Déjà vu – didn’t I pay this property tax already?

A property tax based on floor area and location could be easily introduced according to a study by Economic and Social Research Institute (ESRI) published this month. The options for a property tax include an annual levy, similar to the €200 levy on rental property introduced in 2009, and an annual payment based on floor area and location.


The Commission on Taxation (COT) put forward a similar property tax system in its 2009 report, which recommends a tax based on the gross value of property. Should the COT proposal be implemented, a couple living in a property with a value of €300,000 would face an additional tax bill of between €938 and €1,125. At property values above €400,000 the annual tax cost would range from €1,313 and €1,575. The liability for couples living in property valued at €600,000 and above would range from €1,688 to over €3,750. Under these proposals individuals living in certain large detached homes would be required to have an independent valuation taken out for the purpose of settling the annual tax bill.


The proposals contain no mechanism for taking into account the level of mortgage debt outstanding and cases where mortgage repayments are in arrears. Furthermore, the annual property tax would apply to vacant residential housing units and certain commercial property including bed and breakfast and guesthouse accommodation. They even went as far as to say that person living “in an affluent area should pay more tax than one who lives in a similar sized house in a less affluent area”.


On average, the Government collected €1.09bn in stamp duty each year from 2005 and 2007. A significant portion of this tax take came from young families who traded up at the height of the boom. To impose a further property tax on hese families, many of whom are still paying off this stamp duty liability out of reduced incomes, amounts to double taxation.


The COT proposal recommends a transitional exemption for couples that have paid stamp duty since 2002. However, the short-term deferral of tax is insignificant when compared to the level of stamp duty already suffered by many young families.


The COT and ESRI proposals are not workable and will disadvantage many families with reducing incomes and significant mortgage debt.  the Government should focus on a wealth tax which would be calculated by reference to an individual’s net assets after mortgages and other outstanding debts are taken into account.