It may be unfair, but the price of not paying the household charge is high
It is most unlikely that it will do so for a number of reasons, however (even if it has climbed down partially already on the septic tank registration charge). One is that the damage is done and that any climbdown will be treated by opposition parties on the left as their triumph, emboldening them to go further the next time something controversial is proposed.
The second is that, despite the many claims and the impression that has been created, the money from the collection of the household charge is not going to pay bank debts. What the Government has failed abysmally to emphasise is that, even without bank repayments, the gap between what the State is spending annually and taking in tax revenue is not far short of €20bn.
The gap is enormous and is being funded by borrowing. Even if the bank debt was all written off the issue of the public finances deficit still has to be resolved. And that brings us to the third problem. Our opposition can huff and puff about unilateral action but the reality is that the troika of ECB, European Commission and International Monetary Fund has as firm a grip on us as is possible. If we do anything without their permission they can stop providing the loans we need.
This group has demanded the imposition of a property tax by 2014. None of them care about cultural objections to property taxes, going back as far as tithe days, or the immorality of asking people deeply in personal debt because of a property crash to dig deep to pay the national debts as well. It is a condition of the loans given to us and it has to be implemented, even if the government knows it may as well as sign its own death warrant by introducing it.
I suspect that this was what Taoiseach Enda Kenny had in mind when he said this week that it was not guaranteed that property taxes would be introduced in 2013; he may be hoping that things will change so that he does not have to introduce them at all. The expectation had been that the Government might move earlier as there is a dual rationale for doing so: one is that it raises money earlier and may raise the chances of escaping the trioka’s grip; the second is that it takes the political hit earlier in the election cycle, giving the government more time to heal the wounds before the 2015/16 general election. This government has to live up to the commitment of its predecessor: the priming of the property tax bomb was one of the biggest political liabilities Fianna Fáil left for its successor. So if other ways can be found to improve this government’s financial position it might try to avoid the introduction of property taxes at all.
That will be very difficult to achieve given the state of the public finances. But the fierce reaction to the household charge has given the Government many reasons to think. There is little doubt that the household charge is unfair in that it does not take into account the ability to pay but even if a more “equitable” system of demanding money is found a whole new category of people is likely to become very upset.
Economists like the idea of property taxes because a house is always there and is taking up land space, a valuable asset on which people should pay rent (even if they own their own house on that land and have purchased that piece of land itself). In some respects the idea that the left in Irish politics is leading the charge against this tax is somewhat ironic. Do they want private property to be exempt from taxes? Surely that is the position that the wealthy would want pushed forward?
Just how will valuations be decided? On the nominal market value of the property? On its size? On its number of bedrooms? On its location? Would it be fair if the owner of a large six-bed house in rural Carlow would pay less tax that somebody in a three-bed semi-d in Cork, just because the latter has a larger nominal value? And if a person’s income is to be taken into consideration in setting a property tax why not just levy income tax in the first place? But what if a person with a large property suffers from a dramatic fall in income? Would they be exempted? Should credit be given to people who paid stamp duty on their home purchases, sometimes money that they borrowed in the amount of tens or even hundreds of thousands of euro ? Was that not a form of property tax?
Imagine, for example, that a homeowner is in a job that is paying much less than it did three years ago (and where the second partner might have lost his or her employment). The house is worth less than it was bought for and, more importantly, if sold now would not clear the mortgage that still has to be repaid to the bank. This extra money — or just €2 a week as the government likes to put it — can be a major problem when added to all of the other demands for money being made of people. Yet better to pay than to allow debts to mount up that could result in a possible penalty of up to €2,500 for non-payment.
The Government has not helped itself by the mess made of things by Phil Hogan’s Department of the Environment, especially with its complicated methods of payment and failure to use the strategic presence of the nation’s 1,100 post offices. The lack of proper information until late in the day means that many people were ignorant, or could claim ignorance of, the ways to pay.
INDIVIDUAL ministers’ performance in the last week has been shambolic. Too much of what has been said, even if accurate, has the appearance of threats, rather than winning friends and influencing people. “You can’t break the law one day and then expect the law to be there to protect you the next day,” said Leo Varadkar. “And you can’t refuse to pay your taxes one day and expect then to be able to draw on other people’s taxes when you need to avail of services the next day or later on in your life.” Are opponents of the charge going to be swayed by such straight talking?
Some people, emotionally, are saying they will go to jail rather than paying the charge. Clearly the cost of this would outweigh what has not been paid. But it seems that people should be aware that this option of civil disobedience is not open to them, courtesy of The Fines Act 2010. It is designed to reduce the number of people going to jail for refusing to pay fines by giving the Government more provisions to collect them. This means the Government has the power to remove cash forcibly from people’s bank accounts and to stop benefits if they refuse to pay, albeit after securing court approval to do so.
Joe Higgins has described the potential penalties for non-payment to Kenny as “your disgraceful campaign of intimidation that is starting already, threatening householders with €2,500 in fines for non-registration”. But such fines work in all aspects of life, from those who don’t pay their TV licences or car parking fines or whatever. The reality is that many people, much as they hate the household charge and much as it may be inequitable and unfair and too much of an extra burden even at what works out at €2 per week, may be bounced into paying it because of those realities.
* The Last Word with Matt Cooper is broadcast on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm.
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