Ireland Urged To Ease Property Tax For Low-Paid

By Editorial 19 April, 2012

The Irish government's planned property tax could be fairer than the current interim household charge, the Economic and Social Research Institute (ESRI) has said, warning that the current system hits lowest earners hardest.

According to new research from the ESRI, a property tax could be designed to protect those on low incomes and to put the greatest burden on those with the highest incomes.

The government is committed, under the terms of its bailout with the European Union and International Monetary Fund, to the introduction of a comprehensive property tax by 2014. An Inter-Departmental Expert Group was set up in February to advise the government on this transition, with a view to having the new levy in place by 2013/14.

The EUR100 (USD131) Household Charge has, however, caused the government considerable problems. A recent Paddy Power/REDC poll found that 39% of those liable did not intend to pay the charge, and that almost two thirds of voters (65%) believe it to be unfair. Calls for a boycott have been made by members of parliament, and over 5,000 people marched through the streets of the capital in late March in protest against the levy.

According to the ESRI, the charge imposes the greatest percentage burden on those with very low incomes. On the other hand, its researchers discovered that the impact of a property tax on low income groups could be cushioned by the use of an income exemption limit, below which the tax would not be payable. It believes that this could be combined with reductions in the amount of tax payable by those with incomes just above the exemption limit.

The limits are recommended at EUR15,000 for a single person, or EUR25,000 for a couple. This, the ESRI argues, would have little impact on the poorest one-third of the population. In addition, it suggests that no property tax would be paid by pensioners relying wholly on the State pension. Similarly, those whose incomes – from social welfare or other sources – are at or below the State pension level should be excluded on grounds of low income.

These recommendations would therefore see most homeowners pay property tax each year of about EUR2.50 for every EUR1,000 of house value, raising around EUR500m. In line with the ESRI's wishes, those on the highest incomes would pay the greatest percentage of income, on average just under 1% of their disposable income.

Report author, Professor Tim Callan, said: “Under the agreement with the Troika, the Irish government has committed itself to introducing some form of property tax. There are several key choices to be made in the design of the tax. These will affect how the burden of a property tax is allocated across income groups and across regions. Our analysis helps to inform debate on these topics.”

Tags: Individuals | Expatriates | Tax | Ireland | Property Tax | Real-estate | Ministry Of Finance |


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