The money isn’t there to bring in a property tax
I FIRMLY believe this is not the time for the introduction of a residential property tax and that the Fine Gael/Labour Government would be very unwise to proceed with the introduction of such a tax during its lifetime.
As they read this, I can almost hear Government TDs and supporters ask how a Fianna Fáil representative can say this since it was Fianna Fáil and the Greens who agreed to introduce a property tax as part of the original memorandum of understanding negotiated with the troika in Nov 2010.
Yes, the previous government did commit to introducing a property tax in 2012. I believe the then government was wrong in 2010 to commit to the introduction of a property tax. However wrong it was then, it would be even more foolhardy to proceed with the idea in 2013.
In any event, the troika has repeatedly made it clear that one fiscal measure can replace another of equal value. Their main concern is the achievement of the overall targets.
It is open to the Government to negotiate with the troika the withdrawal of the property tax from the memorandum of understanding. At no stage has any minister said that the Government intends to do this. If the Government proceeds with the introduction of a property tax in 2013, it is because it has chosen to do so.
The bottom line is that hundreds of thousands of families and single people in Ireland simply do not have an ability to pay a property tax at this time. The money just isn’t there.
Let’s look at a few facts. We know that more than one in five residential mortgages is in trouble. Some 168,637 owner occupier mortgages are either in arrears or have been restructured. The number of mortgages in long-term arrears is growing at an alarming rate. This has happened despite the fact that Irish people prioritise the repayment of their mortgage in their monthly budget. How can you levy a new property tax on people who can’t afford to make their mortgage repayments? I don’t believe you can.
We know from a recent report by Davy Stockbrokers that more than half of all mortgages are in negative equity. How can you ask someone, for example, with a mortgage of €400,000 and a house worth €200,000 to pay a property tax? I don’t believe you can.
I have discovered through parliamentary questions that, over the past 10 years, more than 160,000 people paid stamp duty of €10,000 or more on the purchase of a residential property. How can you ask someone who paid stamp duty of €10,000 or more in recent years to pay a property tax? I don’t believe you can.
There are several other important economic indicators that point to the absurdity of introducing a property tax now. Not least, there is the fact that we have almost 435,000 people on the Live Register.
A report by the Irish League of Credit Unions has informed us that more than 1.8m people have less than €100 a month to live on after essential bills are paid.
An obvious response to all this is why don’t you hit the people who hold multiple properties. That is an attractive argument on the surface. However, when you probe a little deeper, you discover that the arrears rate is even higher among buy to let mortgages. The truth is that many owners of multiple properties are drowning in debt and are insolvent.
I will justifiably be asked where I would get the money to balance the books if I were finance minister. Fianna Fáil will publish credible budget proposals in advance of the December budget which will detail revenue-raising initiatives and expenditure reductions.
Last year, for example, we proposed a range of measures including a reduction in the annual earnings limit for maximum tax relief on pension contributions, an increase in income tax on persons earning over €115,000 a year, a levy on off-trade alcohol sales, and a tax on the high sugar content of certain food and drink.
The Government is entering critical negotiations on easing the burden of Ireland’s banking debt. We need a substantial writedown of that debt.
My honest view is that tinkering around the edges of that debt, by adjusting repayment periods and interest rates, will not suffice. We will not be able to repay it. If we do repay the bank debt in full, it will come at the cost of prolonged misery for ordinary citizens.
The Government will have to be relentless in its negotiations. Even with a good deal on the bank debt, tough decisions will still need to be made to reduce the deficit. It is Fianna Fáil’s view that the wealthiest in society can afford to pay more so as to avoid crucifying middle Ireland.
The Government has made a complete mess of the €100 household charge, which up to 40% of householders have still not paid. If Fine Gael/Labour proceed and try to bring in a property tax, I believe it will delay our economic recovery and place an unbearable additional burden on a great many people already struggling to manage.
* Michael McGrath is the Fianna Fáil finance spokesman and is a TD for Cork South Central
* Read more:
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