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Concerns Expressed Over Fairness Of Irish Property Tax

by Jason Gorringe,, London

10 December 2012

Irish Finance Minister Michael Noonan's plans for a comprehensive property tax, to which the government is committed under the terms of its bailout, have received mixed reviews, with concerns about regional price variations and the viability of the exemption regime prevalent.

Collection of the new Local Property Tax (LPT) is due to commence on July 1, 2013. The LPT will be charged at 0.18% of the market value of properties worth up to EUR1m (USD1.3m), and at 0.25% on any excess value over EUR1m. It will replace the interim EUR100 Household Charge - introduced in January this year - which will cease to operate with effect from January 1, 2013.

From the Dublin Chamber of Commerce's point of view, the property tax will prove unfair for those living in the capital and other cities. According to chief executive Gina Quin, the government's plan "completely lacks regional fairness." The same type of house, she pointed out, will be more expensive in urban than rural areas, with the cost of a three bedroom family house in Dublin 80% higher than in the Irish Midlands. "So, a family in Dublin on the same income as someone in the Midlands will have had to pay considerably more for their home, and be taxed for the privilege," Quin argued.

These concerns are echoed by the Construction Industry Federation's (CIF) Director General Tom Parlon. He wants to see further measures introduced that will "recognize the distinct difference between the various markets that are in place around the country." In particular, the residential markets in Dublin, Cork and Galway are showing signs of a more rapid recovery than more rural areas. "The government’s residential property market strategy needs to take this reality into account if we are to see the market recover on a sustained basis," Parlon stressed.

There are also concerns about the viability of Noonan's planned property tax holiday, which the CIF believes will not have the desired effect on the residential market. Noonan said in his Budget speech that the residential market is showing signs of increased activity, and, in order to maintain momentum, any new or previously unoccupied homes bought in the period to the end of 2016 will be exempted from the LPT, as will purchases of any homes in 2013 by first time buyers and residences in unfinished developments.

Parlon is concerned that this will fail to make a major difference, and that if the government "wants to see positive movement in the residential market then they need to address more of the underlying issues." Mortgages remain a key stumbling block, and Parlon said that the government must ensure that the banks make loans available to potential house buyers at affordable rates. Further, there needs to be greater confidence in the market if steadier property prices are to be achieved.

TAGS: Finance | Construction | tax | investment | real-estate investment | Ireland | property tax | real-estate | ministry of finance | tax authority | tax reform

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