€1,000 home tax looks likely to boost coffers

HOMEOWNERS look likely to be hit by a €1,000-a-year property tax after the levy was recommended by a major economic think-tank.

As the Government pledged not to means test pensions in the upcoming budget, the Economic and Social Research Institute said the homes tax would raise €1.1 billion a year.

With ministers seeking €15bn worth of cuts over the next four years, the tax now looks almost certain to be brought back in as Ireland’s debts crisis continues to worsen.

The Taoiseach warned his backbenchers to watch what they say about the economy publicly as he fears it will be picked up internationally and could damage the country’s credibility.

The call came as interest rates demanded by investors to lend money to Ireland for 10 years hit a record 9.26% — effectively shutting the country out of the borrowing markets.

Finance Minister Brian Lenihan admitted Ireland’s bad international image may be due to investors not believing his department’s figures.

“While the announcement on the banking sector in September was not disbelieved by the markets, it wasn’t fully believed either because there is a wait-and-see policy of seeing whether it is an accurate account of exposures in the banking system,” he said.

Social Protection Minister Eamon Ó Cuív attacked “wild rumours” that welfare recipients faced cuts of up to €30 a week in the budget, but refused to say what welfare payments would be hit and by how much.

“A €30 cut across the board would raise about €3bn. I don’t think anybody believes that any government would raise half the required money from social welfare. So there’s a lot of scaremongering out there. It concerns me because it’s frightening people,” he told RTÉ.

While December’s Budget would be too soon to bring in the kind of property tax envisaged by the ESRI, it may herald a temporary version. The ESRI’s report said there was a strong case for a homes tax and suggested an owner-occupier should be charged 0.4% of the value of the property.

This would mean the average home owner paying around €950 per year — some €80 per month. Economists at the institute also floated the idea of a tax on the rental sector.

All 1.7m houses in the state would have to be valued in preparation for the introduction of a tax, with the ESRI saying this could be done within two years. The home would then be revalued every five years and low-income households could be exempt from the charge, the ESRI suggested.

Differences in property values would mean Dubliners paying over half of the property tax. People who had recently paid stamp duty when buying their home would not have a second property tax charge forced on them, under the proposals.

Housing organisation Threshold warned ministers to think carefully before bringing in a homes tax which could hit property values and badly affect 200,000 home owners in negative equity. The financial manoeuvrings came as the Oireachtas Joint Committee on Finance and the Public Service recommended that from next year a new budgetary process should be introduced.

The committee said the Government should introduce multi-year budgets, as they are a better option for allowing departments and the capital programme to be more efficient.

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