How not to tax (Phil Hogan take note)

Tuesday 04 June 2013 17.01

Thousands of people are in mortgage arrears

By Business Editor David Murphy

They say history repeats itself for those who weren’t watching the first time.

Thus there is a lesson to be learned from the larger-than-expected number of people who registered for the Local Property Tax by last week’s deadline, compared to the poor figures for the €100 household charge.

One of the principles of taxation is that any levy should be equitable.

In the context of property, that means an individual with a big, expensive house should pay more than a person with a less valuable, modest home.

When Environment Minister Phil Hogan announced the €100 household charge in 2011, he broke that principle. In doing so he managed to enrage thousands of home owners who felt it was unfair that a millionaire could pay the same amount as an individual on the average industrial wage.

But unlike the household charge, the Local Property Tax did result in people with expensive properties paying more.

By last Thursday’s deadline, 1.54m homes had submitted a property tax return, compared to the 1 million properties that had registered to pay the €100 household charge six months after its March 2012 deadline.

But it wasn’t only that the unfairness of the household charge that lead to its poor compliance; it was also the fact that it was administered by the Local Government Management Agency instead of the more powerful and experienced Revenue Commissioners.

Interestingly, it is not entirely clear how many households are liable for the property tax.

NUI Maynooth Geography Professor Rob Kitchin argues the true number is close to 1.78 million properties. The Revenue acknowledges that it did not send letter to every liable person but it did write to people in respect of 1.69 million properties.

Even using Mr Kitchin’s figure it still shows that there were returns filed in relation to 86.5% of liable properties.

The lesson from the property tax is not a new one. Taxes have to be equitable otherwise they won’t work.

The principle still holds even if people are being taxed to pay for poor management of the county’s finances leading up to the crash.

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