LA based on some fixed non-value based metric such as property size or number of bedrooms.
There should be no connection between the rates for Dalkey and BallygoBackwards.
It should up to each area's elected councillors \ mayor to set a rate based on their property tax base and spending requirements. I think this would also help to restore some genuine local government. Our current system is a bit of a joke.

It should be, ahem, a local tax set by local people for local people and spent on local people

 

[RETIRED2017]

Purple said,Please stop posting that nonsense. Their employer paid high social insurance and they paid not so high social insurance until the PRSI ceiling was removed (I think that was in 2002).

It is not it will not affect my generation but it will affect your generation Government need to be ring fencing part of what is collected i pay related social insurance from payroll into a fund so money is there to pay your pension at present it is squandered on other things,

In fact Philip Lane point is we need to have a fund in place now while we can afford to , which is exactly what we should be doing for the people who see 14.75 % of there payroll go into the PRSI fund ,[/QUOTE]

 

[RETIRED2017]

Purple said ,Please stop posting that nonsense. Their employer paid high social insurance and they paid not so high social insurance until the PRSI ceiling was removed (I think that was in 2002).

It is not it will not affect my generation but it will affect your generation,

Strange how most posters never took in the point Philip Lane was trying to make

I can say there was enough prsi taken from payroll to fund my pension during my working life ,

 

[Purple]

Well, one of the reasons that urban land is more valuable than rural land is because it benefits from more immediate access to various services (roads, schools, concert halls, sports stadia, etc.). Many of these facilities are partly or wholly funded by the taxpayer so, all things being equal, it doesn't seem unreasonable that the owner of property in an urban area would make a higher contribution to the exchequer to reflect these additional (taxpayer funded) benefits.

I like the idea of a site value tax because, as pointed out, it doesn't penalise people who improve their property.
If a local services tax was based on the cost of delivering local services then that tax would be far higher in rural areas. LPT is spent by local authorities but it is not spent where it is collected; for every€1 spent per head in Dublin there is €90 per head spent in Leitrim.

 

[Purple]

Purple said ,Please stop posting that nonsense. Their employer paid high social insurance and they paid not so high social insurance until the PRSI ceiling was removed (I think that was in 2002).

It is not it will not affect my generation but it will affect your generation,

Strange how most posters never took in the point Philip Lane was trying to make

I can say there was enough prsi taken from payroll to fund my pension during my working life ,

The State is paying money into the pensions of the retired which should be saved for the pensions of working people.
The PRSI you paid during your working life was used to fund all sorts of things including your pension. Your employer also paid PRSI. None of that went towards your pension. It's called social insurance, not state pension deduction. For most of your working life there was a cap on what you paid. You came nowhere close to funding your pension. When you meetworking people now thank them; it is they that are paying your pension.
Now please try to stay on topic and stop with this PRSI thing i every second thread.

 

[RETIRED2017]

The State is paying money into the pensions of the retired which should be saved for the pensions of working people.
The PRSI you paid during your working life was used to fund all sorts of things including your pension. Your employer also paid PRSI. None of that went towards your pension. It's called social insurance, not state pension deduction. For most of your working life there was a cap on what you paid. You came nowhere close to funding your pension. When you meetworking people now thank them; it is they that are paying your pension.
Now please try to stay on topic and stop with this PRSI thing i every second thread.

I suspect I am closer to the topic than you,
Philip Lane talks about funding now for future services which is the point I am making, There are some from your generation who are in a position to fund there retirement I suspect seeing you posted in the last few weeks you were on over 100k per year you may be one of them,There are lots of hard working people from your generation who are not in a position to do so these are the people that we need to be looking after now while we can,

 

[Purple]

There are lots of hard working people from your generation who are not in a position to do so these are the people that we need to be looking after now while we can

I agree, but we spend the money runding your pension and bailing out the investments of your generation instead.

 

[Purple]

The point that you are missing it was enough to fund my pension ,That IS Where The Cap Came From ,
The only reason the cap was removed was because lots of other people were reclassified and allowed into the fund,

Nonsense.

 

[RETIRED2017]

Nonsense.

Go check and you will find out the cap was adjusted in line with pension increases most years, just look at all of the people who were added in in the last few months but of coures that went over your head,

 

[Sarenco]

I like the idea of a site value tax because, as pointed out, it doesn't penalise people who improve their property.
If a local services tax was based on the cost of delivering local services then that tax would be far higher in rural areas. LPT is spent by local authorities but it is not spent where it is collected; for every€1 spent per head in Dublin there is €90 per head spent in Leitrim.

I would have no issue with the rate of any site-value tax being set at whatever level a local authority determined was appropriate to meet the cost of providing local services.

In fact, I think it would inject some much needed accountability into the system.

 

[Purple]

I would have no issue with the rate of any site-value tax being set at whatever level a local authority determined was appropriate to meet the cost of providing local services.

In fact, I think it would inject some much needed accountability into the system.

It would result in huge increase in taxes for rural dwellers and a resulting increase in population shift away from rural areas.
The economic reality is that rural dwellers are massively subsidised by their urban counterparts but that's a social necessity.
Therefore a weighted site tax system is fairest.

 

[PMU]

'Property tax' is just its name. It's a quasi-lump sum tax, calculated on the value of your property, but it could be calculated on anything else, like the length of your nose. Each year the taxman comes and takes this lump-sum from your bank account. Economists, e.g. the CB and the IMF, love lump-sum taxes, because (a) they have no disincentive or substitution effects, e.g. income tax acts as a disincentive to work and substitutes black market labour for taxed labour; or (b) do not affect relative prices in the economy or change decision making. You just have less money to spend. It's just another way for the state to take more money from the taxpayer, and is particularly unfair as it does not take into account the income tax you have already paid; and the variability of values of similar type properties.

The tax in this case is a recurring cost of ownership, thus making the asset less valuable.

That would imply people would move from Dublin to the country to lower their property tax bills, and thereby bid up house prices in the country to Dublin-like levels. This just doesn't happen.

The real cost of a house for most buyers is what they will be able to pay per month on their mortgage. If they can pay €800 and that services a €200,000 mortgage then they can spend that (plus a deposit) on a house. If there is a €100 per month property tax then they can only pay €700 a month on a mortgage so they can only borrow €175,000. Apply that to every mortgage in the country and prices drop accordingly.

It would be more correct to say: " The real cost of a house for most buyers is what they will be able to pay per month on their mortgage, relative to what they are already paying for rent, which, unless the landlord is particularly charitable, will include the property tax." The tax is effectively disassociated from property. It represses your budget but not to such a level as to affect decision making. The decision is to continue renting or buy an asset that should increase in value. If you rent the landlord passes on the property tax to you one way or another. So as you most likely pay it, either explicitly or implicitly, it does not impact on your rent or buy decision, so it's irrelevant to the price of houses.

 

[Purple]

'Property tax' is just its name. It's a quasi-lump sum tax, calculated on the value of your property, but it could be calculated on anything else, like the length of your nose. Each year the taxman comes and takes this lump-sum from your bank account. Economists, e.g. the CB and the IMF, love lump-sum taxes, because (a) they have no disincentive or substitution effects, e.g. income tax acts as a disincentive to work and substitutes black market labour for taxed labour; or (b) do not affect relative prices in the economy or change decision making. You just have less money to spend. It's just another way for the state to take more money from the taxpayer, and is particularly unfair as it does not take into account the income tax you have already paid; and the variability of values of similar type properties.

Agreed. Whatever you call them taxes which broaden the tax base, produce stable returns to the exchequer (aren’t capital transaction based) and don’t repress wealth generating activities (work) are to be welcomed.

That would imply people would move from Dublin to the country to lower their property tax bills, and thereby bid up house prices in the country to Dublin-like levels. This just doesn't happen.

It doesn’t imply anything of the sort.

It would be more correct to say: " The real cost of a house for most buyers is what they will be able to pay per month on their mortgage, relative to what they are already paying for rent, which, unless the landlord is particularly charitable, will include the property tax." The tax is effectively disassociated from property. It represses your budget but not to such a level as to affect decision making. The decision is to continue renting or buy an asset that should increase in value. If you rent the landlord passes on the property tax to you one way or another. So as you most likely pay it, either explicitly or implicitly, it does not impact on your rent or buy decision, so it's irrelevant to the price of houses.

No, it is what they can pay to finance the loan. What they spend their money on before they buy the property is irrelevant.

I do agree that property tax, etc has pushed up rents.

If my landlord pays €100 a month in property tax he has to get €210 gross from me. That €210 is added to my rent. In order to pay him €210 I have to earn €445. That means that a property tax of €1200 a year really nets the government €5,400.

 

[Sarenco]

It would result in huge increase in taxes for rural dwellers and a resulting increase in population shift away from rural areas.

Not necessarily.

The vast bulk of local authority spending is funded from sources other than LPT. I'm not arguing for a dramatic change to the aggregate amount raised by way of a property tax - I'm simply arguing for a change to the basis upon which it is determined.

 

[Sophrosyne]

The Tax Strategy Group considered a land/site value tax but rejected it:

"(iv) “Classic” Land Value/Valuation Tax or Site Value/Valuation Tax
60. Land Value Tax (LVT) or Site Value Tax (SVT) is an alternative approach to the use of valuations or the floor space of buildings as the traditional basis for the taxation of property.
LVT or SVT is a recurring tax on the land or site value of a property irrespective of any buildings or structures upon it6. Underpinning this approach is a principle that land is valued according to its optimum potential use (‘highest possible use’) as defined by the planning process rather than on the current use which is disregarded. Therefore, a site with a profitable commercial activity or an expensive house would be worth more (and would be liable for more tax) than less valuable land uses.

61. An LVT or SVT has a number of theoretical attractions:
• it is arguably more equitable than other forms of property taxation;
• it counteracts market disincentive to develop the land;
• it encourages compact city centre development and productive use of land;
• less information and fewer inspections are needed for the calculations; and
• owners who have developed land are rewarded for so doing, while those who have not developed valuable land are encouraged to do so

62. The Commission on Taxation concluded that while there is an economic rationale for a SVT, it is rarely used for tax collection in other jurisdictions. The most notable examples are certain local authorities in Sweden, Pennsylvania, New Zealand and Australia; Estonia; and previously
South Africa (which has recently moved away from LVT). Some jurisdictions have a tax on land values as well as a tax on buildings.

There are practical difficulties in the implementation of LVT/SVT, including the requirement of a comprehensive database of properties which is constantly updated for ownership, boundary and valuation changes.

63. There are existing data sources held by a number of State Agencies (primarily the Property Registration Authority and Ordnance Survey Ireland), but they have been developed over time on an independent basis and a considerable degree of preparatory work is required before the
required robust procedures and processes needed to underpin an LVT/SVT are in place.

64. In this Department’s discussions with these State Agencies, the practical difficulties with introducing an LVT/SVT have been highlighted. Mirroring the experience in other jurisdictions, there would be costly and time-consuming infrastructural issues to be resolved in advance of
developing an LVT/SVT. While the introduction of an LVT/SVT was possible, it was stressed by the Agencies that an initial first-step would involve the development of a transitional property tax followed in time by an LVT/SVT.

65. For the reasons outlined in its analysis, the Commission considered that a long lead-in for this approach would be needed which would involve a long and sustained challenge for policy makers to implement. These factors probably explain why SVT is not widely found in other
jurisdictions."

 

[Purple]

As people move away from hydrocarbon fueled cars we will lose the billion or so in taxes we currently raise from motorists.
That, in my opinion, should be replaced with property taxes in the form of a site value tax.
A sit value tax also discourages people from land and property hoarding; when granny dies the house can be left there to accumulate a greater capital value. A SVT discourages this. It also discourages hoarding by developers and encourages other land owners to make the best use of what land they have.