Government plans for collecting property tax

Wednesday 12 December 2012 16.25

by David Murphy, Business Editor @davidmurphyRTE

The words “property tax” are striking fear and anguish into the hearts of Irish households across the country. It is clear the Troika and many politicians have been less than impressed with the €100 household charge.

It was unfair to levy the same charge on a wealthy person in a big house in Dublin 4 as a less well off individual in a small house Leitrim. That mistake breached one of the principals of taxation. It should be equitable: in other words the wealthy should pay more. So it is not surprising one third of householders haven’t yet coughed up.

After the debacle of the household charge the Revenue Commissioners has been given responsibility for collecting the new tax. It is going to be gathered through the PAYE system for individuals who are taxed a source.

Politically this is an astute move. The household charge took money people out of people’s pockets. By collecting from the PAYE system the Revenue Commissioners would gather the cash before individuals receive it. This allows the State spread the cost of the property tax across the whole year if it wishes. The universal social charge, which is much more onerous for tax payers, has not been as controversial as the property tax because the cost is spread across 12 months.

But there are some problems with collecting through the PAYE system which have yet to be ironed out. Firstly, for reasons of equity and probity, employers are now likely to have to seek permission from their staff to deduct the tax at source.

Secondly, the money is supposed to go to the local authorities. However, this could be more complicated if somebody works on one county and lives in another.

There will have to be some system of ensuring the employers or the Revenue Commissioners directs the money to the correct city or county council. Another issue is that each household will have to nominate one individual to be liable for the tax in circumstances where the home in jointly owned by a couple.

Self assessed earners, who pay their tax in one lot each November, are likely to have the property tax added to their annual bill.

But the more difficult question will be the issue of people on old age pensions and social welfare. One possibility will be to levy the charge and only collected when the home is sold. But would the Troika really agree to any Government proposal to have the tax long fingered for years and years?

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