Finance (Local Property Tax) Bill 2012: Second Stage
Question proposed: "That the Bill be now read a Second Time."
The introduction of the local property tax will serve a dual function. First, it will provide a stable funding base for the local authority sector, incorporating appropriate elements of local authority responsibility. It will strongly reinforce local democratic decision-making and encourage greater efficiency by local authorities on behalf of their electorates. Second, it will deliver significant structural reform through broadening the base for taxation in a manner that does not directly impact on employment and thereby contribute significantly to meeting the immediate financial requirements of the EU-IMF programme.
Before I get to the detailed sections of the Bill, I wish to respond to some of the issues and concerns raised in the other House and elsewhere since publication of this legislation. There has been some criticism of the decision to give the Revenue Commissioners responsibility for the collection of the local property tax. I do not intend to apologise for giving the Revenue Commissioners responsibility for administering the local property tax. They have vast experience in the legislation, systems and collection and enforcement procedures necessary for the smooth running of the tax system. It has been claimed that the deferral system and the 4% simple interest rate will force people to sell their homes. This is a blatant exaggeration. The rate of tax is 0.18%. A deferral for 20 years would result in an outstanding charge of just 5.1% of the value of the property - 3.6% representing 20 years of deferred tax at 0.18% and 1.512% representing the accumulated interest. The level of progressivity and equity of the local property tax among those on the average industrial wage and those on €200,000 per year has been criticised. If such persons are liable for this tax, they will pay the same amounts if they have residential properties which are of the same value. In general, people on higher incomes will have higher value properties. A higher rate of this tax is being applied to properties valued over €1 million.
The local property tax has been referred to as being anti-Dublin. The market values of residential properties vary considerably throughout the country. The market value of a residential property is related to the characteristics of the building itself, the site on which it is located and the characteristics and amenities of the neighbourhood. There will be a relationship between the market value of a house and benefits to the owner in terms of enjoyment of the amenity value of the property. Owners of more valuable properties would pay more under a market value-based assessment scheme. Taxable values based on market valuations would generally be higher in urban than in rural areas. This is equitable to the extent that market value provides a measure of the value of a residential property to the owner, particularly in terms of its proximity to places of work and local amenities and facilities.
In relation to mortgage arrears, the Government is conscious of the difficulty some homeowners are experiencing in meeting their mortgage obligations. The main focus of attention is on those mortgage holders who are experiencing genuine difficulties in meeting their commitments in respect of their homes. A range of measures is being advanced in this area, including personal insolvency reform, the implementation of the mortgage to rent initiative, the engagement with mortgage lenders on the development and implementation by them of mortgage arrears resolution strategies and the provision of a mortgage advisory function. Each family in mortgage arrears faces unique difficulties. We must have a range of solutions which can be adapted to resolve each family's difficulties. A system of voluntary deferral arrangements focused on particular categories of householders will be implemented to address cases where there is an inability to pay the local property tax under specific conditions.
The lack of a relief against the local property tax for people who paid large amounts of stamp duty has been mentioned. The payment of a large amount of stamp duty at the height of the property boom was not recommended by the Thornhill group as a basis for relief, as it does not have regard to ability to pay. In making its recommendation the group was influenced by several considerations in regard to those who had paid large sums of stamp duty during the property boom, including the fact that the impact of such a relief on taxpayers would not be targeted on those in need. The system of deferrals provided for in the property tax is more closely targeted at ability to pay than any exemption for stamp duty paid would be.
The local property tax will apply to local authority houses. I note that domestic rates are charged on local authority properties in Northern Ireland and collected through the rental system. The Thornhill group considered whether local authorities should be liable as owners. Notwithstanding the economic arguments in favour of that approach, the group, on balance, did not favour creating a circular flow of payments. The Government's view is that issues of proportionality could arise if owners and local authority tenants were treated differently. While reform of differential rents would contribute to horizontal equity between local authority tenants and low income owners, anomalies could arise in cases where local authorities owned and rented out properties in otherwise privately owned housing estates. The tenants in such properties would not be subject to the local property tax, whereas the owners of other properties in the same estate would have to pay it.
In such cases, the gross income thresholds may be increased by 80% of the mortgage interest payments. A deferral option, for qualifying cases, will apply until the end of 2017 and will assist individuals currently in mortgage distress.
Where a liable person no longer satisfies the necessary conditions, amounts deferred prior to the date on which eligibility ceased may continue to be deferred. Where the spouse or partner of a liable person dies and the income thresholds for a deferral are no longer satisfied, deferral may continue until the next valuation date. Where a property is transferred by way of gift or inheritance, the Revenue Commissioners may allow an existing deferral to continue if the recipient of the gift or inheritance would in his or her own right be eligible for and makes a valid claim for a deferral. Full or partial payments may be made against deferred amounts. Deferred amounts become payable on receipt of windfall gains such as an inheritance. Simple interest of 4% per annum will apply to any amounts deferred.
Part 13, made up of sections 140 to 144, includes the standard provisions with regard to the powers of the Revenue Commissioners, including the right of Revenue officials to make inquiries in relation to property and its ownership and inspection of relevant records. Part 14, comprising section 145 to 150, deals with offences and penalties. A maximum penalty of €3,000 applies for failure to submit a true and complete return. A similar penalty applies for knowingly making a false statement for the purpose of obtaining any advantage to which the person is not entitled. Interest on late payment of the tax is at the standard Revenue rate of 8% per annum.
Part 15, covering sections 151 to 153, provides that certain persons and bodies will be obliged to supply information on residential properties to the Revenue Commissioners when required to do so, including providers of gas and electricity, An Post, the Minister for Social Protection, the Minister for Agriculture, Food and the Marine and local authorities. The information from these bodies will assist in compiling the register of residential properties.
Part 16, comprising sections 154 to 156, contains provisions in regard to the household charge. The household charge will no longer be payable from 1 January 2013. Arrears paid before 30 April 2013 will be capped at €130. Amounts outstanding after 1 July 2013 will be increased to €200 and added to local property tax due on the property, to be collected by the Revenue Commissioners. This is an important assurance for people who paid the household charge that non-payment of the charge will not be ignored and that arrears will be collected.
Part 17, covering sections 157 to 159, contains various supplementary provisions, including a provision for payment of local property tax by the Minister for Finance into the Local Government Fund from 2014.
I hope that the Senators have found this explanation of the measures in the Finance (Local Property Tax) Bill 2012 useful. I would like to reiterate that the Government sees the necessary introduction of this tax as an opportunity for very real political reform at local government level. A small number of amendments are being considered for introduction to the Finance Bill 2013. I will, of course, also give consideration to any constructive suggestions put forward during our debate today. I commend the Bill to the House.
I understand most of the various bodies that comprise the voluntary and co-operative sector in respect of the provision of social housing would have been approved for charitable status by the Revenue Commissioners. Indeed, such bodies must have such charitable status before they can be approved by the Department of the Environment, Community and Local Government for funding to be used in the provision of social housing.
The Government is aware of the important role played by the approved housing bodies in the provision of housing for those who face difficulty in living in our communities. To the extent that such groups are engaged in the provision of special needs housing, they should be eligible for the exemption for such housing, which is provided for in the Bill. However, such groups also provide general needs housing in the same way as a local authority provides such housing. Most of their funding is provided by local authorities, the tenants are taken from local authority waiting lists and a similar type of differential rents system applies. Depending on the level of local authority funding provided, some voluntary bodies may have flexibility to provide housing for those not eligible for local authority housing. To provide for a blanket exemption for such bodies would obviously be inequitable vis-à-vis local authority tenants. For this reason, the Government decided not to accept the recommendation in the Thornhill report that all charitable bodies should be exempt but to restrict the exemption to those properties that are used to provide special needs accommodation to persons who, for reasons of old age, physical or mental disability, or other cause, need special accommodation and support to enable them to live in the community.
The Revenue Commissioners, who will be responsible for the administration of the local property tax, will publish guidelines to enable liable persons to complete the property tax return and, in particular, to determine whether their property is an exempt property, including whether it qualifies for an exemption on the grounds that the property is used solely or primarily to provide special needs accommodation. However, I acknowledge that Government policy places significant emphasis on the approved housing body sector as an important part of social housing supply in the future. The Government will actively engage with approved housing bodies to ensure the local property tax does not impact on their ability to deliver housing units.
In addition to the preceding commitments, I have also previously indicated my willingness to review the provisions of the Bill in regard to two other areas. There have been some requests for amendments to exempt those residential properties affected by pyrite or pyritic heave. The Government is conscious of the difficulties faced by owners of such properties and I have previously advised that I will address this matter in the Finance Bill 2013.
Under section 11(3) of the Bill, the personal representatives of a deceased person who was a liable person is also a liable person where the estate includes a residential property. The reason for making a personal representative a liable person is to prevent the avoidance of the payment of local property tax by means of unnecessarily delaying the distribution of the estate and the transfer of a property to the person who would become the liable person in respect of the property. However, I appreciate it might not always be possible for the personal representatives to fund the payment of local property tax, whether the tax was owed by the deceased person or by the personal representatives in respect of the period following death. Addressing this difficulty is not straightforward given the variety of complex circumstances that can pertain to the administration of an estate. I have already mentioned that my officials will be examining this issue with a view to formulating an appropriate amendment via the Finance Bill.
I will now outline the detail of sections of the Bill. Part 1, which comprises sections 1 and 2, contains the Short Title, commencement provisions and interpretation sections. Part 2, comprising sections 3 to 10, provides for definitions of "relevant residential property", on which the tax will be chargeable, and that certain properties will be regarded as not relevant residential properties and, therefore, exempt from the tax.
Part 3, made up of sections 11 and 12, contains the rules regarding liable persons. In general, the liable person will be the person who is the owner of the property. A person with a leasehold interest is liable if the term of the lease can equal or exceed 20 years, or where a person has a life interest in the property. In the case of property held under trust, the trustees and beneficiaries are jointly and severally liable for the tax. Where the property is occupied rent-free on a long-term basis but there is no proof of ownership or documentation establishing the interest that the occupier holds in the property, the occupier may be regarded as the liable person.
Part 4, comprising sections 13 to 21, contains the charging provisions of the Bill. The first valuation date will be 1 May 2013 and the valuation on this date will be valid from 2013 to 2016 inclusive. Thereafter, the valuation date that will apply will be 1 November in the year preceding each three-year period; so the valuation date for the period 2017 to 2019 will be 1 November 2016. Where the liable person changes between valuation dates - that is, where the property changes hands - the chargeable value will continue to apply to the new liable person.
Part 5, which comprises sections 22 to 26, contains the standard care and management provisions for Revenue, including the four year time limit on repayments, delegation of functions to authorised officers and allowing for electronic means of return. Part 6, covering sections 27 to 32, deals with the register of properties to be maintained by Revenue, including the obligation of liable persons to register with the Revenue Commissioners by making a return.
Part 7, made up of sections 33 to 46, relates to the making of returns of local property tax to the Revenue Commissioners. As indicated, the Bill provides for a self-assessment system and allows for electronic submission of returns by owners of multiple properties and for submission of returns by agents and lessees. This part will also provide that a failure to submit a local property tax return will lead to a surcharge for late submission of income tax and corporation tax returns.
Part 8, comprising sections 47 to 60, deals with Revenue estimates and assessments. Revenue will make an estimate of the amount of local property tax due in respect of a property, and will notify the liable person. Revenue may amend this assessment if it subsequently considers it to be excessive or insufficient. If a liable person does not submit a local property tax return containing a self-assessment of the local property tax payable, the Revenue estimate will become due and payable. Revenue assessments will be subject to the normal appeal procedures.
Part 9, comprised of sections 61 to 63, contains the usual appeal procedures for taxes under the care and management of the Revenue Commissioners. Part 10, which covers sections 64 to 118, contains provision for "deduction at source" of the local property tax from Irish wages, salaries and pensions, from certain payments made by the Department of Social Protection and from certain payments made by the Department of Agriculture, Food and the Marine. This part also provides that the "deduction at source" provisions may, by order of the Minister for Finance, be extended to cover payments made by other Government Departments or State bodies. Deduction at source from salary or other regular payments will probably be the most convenient method of payment of the local property tax. Where an employee opts to have the tax deducted from his or her salary, employers will be obliged to pay the tax to Revenue in the same way as income tax and PRSI is paid.
Part 11, comprising sections 119 to 129, includes the collection and enforcement provisions for the tax, including the due date for payment, the application of the collection and recovery provisions in the Taxes Consolidation Act 1997 to the local property tax, and provisions allowing for payment to be made to payment service providers. This part provides that any unpaid local property tax will continue to be a charge on property, and that unpaid tax will be payable on the sale of that property. It also provides that an individual will not receive a tax clearance certificate if he or she has not paid local property tax, unless the individual qualifies for a deferral.
Part 12, which includes sections 130 to 139, provides for deferral of payment of local property tax in the case of properties occupied as a sole or main residence. The income thresholds for a full deferral will be €15,000 for a single person and €25,000 for a couple, whether married persons, civil partners or cohabitants. A person may claim a deferral if their income will not, "as can reasonably be foreseen at the liability date" exceed these thresholds in that year. A deferral of up to 50% of the local property tax liability will be possible where the gross income of the liable person does not exceed €25,000 for a single person or €35,000 for married persons, civil partners or cohabitants. An increased income threshold applies in the case of properties occupied as a sole or main residence and subject to a mortgage.
I thank the Minister for his detailed explanation of the Bill. It will come as no surprise to the Minister to hear that Fianna Fáil opposes the introduction of the property tax on the basis that it is the wrong time to introduce it and it is the wrong type of property tax. With regard to the theory of broadening the tax base and looking at how a property tax can be equitably applied, I believe this should be done, although not at this time and for the many reasons outlined by the Minister.
The property tax, in terms of structure, is an anti-urban and, in particular, anti-Dublin tax. It is a value-based tax. I live in a three-bedroom terraced house. Many of my neighbours purchased their houses in 2007. In 2007, a three-bedroom terraced house in the area in which I live cost €580,000. Those who own those houses would be lucky to get €300,000 for them now. The situation in regard to mortgage arrears, in respect of which I will put questions to the Minister later, is progressively worsening. The Minister mentioned the Personal Insolvency Bill, aspects of which I welcome. What I really want to know - I put this question to the Minister on each occasion he comes to this House, where he is very welcome - is this: where are the mortgage arrears resolution strategies from our banks? I am not speaking about the people who will have to press the nuclear button under the Personal Insolvency Bill, which means that people will effectively lose their homes; rather, I am speaking about the people who are currently managing to make their mortgage repayments and the long-term measures needed to free up some of their income. If we were to do that first, I would then be willing to consider a site-value-type property tax.
Given the number of times the Minister and Government have renegotiated the Memorandum of Understanding, it is clear that a measure can be replaced with another of equal value. I agree in theory with the introduction of a property tax. However, I believe that in this regard the Government's timing is wrong due to the mortgage arrears situation, with more than one in four people in mortgage arrears of between 30 and 90 days. Approximately 4% of mortgages are in arrears of over two years. The situation is not getting any better, for many of the reasons of which the Minister and I are aware and which have been discussed in this House.
Yesterday I asked the Leader a question about local authority and voluntary housing. What contact has been made between the Department of Finance, the Department of the Environment, Community and Local Government and the local authorities? Fingal County Council agreed its budget yesterday. The cost next year to Fingal County Council in respect of the provision of 5,079 social houses will be €1.6 million. When my Fianna Fáil colleagues asked the officials of that council where that money would come from, they could not answer. They also could not say whether there had been any contact between the council and the Department of Finance. Colleagues who raised the same issue with Dublin City Council also got no answer from that council's officials. It is important we get this right.
The Minister stated that he proposes to engage with the voluntary housing sector. How are voluntary housing providers such as the North and East Housing Association Limited, the Iveagh Trust, Clúid and so on to pay these bills? I welcome the publication of the Thornhill report, which recommends that local authorities not be subject to the property tax because it would be a circular financial transaction. This is supposed to be a tax that will fund local authorities. How are local authorities to pay this tax? If they are required to pay it they will have to either increase rents or reduce service provision to citizens. This issue needs to be addressed. Fianna Fáil has tabled a series of amendments on Report Stage, at which point we can go through the specifics in this regard.
While I do not welcome this Bill in the context of its introducing a property tax, I thank the Minister for the important exemption from payment of this tax of people whose homes are affected by pyrite. I commend the Minister on that, as I commended the Minister for the Environment, Community and Local Government, Deputy Hogan, yesterday. It is a growing problem. My colleagues in the Seanad are sick to death hearing me raise it in this House, which I have done many times during the past eight or nine months. While I do not welcome the property tax, the exemption in respect of people whose homes are affected by pyrite is welcome.
There is another issue of concern for people who, like me, are living in managed housing estates or apartments and are paying management fees of up to €1,900 per annum. Such people derive little or no service from their local authority. They pay their own insurance, contribute to the sinking fund for their estate and pay for all services in the estate, including bin collection. These people are liable for this property tax. Many of the apartments in which these people live - I discussed this issue earlier with Senator Hayden - are of little value and are worth far less than what was paid for them.
There is an opportunity here. We must also consider those people who are paying substantial fees. If I may say so, the Minister answered well on the matter of deferral and the interest he will charge for that. I do not know who he is accusing of scaremongering on that point but in his budget announcement it was clear what was meant. It is not a punitive charge. What concerns me more is the strict nature of the criteria required to obtain a deferral. These are complex and one would have to be earning almost nothing to qualify. This may certainly assist pensioners, and I can see where the Minister is going in that regard, but I refer to households which used to have two incomes, now have one and are already in mortgage arrears, in a worsening situation. I do not see how this property tax will help that situation but I can see where it will make it worse. If people get a letter from Revenue, or from the Minister's neighbours or friends - he has passed collection of this to Revenue which, in my view, he should not have - in many instances they will have to decide whether they will pay Revenue the €500 or €600 a year, or pay their bank. I know who I would pay, namely, Revenue. The crux here is the long-term mortgage arrears resolution measures. I know it is not easy. I have asked the Minister a question on this before which is on the record of the House. The Central Bank received mortgage arrears resolution measures on 30 September. We have seen no suite of products but we have heard AIB state it would contact 18,000 customers a month. That is fine and I welcome it. This is the nut that can be cracked and if we can do that we can look forward to a future situation in which we can properly introduce a property tax.
I know this will be done in any case and nothing I say in the Chamber tonight will change that. The Minister rammed the legislation through the Dáil, with 88 amendments in three hours and using a guillotine. It went through that House and much the same will happen in this one. The Bill will be passed, will become law and everybody in Dublin will be paying probably twice or two and a half times the average payment in the rest of the country. Many of these people do not even derive a service from the local authorities, are in negative equity and cannot pay. It is the wrong time and it is the wrong tax. We will discuss it in more detail tomorrow, in the specific amendments. I thank the Minister for his presentation.
The Minister is welcome. Nobody welcomes a new tax, however, and I am sure the Minister would prefer not to have introduced this one, had there had been other options. One must compare the option of a property tax that would raise €500 million versus an increase in income tax. The figures I received from the Department on the Minister's budget submission show that income tax is expected to bring in €15.75 billion next year. Listening to representatives from the OECD and the Irish Taxation Institute, it is clear we have gone to the limit in regard to income tax. There is no scope to go further. That leaves the option to introduce a new property tax, which I have described as the re-introduction of rates that were dissolved in the 1970s. It may be unpleasant but there are few other options.
I refer to the anti-urban notion, that this is a Dublin tax.
This is not a Dublin tax, it is a national tax. People in Dublin will pay more.
It is an anti-Dublin tax.
Why will they pay more? It is because the value of their house is worth more. It goes without saying that anybody who lives in the countryside-----
It should be a site value tax.
-----has always had higher running costs just to live there. I speak as one who lives in the country and has always supported rural housing. Everybody who buys or builds a house in the countryside knows and accepts this is the case. There is no bus system to bring children to school. If one has children one does not have the option to keep them at home when they go to university. One has to send them away, which costs more. That is the reality. It is true that houses in the countryside tend to be larger but that is because the cost per site in Dublin is much more expensive.
I welcome that this is a method of funding local authorities. Something that has gone more or less unnoticed is the plus or minus 15% for local authority members. Some local authority members come up with the very best of schemes for projects in their area but have no funding stream. If there is a good funding stream, or a good project that requires funding, local authority members can now put their hands up and vote up to a maximum of 15% increase in how a project can be funded. That is welcome. It also enhances the role of local authority members in being abler to ensure that these valuable projects, for which people find it difficult to get funding, can be funded.
I spoke to the Minister on another point, which I believe is very important for people. The measure is effectively fixed for three years following the declaration by people of house valuation for the property tax. There will be certainty now in that regard. The statistics I have been given show that some 75% of homes in the State have a valuation of between €150,000 and €200,000. Taking as a calculation the mid-point of €175,000 the property tax at the rate of 0.18% will cost €315 for approximately 70% or 75% of people who will pay the tax. These figures have been available for some time and the matter has been clearly explained. The average collection from the household charge was €100; if that had been trebled the average would have been €300. We were also given those figures.
There has been much talk about people who cannot pay. I doubt if there is anybody in this Chamber who does not know or accept there are people in very difficult financial circumstances. However, if a person cannot pay, there is a deferral structure in place, which I welcome. It is a good thing. If a person cannot pay his or her motor tax that does not mean he or she should not pay it. Whether we like it or not, and contrary to what is said by some political parties, the vast majority of people in this State pay their taxes, which is right and proper. If taxes are not paid all the structures stop and fall. The figures for household charge payment have gone over 70%. I always maintained that when that figure is reached and approaches the 80% mark it is getting close to the threshold where people will pay. I use the example of the television licence for which some 15% to 20% of people do not pay. This is not paid for in the same way as the household charge. If one has a television one pays the charge which is €170, by comparison with the household charge of €100. That price is irrespective of the area or size of the house and the amount of earnings going into that house.
I will touch on a number of other issues. The Revenue Commissioners collect taxes and do their job well. People may not like what they do but I refer again to those people who choose not to pay other taxes - without collection of taxes the structure will fall. We need taxes to run the country. Following the introduction of the household charge which started slowly and began to build, I heard many people ask, "What about those who are choosing not to pay? Why should the same people who always pay their taxes pay while those who do not effectively get away with it?" I am glad that for those who chose not to pay the household charge the amount will be rolled forward into the property tax and the charge will remain. It is the right thing to do in regard to those who have paid, a figure that is now over 70%.
There is a certain amount of hypocrisy about this tax. Fianna Fáil negotiated the position for €540 million in the memorandum of understanding.
What is proposed here is €40 million less than that. I thought the Fianna Fáil Party was going in the correct direction in that it had stated that it was going to do what was right. On this occasion, however, it has reverted to type as a result of the bounce it got in the polls. Stating that one is against the property tax is the populist thing to do. I am disappointed by Fianna Fáil reverting to type but that is what it has done.
Sinn Féin's position on this matter is completely hypocritical. In Northern Ireland, people are obliged to pay a multiple of what it is proposed people in this jurisdiction should pay. I accept that some additional services are provided out of the money paid by our neighbours in the North. I am trying to be fair about this issue. Some 16 or 17 OECD countries have property taxes. A property tax is a wealth tax. If one examines the figures provided by the Department of Finance in respect of the budget, one will discover that capital gains tax and capital gains tax bring in approximately €750 million. The property tax will bring in €500 million. This means that a total of €1.25 billion will be collected in wealth taxes.
I will not be using all of the time available to me because I am losing my voice. Some people might say that is no harm.
I welcome the Minister. I wish to make two points, one of which is general in nature while the other is specific. A property tax does not sit easy with people, in fact no tax does so. However, I welcome the way the property tax is structured. I also welcome the way in which the Minister outlined it to the House. I will be supporting the Bill because I cannot, with easy conscience, argue against specific cuts to social welfare and then argue against this measure, which is designed to raise revenue. I am very cognisant of the fact that revenue must be raised. I would prefer it if we were not obliged to introduce any further taxes but I am of the view that the approach the Minister is taking in respect of this tax is fair.
Before making the specific point to which I have already alluded, I wish to make a declaration of interest in that I am a director of the Irish Girl Guides Trust Corporation Limited. It was in the latter role that I became aware of the issue I wish to raise. The Irish Girl Guides Trust - like many other children's and youth organisations - holds properties it uses for activities relating to children's and youth activities. These are held on a non-residential and non-commercial basis. Girl guides would go and spend weekends away at the type of properties to which I refer. They are charged very low fees for their stay because no profits are made. Most of the properties in question are in need of serious investment and repair. The property tax could place many of them in a precarious position.
I have tabled an amendment for Committee Stage in respect of this matter but I wanted to take the opportunity to raise it now in order that the Minister might have time to consider it. I can supply to him a list of the properties owned by the Irish Girl Guides Trust Corporation Limited. I am aware that other children's and youth organisations will be in a similar situation to the Irish Girl Guides. The type of properties to which I refer were exempted from the household charge.
The exemption in respect of them will cross over into this legislation.
That is very good news.
I also wish to refer to the position of housing associations but I have no doubt that Senator Hayden will discuss the issue in detail. I will leave it to her to outline the position in that regard to the Minister.
I welcome the Minister. One of the matters with which I wish to deal is whether this is a local property tax or just a property tax. To provide some background and as most Senators are aware, there were property taxes in this country in the 1970s. From the 1960s onward, however, there was a trend towards sucking all responsibility at local level into what over the years has become Department of the Environment, Community and Local Government. This was not just done by Fianna Fáil Governments but a Fine Gael-Labour Party coalition actually removed local domestic rates in the 1970s. One of the difficulties with such rates in the 1970s was that they were a specifically urban charge and did not apply in rural areas. I remind Senators that income tax did not apply to a large part of the urban community in the 1970s either. There is a bad history with regard to local taxation in this country. The impact of this is that there is no real relationship between local services and taxation. This is because we levy taxation and make provision for local services centrally.
My second point is that there has been too much control at local level and this is because funding for local authorities comes from central government. The worst impact in this regard was felt during the era of the Celtic tiger, when poorer local authorities which could not raise money by levying commercial rates did so by imposing levies on developers. They also granted planning permissions in respect of areas in which such permissions should never have been forthcoming. We are dealing with the consequences of this today. What I am stating here, in very broad terms, is that I favour local taxation for local service provision. There are many benefits to be gained in this regard, particularly in the context of local democracy.
There are a number of other issues which arise. Successive commissions on taxation have advocated a broadening of the tax base. Our tax base has been acknowledged as being too narrow. Even if the troika had never said so, the reality is that the imposition of a property tax should have been considered before now. The fact remains that our experiences in attempting to deal with property taxes have, to date, been extremely poor. Some 75% of the income from the most recent property tax came from the greater Dublin area. I take issue, therefore, with his contention that this is not an urban tax. Richer people obviously own more valuable properties. As a result, they will pay more money in property tax. It is more difficult to hide a building or a parcel of land than it is to hide money in foreign tax shelters, etc. The property tax is, therefore, a better way of ensuring that we are levying moneys from those who can afford to pay.
I would urge caution in respect of a number of issues. The first of these relates to the need to be aware of the unintended consequences of the measure before the House. There has been a slight recovery in the property market recently but the reality is that everyone is suffering as a result of the fact that said market is actually defunct. I do not just refer here to couples with three children who are trapped in two-bed apartments and who need to moved, I am talking about the fact that any healthy economy needs a functioning property market. The Minister must be conscious of the fact that this measure may have a significant impact in the context of damping down an recovery in the property market.
The second issue which arises in this regard relates to the need to take account of the effect of this measure on aspects of the market. I refer, in particular, to the private rented sector. As I have indicated on many previous occasions, one in five families live in houses or apartments that are rented from landlords. It is a well known fact that more of these properties - in which real people live - are in negative equity and are distressed than is the case with properties in any other sector. I am of the view that a number of the measures introduced in or as a result of the budget - I include the Bill before the House in this regard - are going to have a negative impact on this sector of the market. The Minister must be aware of that fact.
On the main aspects of the Bill, questions arise in the context of the urban-rural issue. This is an important matter and no one should be fobbed off in respect of it. Property values in Dublin, Cork and Galway are higher than in other parts of the country. Ordinary families in these cities are obliged to pay out more of their disposable income in respect of maintaining their homes. These people could go to the cinema and do many other things if they were not obliged to spend their money keeping a roof over their heads. I do not agree that because people own properties which are more valuable, this should have any impact whatsoever on the services they receive at local level. This is a matter which will have to be addressed, perhaps not today or tomorrow but certainly in time.
As Senator Darragh O'Brien stated, no allowance has been made for the fact that many people live in apartments which they bought during the boom and in respect of which they are paying significant service charges. These individuals are actually already paying for some of the services which local authorities are, in theory, supposed to be supplying. I am surprised that more of those who live in apartments do not request that common areas be taken into charge by their local authorities.
Senator van Turnhout referred to the impact of the Bill on local authorities and voluntary housing associations. I am at a loss when it comes to gauging how the latter are going to be affected. I accept that the legislation refers to the chargeable value and that the word "unencumbered" is used. Research has been carried out by the Department of the Environment, Community and Local Government - I am sure the Minister's Department has carried out such research - by Indecon and others which indicates that, as a result of a number of factors, it is practically impossible to determine the value of local authority properties. The factors to which I refer include tenants' security of tenure, successor tenancy rights and, in the past, the entitlement to purchase.
This will require serious consideration.
As the Minister is well aware, the Government is placing a significant burden on the voluntary housing association sector to house people who are in most need because we no longer have local authority housing provision. That is not the way we see ourselves providing housing, certainly in the short term, given the financial difficulties in which we find ourselves. There is no doubt in my mind that Respond!, the largest housing association in the country with 6,000 units, and Clúid which has a significant number of units not far off that figure, are not in a position to come up with this money. It is facetious to say they can turn around and get it from their tenants, some of whom are among the poorest people in the country. Some measure needs to be found to deal with this issue, both for local authorities and the voluntary housing association sector.
The stamp duty issue is very difficult. I am a solicitor and was in professional practice a number of years ago. I am very conscious of the fact that people paid very significant prices for property during the Celtic tiger years. The bottom line is that stamp duty is a tax, yet we are asking the people concerned to pay once again. I ask the Minister to give serious consideration to alleviating the distress of those who paid very significant amounts of money to the Exchequer in stamp duty. I understand local charges are a better way and I ask him to take this into account in stamp duty legislation. We must reduce stamp duty to a nominal level, given that we are imposing local taxes.
We are a nation of home owners. I do not want to bore Members with statistics, but significant research by people such as Professor Tony Fahey and the ESRI shows that older people suffer less in old age in terms of poverty because they own their own homes. It is a fact that poor people are more asset wealthy than their incomes would suggest. Home ownership has been a serious income redistribution factor. I know the Minister has made allowances in the legislation for deferral and so on, but my experience of dealing with older people is that they are very cautious, very worried about the future and providing for themselves if they need care and so on. I am very concerned - I ask the Minister to keep this under review - about the impact this measure will have on them.
In general, a property tax is necessary. I take on board the figure of 15% allowable either way, while there is provision to pay into the local government fund an amount equivalent to local property tax. I live in Dún Laoghaire. Will the property tax raised there come back to it? How much of it will come back to it? What is the relationship between how much I will pay and how much my local authority will receive? I do not think 15% one way or the other will make an essential difference.
I welcome the Minister for Finance, Deputy Michael Noonan. I compliment Senator Aideen Hayden on her splendid analytic speech. She made a number of the points I would have made. Underneath the velvet tones of the Minister's speech, there was steely language. He stated: "There will be a relationship between the market value of a house and benefits to the owner in terms of enjoyment of the amenity value of the property" and "This is equitable to the extent that market value provides a measure of the value of a residential property to the owner, particularly in terms of its proximity to places of work and local amenities and facilities". Home is a central element of Irish culture. We value and treasure our homes, not just for their market value, which is variable. It seems there is callousness in what the Minister said.
There are some aspects of the content of the Bill that I welcome. It is a very good move that residential accommodation for people with special needs will be exempt. I am also very pleased that the Minister has taken on board the issue of pyritous materials first debated in the Seanad when I raised the issue. It seemed to be totally unjust to extract money from people who could not live in their own houses in certain circumstances. Certainly, their value has gone down the drain.
I wonder about the idea of making executors liable. This may have the effect of deterring people from becoming executors, if they believe they are putting themselves in danger.
It is welcome that the Minister has indicated that he is prepared to listen to constructive suggestions. It is important that we have the Minister for Finance, a very busy man with an onerous job, in the Seanad.
How does one assess the value of a house? It is very difficult these days, particularly outside newly built estates where the houses are all the same. They tend to change over time as people modify them or add an extension and so forth. There is also the question of the price the house commands on the date of its sale, particularly if it is an individual house. For example, a house that was sold through an advertisement or at auction, at which there was only one bidder might be valued at €500,000. If there are two bidders, it can reach astonishing levels. Which is the real value and how will it be assessed? Of course, there will be annual changes in the value of currency and so on. I accept that a property tax is a good idea if the money goes to the local authorities, but even then, in many local authorities and certainly in Dublin, many of the services that used to be provided by local authorities are no longer provided by them because they have been privatised, for example, bin collection services. The private companies have made a complete bags of that service. Water services will be privatised. Therefore, what services will be provided by local authorities? We are entitled to a bang for our buck and it will be a high one. These questions needs to be answered.
The principal reason I wish to speak to the Bill is to raise the issue of listed buildings. It is very important that we respect our heritage. If one looks at the very small number of significant houses on their own parkland such as Birr Castle, Glin Castle, Castle Leslie and Westport House, they will go if they are hit by the property tax, which would be a very serious blow. There will be no point in crying after they have been detenanted and the roofs have fallen off. I also must declare a direct and personal interest in listed buildings. In 1978 I bought a semi-derelict house in North Great George's Street which was then a slum area, with the lower end unravelled. In June 1979 I started the North Great George's Street Preservation Society which is now under the chairmanship of Ms Muireann Noonan, an adornment to the clan, although she spells her name slightly differently. Under her guidance, we won the national pride of place competition. It was an extraordinary change from being a tenement area of semi-derelict houses. The James Joyce Centre, No. 35, which has been assisted recently by the Government has become a very significant tourist attraction. Our visitor numbers are up 10% this year in the middle of the financial fire storm. During the 35 years I have lived in the house I restored it at my own expenses and did one room a year, which is what I was able to afford. That was good because it meant the adventure and excitement of restoration continued over that period and at the end of a year I had a new achievement. The last room was done about three years ago as a result of the fact that I had made a donation of all my papers to the National Library of Ireland, which freed up the room in which I had dispersed them all over the place. I have spent well over €1 million, possibly €2 million, during the years. It is amazing the way it mounts up. One operation alone cost me nearly €300,000.
I was glad to pay it. I provided employment. I restored a building that was at risk. It seems we are travelling backwards in this country. I have instanced various things such as evictions, soup kitchens and so on but now we have what one could say is rack-renting. If the unfortunate peasants dared to improve their holdings in the old days, they were given a slap by the landlord and charged for the improvements.
I bought my house in 1978 for the price a three or four bed-roomed semi-detached house in the suburbs at the time. How do I value it now given the money I have spent on it? Do I value it at the equivalent of that or with all the improvements I have made to it? I might be able to survive in this respect but there are people living on my street who will not. I dread to see that beautiful street sliding back into dereliction.
There are other considerations as well. For example, many people have let out parts of their houses. I have put in a luxury flat in the basement of my house, which has stabilised the house and I paid the property tax on both parts, because one had to do so. I assume the same requirement will apply to the payment of the property tax. That might bring me in underneath the threshold. I suggested to my neighbours that we get together and decide what are the appropriate valuations not to cheat the system but rather to establish what is the correct valuation. It is difficult to establish that with these houses as they are all different. Some of them are two-bay and some are three-bay. Around the corner in Mountjoy Square two houses, one in good order and the other not in good in order, were sold together for €670,000 and dividing that figure by two, perhaps the value of my house will come in under €1 million.
It is almost shameful to make any kind of special case, particularly when we have just been dealing with carers. I will do everything I can to pay whatever tax is exacted from me, and I know my neighbours will as well, but it would be a real shame if, in pursuit of some kind of fiscal rectitude, we destroyed our heritage. This is a savage Bill, let nobody make any mistake about that. The household tax was not collected by the Revenue Commissioners and non-payment of it was not a bar to membership of either House but because a tax clearance certificate will not be issued unless the property tax is paid, it means that the kind of protest in which some of our colleagues in the other House engaged will be completely impossible, and that poses certain questions.
I welcome the Minister. He has a very keen mind and I hope he will take on board some of the things I said. I apologise if what I said appears to be selfish. I am not thinking only of myself. I think in particular of the work that was done, which was very unpopular, by people like Desmond Guinness in preserving our heritage. All the glorious work in this Chamber is not an expression of an alien culture. This was done by Michael Stapleton, whose two sons went to Clongowes Wood College in the 18th century. This is Irish craftsmanship and it is unique and distinctive. I know a little bit about plasterwork and I identified the workmanship of the ceiling.
The Senator is way over his time.
It is wonderful to think that a large section of that ceiling was restored by young people. I could not tell the difference. Those people have the talent. The plasterwork of the 18th century in Ireland is distinctive, different and, in my opinion, better than the comparable plasterwork in London, Edinburgh or Bath. We should be proud of our heritage.
I wish to share my time with Senator Noone.
The property tax was well flagged and we knew it would be introduced. It is part of our obligation under the EU-IMF programme.
Yes it was. As part of the memorandum of understanding between the Government and the troika, a commitment was given to introduce tax in this budget.
Senator Clune to continue without interruption.
That condition has been there since 2010 and we are now implementing it. It is a positive measure in that we will have a more sustainable tax base in the future. We can look back on how spending increased from 2002 to 2007 and beyond that. When the bottom fell out of the property market we were dependent entirely on revenue from VAT and income tax and we know what a vulnerable position we were in. Putting a value-based property tax in place is important for a sustainable future. The OECD, the Commission on Taxation and the ESRI all agree that property tax is less harmful to the economy than any other forms of taxation, particularly taxation on income earned from employment. The objective is to keep tax on income as low as possible.
I am slightly concerned about the market valuation of city properties that will be considered in this respect. There has been considerable discussion about those living in higher valued properties, particularly in cities, although in many instances that may not be the case. The situation has evolved where the market reflects those properties have a higher value now. Many people will never realise the value of their property. Usually they will sell their property and move to a property within a similar market and the value of their property will not confer an advantage unless they opt for the rural resettlement programme. The value of their property will be an asset that could be used as collateral or an asset in their estate but most people do not realise the value of their property.
Thee is a concern about the rural-urban divide in this context. When I was a representative of Cork City Council and Cork County Council there was a debate on the large rate base for the county which was in around the city and much of that money was not spent where the local authority members perceived it should have been spent. It was spent in the western part of the county in developing tourism and roads - Cork being one of the largest counties.
As city dweller, I recognise that some of the taxation from this measure that will be raised locally will be used nationally. Some of it will have to be spent to support other issues such as developing tourism, beaches and marine areas which we like to visit. There is a great deal of concern in local authorities as they do not know what proportion of the tax collected in their area they will be allocated. I ask the Minister to convey that concern to the powers that be, particularly the Minister for the Environment, Heritage and Local Government, who will be making these decisions. This is an important consideration.
I wish to raise the issue of rents, which Senator Hayden mentioned. I note from the property website daft.ie and local reports that the value of a three-bedroomed, semi-detached house in my area varies from €375,000 to €400,000. That value will be passed on to tenants. A large number of mortgage holders are in distress and a third of landlords are in mortgage arrears. As a State we very much depend on rental property as a solution to our housing problems. There is a balance in that respect and that needs to be recognised.
I thank Senator Clune for sharing her time. I want to briefly concur with Senator Norris on what he said about heritage homes. In many cases the owners of these homes are perceived to be extremely wealthy but in many cases they are doing a huge favour to the State in that they restore and spend huge amounts of money on these properties. They maintain them by keeping them warm and in many instances that is a huge ongoing cost. They maintain the grounds and in many cases they allow their homes to be visited by members of the public who are interested in the architecture and culture of the homes. Very few houses fall into this category and it is a category that should perhaps be assisted in some way in terms of some sort of an allowance.
Ba mháith liom mo chuid ama a roinnt leis an Seanadóir Brian Ó Domhnaill.
The Minister made the point, and then attempted to rebut it, that the local property-----
On a point of order, with all due respect, I suggest that the Minister of State should stop using his phone and have the courtesy to listen to the speaker.
That is not a point of order.
Whatever it is, he should show some respect.
He is not unique in that.
Senator Byrne to continue without interruption.
The Minister stated that the local property tax has been referred to as being anti-Dublin and anti-urban.
Senator Byrne without interruption.
The Minister of State did not rebut the point. Average property sale prices in Meath East in 2012, according to propertypriceregister.ie puts Dunboyne in the top 13% nationwide. The same applies to Ratoath, Ashbourne and Stamullen, which are in the top 20% nationally. I have used the same figures as the Government from the residential property price register, the Thornhill report and the ESRI report. Those people are among the most heavily indebted in the country in terms of mortgages. Many paid significant amounts of stamp duty. They do not receive the services from local authorities they got in Dublin, if they used to live there, or the services they might get in an urban district council area. I refer to street cleaning or the council cutting grass in estates. Many feel they get no services at all. The average homeowner in Dunboyne or Ratoath will pay just under €500 a year in property tax. That is blatant unfairness when similar properties in Longford and Roscommon will pay one fifth of that sum. The Minister is overestimating the capacity of middle Ireland to take any more of the property tax. It is being rammed through the Dáil and Seanad without any consideration of how it will affect people. People will not pay the tax if they are not getting the services for it. They will not pay the tax if they are paying five times more than a similar property in a different county. It is simply unfair.
At least a site value tax, which Fianna Fáil signed up to but which we think is inappropriate in the current economic circumstances, is a different tax. Owners of zoned residential land, of which there is plenty in County Meath, would be liable for a site value tax but they are exempt from the property tax. There is nothing for homeowners struggling under the weight of heavy mortgages. A property tax is fair if it is a wealth tax but this is not a wealth tax because most of the people are in negative wealth. The value of their loan is higher than the value of their property. It is unfair and the Government is underestimating these people's resistance and their capacity to protest. They will have the capacity to protest when the bills start coming through. This is middle Ireland and they cannot take any more.
Tá mé buíoch den Seanadóir Byrne as ucht a chuid ama a roinnt liom. This property tax is simply coming at the wrong time. It is not taking into consideration the ability of individuals to pay. Members have spoken about those who paid stamp duty, particularly over the past ten years. Many people paid substantial sums over the past ten years amounting to €5 billion in total. People also paid local authority service charges up to €20,000 and they are not being taken into account. When 25% of all mortgage holders in the country are struggling to some extent to meet their mortgage repayments, it is madness to bring in a property tax. The troika is not forcing us to do it, despite what has been said. We can substitute one budgetary measure for another as long as we make meet the figure of €3.5 billion. The troika has continually made the point in meetings with Fianna Fáil.
I refer to the proposed exemptions. Fianna Fáil is totally opposed to the legislation as currently formulated because it will drive into poverty those with property and those struggling in the middle-income brackets. I heard the Minister for Finance, Deputy Noonan, say handing over powers to the Revenue Commissioner would be efficient. The Minister for the Environment, Community and Local Government, Deputy Hogan, said the same thing in the Dáil. It will effectively criminalise people. Fines are included in the Bill. The Revenue Commissioners have sweeping powers and will now be given those sweeping powers over homeowners and families. That will cause mayhem and havoc, particularly if a young person has a taxi business and seeks a tax clearance certificate to renew a licence. If the person has not paid the property tax and is incurring interest, the person will effectively be out of a job.
I have read the exemptions but it is not clear from the legislation or the explanatory memorandum whether NAMA properties are exempt. I assume they are not exempt as it would be crazy if NAMA properties were exempt while people in council houses must pay the tax.
Lifting moneys out of social welfare payments and payments from the Department of Agriculture, Food and the Marine is wrong. We spoke earlier about the Social Welfare Bill. This measure will cut social welfare payments further because it penalises people in receipt of them. An example concerns a four-bedroomed property sold at auction in a prime location in County Donegal for €40,000. What happens if owners living on the same street believe the sale value is €40,000 but Revenue catches up in five or six years' time, when the market recovers, and the owners are caught for additional taxation measures?
We must be clear where this is going. This will cause more difficulty than the Government anticipates. It will drive the property market into decline and have irrefutable consequences for the recovery of the country. I know that from speaking to people in the property business and people living in ordinary family homes. It is the wrong time for the measure.
I welcome the Minister of State to the House. I agree in principle with the application of property tax in Ireland because nearly all developed countries have some form of property tax. It is an internationally accepted way of funding local services. I will refer to the application of funding of local services later.
A local property tax is a steady source of income for local authorities in most countries. The introduction of a property tax is in compliance with the memorandum of understanding of the EU-IMF programme. It is part of a number of measures being brought forward by the Government. The introduction of the tax is an opportunity for real political reform at local level. Local property tax will provide a stable funding base for the local authority sector. It is an introduction and we must crawl before we walk. We must start somewhere and we cannot implement all the measures we would like on the first day. It is a reform at the level of local government. It will strongly reinforce local democracy and decision-making and encourage greater efficiency by local authorities on behalf of their electorates. Not everything will happen on the first day.
A notable feature of the Irish taxation system in recent decades has been the absence of a residential property tax. I will not go over the comments of Senator Hayden on the history of rates. The flat charge of €100, regardless of the value of the property, was a blunt instrument and an unfair application of property tax. It had to be implemented temporarily to try to redress the appalling financial situation. Any attempt to say this was a fair way of implementing a property tax is not real.
There is a property tax in the North of the island. I am usually shouted down when I say that because I am not comparing like with like. In addition to the tax levels in the North, there was a 10% increase this year. In Derry, a house worth €200,000 will pay £1,500 and a house worth €200,000 in Ireland will pay €315. We are comparing like with like because my analysis takes into consideration different services. Members have pointed out that some services are free while others are not.
Local authority houses also pay domestic rates in Northern Ireland. Members have said that, given the integration of local authority houses in private estates, there is a circulation of money. We can look at it that way but local authorities also rent houses in private estates. We have encouraged that to ensure integration of people in various estates.
It is also the case in apartment blocks, including very nice ones. This is appropriate because local authority tenants are entitled to the best of accommodation. It would be very unfair if a very low-income earner struggling to pay a mortgage and in negative equity was not funded while another individual, earning nearly the same amount, was funded. It is a question of fairness for all. The scope of the tax system must be as wide as possible in so far as it brings itself to bear on property owners. The Minister listed the exemptions. I will not repeat them; suffice it to say the provision on pyrite is very welcome. I thank the Minister of State therefor.
We cannot continue to spend money we have not got but we must get money somewhere. The budget is widening the tax base. Property remains the primary source of wealth in the country. Importantly, it is immobile and cannot be transferred out of the State. When raising income, one must ensure one protects jobs. Every other country in Europe has a property tax because property cannot be moved abroad. Ordinarily, cash can be transferred abroad with the press of a button on a computer. We now know what the deficit is. The property tax is a responsible way to raise money, particularly for local services. It is less harmful to the economy than certain other measures.
Senator Norris referred to protected houses. He mentioned Castle Leslie, a lovely castle and commercial property that hosts weddings, etc. The issue raised by the Senator would have to be considered seriously. One protected property is not equal to another. Those with protected properties who cannot afford to pay the tax will be able to avail of the deferral arrangement, at an annual interest rate of 4%.
Protected properties owned by local authorities should be subject to an exemption. Some could be very pricey. Former councillor Stanley Laing and I have been working hard in respect of Templeogue House in Dublin 6. It has a high value. There are other properties around the country owned by local authorities. Templeogue House is a protected structure and there are those who are trying to save it. There are other such buildings around the country in respect of which the tax burden should not be placed on local authorities.
I welcome the Minister of State, as always.
My ever-active research assistant took out the document issued by the IMF today at 5.10 p.m. In contains material in which we state we are introducing the tax on 1 July 2013 and that it will be collected centrally by the Revenue Commissioners and constitute an important and stable source of revenue. It will not be stable. Ireland and Spain illustrate this very well. If we had been collecting this tax five years ago, would the revenue be down by approximately 60%? The Department of Finance should get the house price market right when talking to the IMF so it will not print this kind of stuff in its reports.
On reading the report the IMF produced in September 2012, entitled "Ireland: Selected Issues", I noted an important finding in Table 1. Ireland is now a high-tax country.
The Minister of State has been lobbied by various groups stating it is not. Taxation accounts for 44% of GNP while the OECD average is 41.9%. We might have had a low-tax economy in the past but the property tax is on top of an already heavily taxed population. The myth that we have a low-tax economy should be debunked. It might be nice if one's corporation tax rate is 12.5% but the rest of us live in a high-tax country. The problem is that we are spending 55.5% of GNP whereas the OECD average is 45% and the OECD-EU average, including Scandinavia, is 47.6%.
The problem with the agreement in the documents of April 2011 is that we are increasing taxation in the period of the rescue from €34 billion to €44 billion while expenditure on the current side stays at approximately €48 billion. Too much of the adjustment has been achieved through taxation. The property tax continues in this vein in the belief that Ireland is a low-tax country. While the Minister of State does not believe this, many commentators do.
Rates are being reintroduced in an already heavily taxed country. They had been abolished on a revenue-neutral basis because all the other taxes rose. There were some benefits. The Minister of State is too young to recall that the de-roofed properties all along the west coast were the result of rates. Taking them off resulted in a higher standard of housing. The abolition of rates was not at the expense of the Department of Finance because the other taxes were raised.
With regard to the once-off taxes that people pay, the Minister was very tough. This matter must be taken into account. The fault with the once-off taxes, such as stamp duty, a property tax, is that the Department of Finance did not distinguish between once-off revenue and recurring revenue. It spent it all. It is dangerous to tell a person who paid tens of thousands of euro on stamp duty that he or she did not pay any property tax and is liable. It shows that when dealing with the Government, one never wins. If one pays taxes up front, it will be back to collect more. That must be addressed.
The problem with house prices in general is determining the actual value. All the Senators who have spoken have identified this issue. Our property prices are kept up by NAMA, by not putting 83,000 ghost estate houses on the market and by forbearance. If we freed up the market, the real price of property might be 30% lower. The ESRI or some such body should be asked the real value. Homeowners, who have already been subject to tax increases, now must pay the property tax because the Government is propping up the price of property in order to make banks look a bit better.
We must consider the issue of inability to pay. I refer in particular to older people. For them, the value is pretty much irrelevant. To use one of the phrases of the Minister for Finance, if a "deranged banker" buys a house near one, must one pay more property tax? There are plenty of deranged bankers. The phrase "deranged banker" was used by the Minister when he was addressing the finance committee.
What about the Dunboyne factor mentioned by Senator Byrne? There will be areas in which locals will not be able to live because spillover incomes from people moving in will ramp up their tax burden. The locals have not got any extra income. Perhaps the local shopkeeper or another individual may benefit a little but we must account for the fact that events that have nothing to do with an individual's ability to pay could dramatically increase his or her liability to the tax, irrespective of whether a deranged banker or another individual moves into a property down the road with an inflated price. There would be no increase in the income of anybody else but, under this tax, he or she would be liable.
Consider the circumstances if one must sell one's house to pay the tax. A house is not just the building one sells to pay the tax to the Revenue Commissioners; it is also a link to schools, neighbours, community facilities, the parish, the community and the GAA. This must be taken into account. There would be serious losses of welfare if people had to break all these connections. A house is not just a building on which the Revenue Commissioners put a value.
On what will local authorities spend the property tax revenue? Responsibility for roads has been transferred to the NRA, and responsibility for health to the HSE. Waste collection is now the responsibility of the private sector, responsibility for water services is being transferred to NewERA and responsibility for higher education grants is being transferred to SUSI - Lord between us and all harm. If local authorities are not doing anything, why should there be a tax to support them? I take into account the fact that residents mow their own grass and pay private companies to remove their rubbish. Many live in apartments with service charges. What exactly are local authorities supposed to do for us? The Government does not appear to believe in them. Since it has transferred so many functions from local authorities, why do they need additional tax revenue?
I thank the Minister of State for his patience.
Today I met two people from Northern Ireland here. One man lived close to Queen's University, which, as anyone who knows the area will be aware, is an affluent part of Belfast city. I asked him how much was his household charge and he said it was approximately £2,000. Another man in his company was from a rural part of County Armagh and he paid £700 for his three-bedroom bungalow. Last Saturday I asked my son-in-law, who has a house on the outskirts of Newry, and he said that his charge was £1,400. I noted these rates because I knew that this debate was coming up. The two guys whom I met today are public representatives from Northern Ireland. In view of the variation in charges in Northern Ireland, one can see it is not an anti-Dublin matter. I hope it will be a long time before we reach the high charges that exist in Northern Ireland.
I want to ask the Minister of State about section 122. What percentage of the take will be paid to the payment service provider? Will it receive commission? Will it work on a part-time basis? Will people be recruited from existing Revenue Commissioners and county council staff? Will a person who is unable to pay the full amount at once be provided with the option of paying by weekly or monthly instalments?
As I have not used up all of my allotted five minutes, may I share a minute with Senator Michael Mullins?
I thank the Senator. I have just read a copy of the EU-IMF agreement, which clearly states that a property tax would be introduced in 2012. Lest there be any doubt, it is stated in the agreement in black and white. As all Senators will know, revenue is needed to plug the public finances and since the property collapse the means to raise revenue have decreased significantly. It is a disgrace that the property tax was not introduced in the good times as it would have taken the heat out of the property market. It would also have started the process of putting in place a replacement tax for when stamp duty and other taxes dried up.
I am pleased that the rate of property tax has been set for the next three years until 2016. It means that people will have certainty about their liabilities for the period and can plan accordingly. I also welcome the exemptions. Perhaps the Minister of State will tease out the deferral scheme further for me. How will it work? What categories of people can avail of it?
There has been controversy about the possibility of local authority tenants making a contribution, but I am not alarmed at the possibility. The State provides a house and repairs it when necessary, so it is appropriate that these tenants make a small contribution. The tax needs to be modest. Let me put it in context. It will be the same outlay that the majority of people pay for their television packages.
I have listened to the debate and I ask Senators to note that I did not interrupt them. I hope I shall not be interrupted because I wish to make a few salient points.
Yesterday the ESRI issued a statement called Budget 2013: Distributional Impact, which stated that the people on the lowest incomes would suffer a greater impact from the budgetary measures than those with higher incomes. It stated:
Property tax is a key driving factor in these results. For those with low incomes after housing costs, the emphasis is strongly on deferrals of property tax liability rather than income-related exemptions or relief. This means that the burden of the tax - deferred or otherwise - tends to be greatest for those on low incomes.
While I sat here listening to the debate I wondered which suspended reality did most of the Senators live in. I have attended numerous public meetings over the past week and the greatest issue to crop up is that people wonder where in the name of God they will get the money to pay a property tax. That is not the real issue, however; the real question is where will they get the money to pay their mortgages after the Revenue Commissioners has taken its property tax. People have no choice and they will be hammered trying to pay their other bills that they cannot pay because the Revenue Commissioners will have taken the property tax out of whatever moneys they have. We are in an incredible situation today. At the height of an unprecedented and unyielding mortgage payment crisis, we are discussing whether to impose another arbitrary tax on the same people. Between July and September 115 new families fell into mortgage distress every day and 23.5% of all residential mortgages are in distress. These are the same people that the Government seeks to pile a home tax on. The measure makes no sense and the Government should cop on. It is no wonder the Government wants to rush the legislation through with as little debate as possible. A proper debate and scrutiny of the tax would show how unfair and unrealistic it is. In the Dáil, members managed to discuss only one amendment before the debate was guillotined. That is testament to how deeply uncomfortable the tax is for Government Deputies and Senators. There is still time for Senators to listen to their constituents, use common sense and reject a family home tax. Let us make no mistake: this is a family home tax, and to call it a property tax is deeply and deliberately misleading. A genuine property tax would be one on properties that included yachts, luxury cars and the like. This is a family home tax, pure and simple. In 1994 Deputy Enda Kenny said: "[I]t is morally unjust and unfair to tax a person's home". Only two years ago Deputy Eamon Gilmore promised not to introduce a family home tax. He said: "We have to remember that many people have already paid a property tax on their residential home," and he was referring to stamp duty. They were both right, but now they are in the wrong. The haste with which they are pushing the legislation through tells us that they know they are but do not want to talk about it. The hypocrisy is not limited to Fine Gael and the Labour Party. Fianna Fáil, a party of the troika, signed up lock, stock and barrel to a property tax in its surrender letter to the IMF.
In its pre-budget submission last year Fianna Fáil pushed for a family home tax. Now it says this is the right tax at the wrong time.
That is because Fianna Fáil is not in government.
For mortgage holders this is a worse time than last year. When we look at the family home tax we can see how it fails on the question of fairness. The Government has chosen to ignore its own experts and include social housing in the legislation. Local authority housing and voluntary association housing will also be taxed and their tenants will end up footing the bill. I noted the statement made by Senator Hayden and agree with a lot of it. I hope she will stick to her convictions about the issue. I hope that if she does not see the legislation being scrapped or changes being made to it, she will vote accordingly and encourage her Labour Party backbenchers to do the same. There is no point in her saying something here but voting for the cuts after opposing them verbally and telling the public and the media that she is against them.
There are no exemptions for citizens on social welfare, living in poverty or with unsustainable debts. Those who can defer the tax will face a 4% interest penalty but the option is only available to those on very low incomes. The Government will tax people's homes. People will have to pay regardless of whether they can afford to and regardless of whether paying the tax is the difference between feeding and clothing children and not doing these things. This is a deeply unfair and regressive tax. Reference to rates in the Six Counties is a cheap shot and only shows the ignorance of some Members whose interest in the North is purely opportunistic. Citizens North and South can easily see through such claims and know that the North uses a different model. People in the North have a different system for paying rates and receive water, education, school transport, meals and health services. In the South we are being asked to pay a property tax to a local authority, but what do we get in return? We also pay refuse charges and the Government has asked us to pay water charges on top of it. I ask Senators to compare like with like and make real comparisons. I ask those on the Government side to stop talking the claptrap it has spouted for the past couple of weeks.
Sinn Féin should take its seats in Westminster and object to the rates in the North.
What will people receive for paying these extra charges?
The worst aspect of this Bill is that there is a clear alternative, a fair way for the State to raise revenue in a way that is sustainable and realistic.
My party has published a wealth tax Bill that would tax those who can afford to pay.
What is the objection to asking people with assets of over €1 million to pay a 1% wealth tax? Is that not a fairer way of raising revenue-----
-----than going after the family home?
I must ask the Senator to conclude.
Some of the most progressive and equal countries in Europe including France, Sweden and Finland, operate a wealth tax and it works. Unlike this proposed family home tax, a wealth tax would be easier to administer and could be collected with regard to people's ability to pay. Members should not be under any illusions. This is a family home tax. It should be opposed and I hope the Senators oppose it.
I am sorry that the Minister of State, Deputy Hayes, will bear the brunt of a rather testy temper on my part today.
Many of us who are new to politics had a rather unceremonial declaration of our political naivety this afternoon in the Social Welfare Bill and it has probably hardened our rhetoric somewhat. This idea is daft. It is straight out of Monty Python. There is a great scene in Monty Python where the black knight is on the bridge and he is charging everybody tax to cross it. This measure reminds me of that.
Why do we have tax? We have tax for two reasons. First, to fund essential social and public services and, second, as a form of wealth redistribution, and I support both of those aims. The principle of tax should be that it is fair. If one has a lot one gives some; if one is in trouble, society helps one with the tax that others have given. That is the way it should work. What we have here is a highly selective asset tax. People have identified that there are assets such as yachts, and not many people have yachts, that should be taxed but many people have stamp collections, coin collections, furniture, clothes, toys, pets and cars, although we tax cars. Why is it that of all these things there is one asset that at this point in the history of this country is a liability?
Every country in Europe has a property tax.
Senator Crown, without interruption.
I have been careful not to interrupt other people, Senator.
I know we are all a little cranky this evening but-----
I would make the point to anybody who would have the temerity to interrupt me in my crankiness this evening that we are also the only country in Europe that charges people 9% and makes them borrow money to pay a tax to buy the house in the first place. I know of no other country that does that but we will come back to that issue another time.
Of all the assets somebody could have, the only one that actually costs them money, and which currently is not an asset but in many cases is a liability and a millstone around their neck that may prevent them moving job, location and educating, feeding and clothing their children and something they feel their entire life is in hock to, is the typical negative equity mortgage that many Irish people were hoodwinked into taking out because the priest class of mortgage advisers, bank officials and bank managers that we had always been taught were steady, solid individuals who had our best interests at heart and would look after our fiduciary interests were on short-term bonuses in an attempt to get us to make unwise investments. That is the position in which many people find themselves. Of all of those assets, the one that we decide to tax is the one that is costing people money. What we are talking about is not a wealth tax or an asset tax. For most people it is a liability tax, it is a debt tax. The logic of taxing somebody's negative equity mortgage is about the same as the logic of taxing their credit card debt. It is insane.
We know that the money raised from this will not go to local government utilities. Somebody asked me if it would go to Dún Laoghaire. It is going to Dusseldorf. We know where it is going, and it is not to Dún Laoghaire. It does not make sense for people to want to pin a regular, reasonable consumption charge on the local services that people consume, call it a service charge and tax them regardless of whether they own their house.
I will conclude by showing the Minister of State that I am not such a bad guy after all and make him an offer.
The Senator is going to park his yacht in Malta.
If he believes my negative equity home is a taxable asset I will gladly give it, and the mortgage, to the State. That is the ultimate-----
We will accept the Senator's income more so than his property assets.
The Minister accepted an extra 4% of it last week but I am not complaining about that. I make tonnes of money and I have a house in negative equity. The logic is to charge me more income tax. I have no problem paying more money than I would pay on the property tax in income tax because that is fair. What would happen if I owned the same house but I lost my job? I would have the same tax liability on this liability around my neck.
I want to ask the Minister a question. One of my more talented young researchers identified a possible paradox in the Bill which I would like the Minister of State to clarify for me. Section 119 states that in July 2013 one half of the tax will become payable and the second half in November. Does that mean that one and a half year's tax will be paid by next November? That is my reading of it but I may have misunderstood that. I thank the Minister of State.
With the permission of the House I want to share one minute of my time with Senator White.
I welcome the Minister of State to the House. This is the wrong plan at the wrong time. The man who told us the most about that is not anyone in this House or in the Dáil but President Clinton when he said in October 2011 that Ireland needs to solve its mortgage problem. We are not solving our mortgage problem. To bring in a property tax now without having solved the mortgage crisis, and it is a growing crisis, is a crazy move by any Government. We have 29% of borrowers in difficulty. They are either in arrears or have rearranged their loans. That means there are 450,000 people in mortgage difficulty and the amount involved is €15.1 billion. That problem is growing, although not as fast as it did in the past, but just because it has slowed down does not mean it is getting any better; it will get exponentially worse.
As the Minister is well aware, 400,000 tracker mortgages were taken out and tracker mortgages, which are linked to the European Central Bank rate, are as low as they could possibly be. As the Minister of State is aware also, the European Central Bank rate can only rise and if it goes up by 0.75%, and by another 1.5% over time, people will be shifting more of their income into paying mortgage debt. That is the ticking time bomb Ireland is facing. There is nothing surer than that it will happen. We have 400,000 people whose mortgages will suck more of their income from them and the knock-on effect of that on our economy is that more jobs will be lost, more shops will close, and less money will be spent in the economy.
It is crazy to bring in a property tax now knowing that we have a mortgage problem we have not addressed, affecting 29% of mortgages, to help those in distress at this time and knowing also that 400,000 people are on tracker mortgages which are guaranteed to cause more difficulty for the economy and put more people into arrears thereby causing more jobs to be lost in the wider economy because people are not spending money.
I am not the expert on that. President Clinton said that property and mortgages are our biggest problem and as a nation we have not dealt with that. To bring in this tax at this time will make a very bad situation much worse.
I am a valuer. I have read the legislation and I can guarantee the Government that there will be pandemonium next year when it comes people self-assessing the value of their properties. That will be very difficult for a paid professional in a market where nothing is moving but to ask a person to try to value their own property under guidelines that are currently unknown is madness.
I remind the Senator that he is sharing time.
The Minister is well aware of the ticking time bomb that is our tracker mortgages issue and of all the properties in default and in arrears. He knows that introducing a property tax in a distressed property market by any economist's standards is the wrong thing to do at this time.
I welcome the Minister. As Senator Crown said this tax is daft and nuts; I concur with him. Senator Mark Daly is a professional in the area of valuation and he has put it very crisply.
Fianna Fáil is totally opposed to the introduction of a deeply unfair property tax. The Government's proposals for a property tax will hit struggling home owners at a time when they can least afford it. Now is simply not the time to inflict a property tax on a struggling economy, a weak housing market and home owners working to make ends meet. Not only can people not afford the tax, but the tax will only suffocate further a property market that is on its knees, reduce domestic spending and damage the economy. Elderly people living in properties they worked hard to own and in which to raise a family are being driven out of that same home by an onerous tax. The domestic economy is in a fragile state. The most recent Irish League of Credit Unions survey indicates that half of all adults are struggling to pay their bills on time. Some 42% of consumers have had to borrow money to pay bills in the past 12 months and only three out of ten are able to save any money at the end of the month.
I believe Fianna Fáil made a serious mistake in 1977 in its controversial budget when it removed rates on houses. It was a crazy decision as local authorities need money to provide services. The problem is that the people are not confident that the money will be put into the local authority and utilised properly. Fianna Fáil was remiss in not introducing a water charge. I do not have a problem with privatising the water service.
There is something seriously wrong with the Fine Gael culture of not touching income tax. I do not understand it.
We are discussing property tax.
I believe that Irish people who earn a good deal of money are more willing to part with it and it has to be addressed.
I welcome the Minister of State to the House. I do not know whether he has seen the preliminary findings from the ESRI and its commentary on the budget. It breaks the income household brackets into three broad areas - low income families and individuals; middle income families and individuals and high income families and individuals and comments on the last six austerity budgets. In respect of this budget, the lowest income earners in the State saw their net income, according to the ESRI, drop by more than 1%. The middle income earners saw their net income drop by less than 1% and the high earners saw their income drop by a half of 1%. The commentary refers to the last few austerity budgets under a Fianna Fáil-led Government and states that, proportionately higher earners were asked to pay more.
Since 2008. I have read it.
That is contained in its commentary. It then goes on to mention the property tax. Before doing that it states that the average income for the top 20% of households is more than five times the average income of the poorest 20% of households. This means that for a budgetary package to impose an equal percentage burden on each group, for every €50 million taken from the lowest income group, a further €250 million would need to be raised in taxes or benefit reductions from the top income group. The Government failed to take even a cent from the top earners through income tax. That clear choice was avoided and instead the Government has gone for an unfair, unjust, regressive property tax.
The ESRI refers to the options open to the Government for dealing with low income families which included the option of deferral and income related reliefs. It stated that income-related reliefs was a better and fairer option as comparisons were made with other countries across Europe which showed that income related reliefs, rather than deferrals, was the best way to protect low income families, especially as the Government is about to charge such families 4% interest because they simply do not have the money to pay for the family home tax.
I agree with Senator John Crown that one should go back to the starting point as to why we pay taxes. This is a tax. We pay taxes for the provision of services. For me, the principle of taxation is that it would be fair and progressive. How can anybody say that a family home tax which is based on the value of a property which is not linked to ability to pay is fair, where the combined income going into one house could be €250,000 per year and that family will pay €316 per year on average while a family with a total income of €80,000 will pay exactly the same amount? That means that low income families will pay the same amount as high income families unless those high income families live in mansions, of which there are very few.
It is interesting to note that when we speak about imposing a wealth tax we are told there is no wealth in the country and that such a tax cannot be imposed. Yet the same Labour Party and Fine Gael Senators say it was a victory that a mansion tax was included in the budget and that this would tax wealth. They also said it would take €500 million from wealth but when costed the take is only a fraction of that amount. One cannot say this tax is fair. Essentially, it is tax on the roof over a person's head.
Comparisons were made with the North. The rates in the North are too high and I would prefer if they were lower. I would like to have the taxation powers in the Assembly to enable us make the choices we would want to make. If the Minister of State was honest about the North he would admit that it does not have the same level of fiscal powers and responsibilities that we have in the State.
The North is subsidised every month by the English taxpayer.
The citizens in the North would disagree with that. Many studies have been done which show that is not the case. Actually more money leaves the North than what we get.
Senator Cullinane to continue, without interruption, please.
I will not take lectures from somebody who wears a number of hats. The Senator says one thing while wearing one hat and something else when wearing a different hat. She has no credibility whatsoever.
The Senator's time has expired.
I certainly will not take lectures from that particular Senator who has absolutely no credibility. Perhaps I can finish on one issue. As high as the rates are, at least there is one charge, it is a rate, for which one has one's water paid for, one has free health, including free school, free books, free meals, free education and roads are repaired. We know that the average local authority in the State had a reduction in the amount received not an increase.
I am incredulous. I imagine if one was a commentator on the right of the economic divide one might have a difficulty with the idea of taxing an asset but I am incredulous that parties who claim to be on the left could oppose a wealth tax.
A regressive property tax.
It could only happen in Ireland that people would promote a measure they oppose and oppose a measure they favour. It is unbelievable. All afternoon we have discussed the budget which has been called unfair and regressive because we are required to reduce the provision of services. Within the hour, the same people who were promoting an increase in tax are now opposed to it. It is populism at its worst.
It makes a mockery of the House and our democracy that people would find themselves in these positions. People are quoting selectively from reports to support their positions. Senator Barrett mentioned the IMF report which said this is a high taxation country. As it does not suit a particular agenda to acknowledge that, a different report is used selectively. We need balance and sense in what we do and say. This is one of the most progressive countries in its taxation system in the entire world, but we ignore it. This is a high tax, progressive tax State. I am bamboozled by the lack of logical and coherent thinking in the economic sphere by certain parties in the Houses.
The Minister is doing the same thing Fianna Fáil was criticised for doing which is to follow pro-cyclical policies. If the country needs anything, it is assistance for growth. Households are submerged in debt. Some 29% of mortgage holders are in arrears or have had to make an arrangement with their bankers. This measure could be what tilts them over the edge. It fails to show an appreciation for the real difficulties people are encountering.
When we were making decisions in 2008-09, the Minister will remember saying we could not tax our way out of these difficulties. The Minister should revisit what he was saying because I agree with it. While it is appalling that this measure is being introduced at this time, it is even more appalling that there is such total disregard for our democratic institutions and the people who will be affected. We are ramming it through the House without the due deliberation which is absolutely required. As it is not coming into force until July 2013, there is no reason not to carry the Bill over for a proper debate in both Houses. I urge the Minister to rethink. Of all those in Government, he is one of only two or three whose views and vision I subscribe to. I hope he will carry that sentiment back and endeavour to achieve further consideration of the Bill.
I thank all Members for their contributions. I watched the debate when the Minister for Finance was in the House and I noted all the contributions. It was a lively, useful debate and I congratulate colleagues for their contributions. In case I forget at the end, I wish all colleagues a very happy Christmas and a happy New Year. I have spent a lot of my time here in recent weeks - not by choice - but as I listened and participated, I enjoyed the amount of time I was given as a Minister. I understand a Minister can speak for as long as he likes in the Seanad, which does not apply in the other House. It is an occupational hazard.
There should be a guillotine.
That might be a good idea. I very much liked Senator Crown's suggestion that he wants to contribute more of his income in tax. I will suggest in the morning to the Chairman of Revenue that she sits down with him immediately and works out between now and 31 December 2012 how much more of his substantial income he wishes to hand over to the taxpayer. We are all ears. There is nothing in the tax code preventing him from giving up more. I expect him to get a call in the morning.
There is near unanimity among all parties that the decision taken in 1977 to abolish a form of local taxation was crazy. We must learn the lesson. Of all taxes taken in, 42% comes from income tax, which is way out of kilter with other OECD countries. We must broaden the tax base over a period of years to avoid continuing to tax the hell out of people who are working. The way to encourage employment and address the problem of 450,000 people having no work is not to continually tax more and more people. This measure by the Government is a progressive tax. I agree with Senator Gilroy who did not know how parties of the left could argue against it. Those in larger properties in posher areas will pay more as a consequence.
Even if they have nothing to pay.
It is not the case across the European Union that there are site valuation taxes. Tax is based on real market value. The point has been made by my friends in Fianna Fáil that it is the wrong time at the wrong economic juncture, irrespective of whether it is a site or market valuation. The bottom line is that in the original memorandum between Fianna Fáil and the Troika, the former suggested a tax of €550 million could be obtained in the first year of implementation. We suggest the tax should be €500 million, which is below that target. Whether site or market valuation is used, the net issue is how much will be brought in. We will bring in less than Fianna Fáil suggested notwithstanding the promise they made previously.
My good friends in Sinn Féin have made a number of suggestions this evening. First, they suggest Northern Ireland should have full control of fiscal powers. It is a good idea. I am sure the taxpayers of Herefordshire and Gloucester would like to know that when they hand full power on taxation measures to the Northern Ireland Executive the little cheque that comes to the mantlepiece every month to make up the difference between tax and revenue will be put to one side. Of course, no one is suggesting that. In reality, the English taxpayer foots the bill in Northern Ireland week in, week out to make up the difference between income and expenditure. We do not plan to do it any time soon as we do not have the resources. Sinn Féin has been caught red-handed on this issue. Throughout Northern Ireland, where Sinn Féin is in government nationally and locally, close to €1,000 per annum is paid by homeowners. That is rightly so as Sinn Féin has recognised that one must have a broadly based taxation system. On the passing of the Bill, which I do not assume, the question for Sinn Féin is whether it will suggest to the electorate as it did last year that people should not pay.
We did not suggest that last year, to be fair. That was the ULA. It should be corrected.
Will Sinn Féin tell us in next year's pre-budget submission that it is going to abolish this tax? We know from recent history that Sinn Féin was against the increase in VAT from 21% to 23%, which brought in €750 million. When I looked to see if this year it was suggesting revoking that increase, no such suggestion could be seen. Sinn Féin at the last election said it would abolish the universal social charge. At its last Ard-Fheis, the man without a plan from Donegal said he was also going to abolish the universal social charge. On its first Private Members' motion in the Dáil, Sinn Féin proposed to abolish the universal social charge. However, when I looked for the plan in its pre-budget submission to knock out €4.5 billion by universal social charge, I could not find it. The voters need to know if Sinn Féin is going to abolish this measure. That is the real test.
I agree with Senator Barrett that this has become a high taxation economy. Of the adjustment since 2008, 60% has been by way of tax increases, not by reductions in expenditure. I agree with Senator Walsh in that regard. Thus far shalt thou go and no further, as Parnell once said. The top marginal rate of 41% is not 41% but is effectively 52% when the 7% universal social charge and 4% PRSI rates are included. I encourage colleagues to consider Annex F in the statement of the Minister for Finance to both Houses which sets out how progressive our taxation system has become since 2008. It was not progressive up to that point. We now have a system in which the top 10% of income earners pay 60% of all tax. The 70% of people on incomes of €50,000 or less pay 19% of all tax. The hocus pocus argument that the rich do not pay their fair share is demolished in every recent commentary not just by the Government but by the OECD and the European Commission. If we have the most progressive taxation system, where is there to go?
We have got to move to a broadened taxation system under which we look at other ways of taxing wealth and income. To take up the suggestion made by my colleagues in Sinn Féin, if ever there was an example of a wealth tax, it is the property tax. Sinn Féin has claimed it would raise €800 million in year one of its proposed wealth tax. Next year it will be difficult enough to raise €250 million with all of the protests and the rest of it that will follow. Last year Deputy Pearse Doherty asked the Minister for Finance how much a French-type wealth tax would yield, as proposed by the then French presidential candidate François Hollande. The Minister, honest man that he is, replied that it would yield somewhere between €400 million and €500 million. When François Hollande got into office, he did not even introduce his proposed wealth tax, while overnight Sinn Féin simply doubled the numbers to €800 million on the basis of a reply to a parliamentary question.
Why will the Government not cost the proposal?
The Minister should give us the figures.
The Minister of State to continue, without interruption.
The Government refused to cost it.
I would love Sinn Féin to set out how much of the €800 million would be raised from property, shares and income outside the country. It claimed it would produce a Bill to introduce such a tax, but it has not done so.
No, Sinn Féin has not. I read these things very carefully. Sinn Féin produced an explanatory memorandum, a speech on the back of an A4 sheet.
I challenge the Senator to introduce the Bill in this House.
I agree with colleagues on the need to ensure this tax is fair. Up to 70% of the people have paid the household charge. There were some attacks on Revenue which is not the last vestige of the Raj or some outpost of the British Empire. If people had obliged and paid their fair share of tax in recent years, we would not be in the hole in which we are now. The laws established by the Houses of the Oireachtas will be administered by Revenue and those who have a liability will have to pay.
I agree with Senator Michael D'Arcy on his comparison of property tax with employment tax. We have reached the point where 42% of all our taxes are on the income side. There is very little additional room to give. That is why the Government, unfortunately, had to introduce this tax. We recognise that it will be an imposition, particular for those in negative equity. We have also said, however, that it will not be increased in the lifetime of the Government and that the valuation will apply to 2016. This gives certainty to the majority who will be paying less than €300 a year.
Senator Jillian van Turnhout referred to the buildings owned by youth organisations. My understanding from the Minister for Finance is that the exemption that applies to domestic charges will apply in this case.
Will the Minister take up my offer to the State? The Government can have my house, as well as the negative equity mortgage, if it thinks it is a taxable asset.
We will take both of them because the Senator has an ability to raise income that the rest of us do not have.
We could work a deal on that basis.
When the chairman of the Revenue Commissioner rings the Senator tomorrow-----
It should also be extended to every citizen. For many of them, their house is not an asset but a liability and they do not have the money to pay this property tax.
We are not yet on Committee Stage.
Neither are we on the stage of the Abbey Theatre. These are issues the Senator needs to work out with the chairman of the Revenue Commissioners when she calls. I am sure she would be more than amenable to his suggestion.
The Seanad divided: Tá, 30; Níl, 17.
- Bacik, Ivana.
- Bradford, Paul.
- Brennan, Terry.
- Burke, Colm.
- Clune, Deirdre.
- Coghlan, Eamonn.
- Coghlan, Paul.
- Comiskey, Michael.
- Conway, Martin.
- Cummins, Maurice.
- D'Arcy, Jim.
- D'Arcy, Michael.
- Gilroy, John.
- Harte, Jimmy.
- Hayden, Aideen.
- Healy Eames, Fidelma.
- Henry, Imelda.
- Higgins, Lorraine.
- Keane, Cáit.
- Kelly, John.
- Landy, Denis.
- Moloney, Marie.
- Moran, Mary.
- Mulcahy, Tony.
- Mullins, Michael.
- Noone, Catherine.
- O'Keeffe, Susan.
- O'Neill, Pat.
- Sheahan, Tom.
- Whelan, John.
- Barrett, Sean D.
- Byrne, Thomas.
- Crown, John.
- Cullinane, David.
- Daly, Mark.
- Leyden, Terry.
- MacSharry, Marc.
- Mooney, Paschal.
- Ó Clochartaigh, Trevor.
- Ó Domhnaill, Brian.
- O'Brien, Darragh.
- O'Donovan, Denis.
- O'Sullivan, Ned.
- Power, Averil.
- Walsh, Jim.
- White, Mary M.
- Wilson, Diarmuid.
Tellers: Tá, Senators Paul Coghlan and Aideen Hayden; Níl, Senators Trevor Ó Clochartaigh and Diarmuid Wilson..
Question declared carried.
When is it proposed to take Committee Stage?
Question put: "That Committee Stage be taken tomorrow."
The Seanad divided: Tá, 30; Níl, 17.
- Bacik, Ivana.
- Bradford, Paul.
- Brennan, Terry.
- Burke, Colm.
- Clune, Deirdre.
- Coghlan, Eamonn.
- Coghlan, Paul.
- Comiskey, Michael.
- Conway, Martin.
- Cummins, Maurice.
- D'Arcy, Jim.
- D'Arcy, Michael.
- Gilroy, John.
- Harte, Jimmy.
- Hayden, Aideen.
- Healy Eames, Fidelma.
- Henry, Imelda.
- Higgins, Lorraine.
- Keane, Cáit.
- Kelly, John.
- Landy, Denis.
- Moloney, Marie.
- Moran, Mary.
- Mulcahy, Tony.
- Mullins, Michael.
- Noone, Catherine.
- O'Keeffe, Susan.
- O'Neill, Pat.
- Sheahan, Tom.
- Whelan, John.
- Barrett, Sean D.
- Byrne, Thomas.
- Crown, John.
- Cullinane, David.
- Daly, Mark.
- Leyden, Terry.
- MacSharry, Marc.
- Mooney, Paschal.
- O'Brien, Darragh.
- O'Donovan, Denis.
- O'Sullivan, Ned.
- Ó Clochartaigh, Trevor.
- Ó Domhnaill, Brian.
- Power, Averil.
- Walsh, Jim.
- White, Mary M.
- Wilson, Diarmuid.
Tellers: Tá, Senators Paul Coghlan and Aideen Hayden; Níl, Senators David Cullinane and Trevor Ó Clochartaigh.
Question declared carried.
When is it proposed to sit again?