End the ad hoc posturing over property tax

There are many economic reasons to tax property, including household land or capital value. Taxing things that can’t easily move is easier than to tax those that do and, despite the collapse in the economy, household net worth in Ireland is still north of €500bn, the bulk of which is made up of the value of homes.

One taxes where the money is. The Government, having made errors aplenty in the introduction of the household charge, now seems determined to continue to do so with the “proper” property tax. We are told that this is going to be a tax on the market value of one’s home, self-assessed and returned (although with an option to deduct from PAYE) and that it will come into force in 2013.

This makes little economic sense, and seems to be as a result of the Government baulking at the rural lobby which felt a land or site tax would be unfair to rural dwellers. Of course, a valuation tax will fall disproportionately on urban dwellers, whose homes are generally more valuable. With nearly a million more people living in aggregate urban areas than rural, as of the last census, this doesn’t seem politically sensible either.