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Ireland Ignores IMF Property Tax Advice

by Jason Gorringe,, London

12 September 2012

Irish Finance Minister Michael Noonan has rejected the International Monetary Fund's (IMF's) call for a 0.5% property tax. The rate proposed is thought to be at least twice that currently under consideration by government ministers.

The government is expected to unveil its plans for the controversial levy in December, when Noonan will deliver his budget. The property tax will replace the EUR100 (USD127) household charge, introduced at the start of this year as an interim measure. The charge has been heavily criticized, with several members of parliament urging a boycott.

The IMF's latest Article IV review of Ireland's economy concluded that a value-based property tax would provide a progressive and stable source of revenue. It argued that the tax should be set at a "suitably high level", designed to maximize such benefits. A 0.5% rate found the greatest favour amongst IMF review staff.

The government is committed, under the terms of its bailout with the IMF and European Union (EU), 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. It is now thought that the tax will be payable from July 1 next year.

Responding to the IMF's recommendations, Noonan told reporters that he thought the level was too high. Although a 0.5% levy could bring in roughly EUR1bn (USD1.3bn), Noonan is not prepared to propose such a rate to the government. He added that he sees the suggestion as simply advice - advice that the government will not be following.

TAGS: Finance | tax | investment | real-estate investment | Ireland | property tax | real-estate | International Monetary Fund (IMF) | tax rates | European Union (EU) | Europe

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