IT: Boom years house buyers may get property tax break

Have heard rumours of this in the past, but not spotted this story yet…

Boom years house buyers may get property tax break

Looks like the government are kite flying.

What think ye?

Sop to the rich… er, formerly rich… feck it, debt monkeys, call a spade and all that…

If there’s a full stamp duty credit then the D4 purchasers who spent x00,000 on stamp duty won’t ever have to pay property tax in their lifetimes. Politically acceptable?

Key word = “may” missing word = “not”
Government agenda = Get the referendum vote passed, while derailing the plebs from making the “poll tax” an issue.

Precisely. From an equity point of view, it’s a non-runner.

They are two different taxes. If VAT goes down part way through the tax year, you don’t get a refund for the extra you paid. Indeed, if VAT goes up, you don’t get an exemption from excise duty or some other different tax. Taxes change…

I see the IMF laughing heartily at this with the follow up question being “Wait, you were serious?”. Every time they bring in a non-income tax the government tax tries to exempt half the population from it.

Brilliant does this mean I don’t have to pay my motor tax seeing how much VAT & VRT I paid when I bought it :angry:

This is becoming a farce. There are already far too many exemptions from the property tax. Any more exemption any I will refuse to pay it.

I’ve a couple of problems with this when you actually think about it:

1: The very generous exemptions from stamp duty for first time buyers meant that huge numbers of people never paid any duty on their houses. This is true for tons of houses and even predates the radical changes in 2007 (see below). Therefore, if you provide an exemption from the property tax for those who paid a lot of stamp duty, you’ll still catch tons of people who merely took advantage of the law as it stood at the time. Therefore not politically a great move because it wouldn’t benefit many of those who bought during the bubble.

  1. The people who benefitted from the stamp exemption between 2000 - 2007 aren’t much less in debt than those who paid stamp duty. Many new-build estates which were specifically designed to be exempt from duty for FTBs (through their floor area being less than 125 sq m) had an increased price. Effectively, the developer knew that the stamp exemption meant that people could contribute more to the actual purchase price and therefore a stamp duty exempt house was (excluding the duty) more expensive than a second hand property. Accordingly, if the point of this exemption is to provide relief to those who bought very expensive houses, it fails.

  2. You couldn’t exclude those who bought between 2000 and 2008, regardless of whether they took advantage of the duty exemption. Since 2007, as shown here, (viewtopic.php?f=19&p=32536) things went totally out of control with 13 property deals worth over €1 million each exempted from stamp duty between March and October 2007. (The strategy in 2007 was for an eldest child to fund the house with a guarantee from the parents. No stamp duty and a nice gaff!.) It would be crazy to exempt someone who had spent such cash on a house from property tax.

  3. Everyone who bought a new house (and who got a stamp duty exemption) still contributed a huge amount to the central funds, through the fact that there was VAT on many of the properties purchased. At c.20%, this is vastly in excess of the stamp duty contribution made by someone who bought a second hand house which might have been built 20 years previously. Therefore, if the “contribution” point is the basis for an exemption, then this doesn’t stack up. Why is stamp duty a “good contribution”, but VAT isn’t?

  4. The people who actually paid duty were, in the most part, investors and those trading up, or buying more expensive houses. I can’t see how you would ever exempt an investor? - no way (unless I’m totally misreading the public mood).

  5. Could you foresee someone who traded up, or an FTB who exceeded the thresholds getting an exemption from property tax? The trader upper might have paid a lot of duty but also they benefited from a huge uplift in the value of their old house, all of which was tax-free through the PPR tax relief. So do you exclude them and just focus on FTB’s who exceeded the thresholds?

  6. If you do give a property tax exemption to both trader uppers and rich FTBs you need to think through the maths on it. How much duty did they actually pay? As shown on the Revenue website, the rates were not automatically 9%. … 05supl.pdf. A person buying in 2005 who paid 380K was only at the 3% rate. They were subject to the 6% rate between 381K - 635K and only 9% where they paid over 635K. Should each class of person be given an exemption, or should different exemptions apply depending upon what rate of duty you paid? Sounds complex to me.

  7. Do you only exempt people who still live in their houses? Many of those who bought in the bubble have now found that their poxy apartment or new-build estate house does not suit their needs and have moved out to rent. They still pay the mortgage but now have a rental property which is nearer to their work. Do you give that original (but now rented) house a property tax exemption, because a lot of duty was paid on it, or do you say that the individual owner must pay the tax because they no longer live there.

  8. Finally, and slightly unrelated, is that one of the unbelievable things about the Irish stamp exemption for FTBs, or the lower rates for owner occupiers, is that, to my knowledge, there has never been a recorded instance of a person being prosecuted for failure to continue to maintain that house as their PPR. Under the law, if you moved out and turned it into an investment property, you should have suffered a clawback of the original exemption. This indicates that, either this is the only global instance of a tax having been fully complied with (doubtful when you consider most people’s attitude to tax), or that it has never been investigated successfully by Revenue. I know that the latter is correct because the tax is actually impossible for the stamp taxes division of Revenue to police because they don’t have any actual “on the ground” auditors who could investigate it. I just throw that in there but its not directly relevant to this discussion, but interesting nonetheless.

This has taken me ten minutes to type and I hope it illustrates some of the complex issues to be considered. Now, I don’t for a minute believe that any journalist is capable of using similar logic in order to discuss this. Far easier to report/parrot govt press releases. I’m also very conscious that the IPOA and the Irish Tax Institute (for example) will argue that people who paid a lot of duty should be exempt from property tax. Therefore, expect lots of lobbying to focus on this, but without anything like the correct level of analysis.

I believe that if the tax is supposed to raise money related to local service, it should be paid by those who use the local services, regardless of who they are (owner occupier/tenant). Unfortunately the reason none of this tax makes sense is because it is just going into the central fund and will be divvied up based on political needs (e.g. getting a new road in an FG marginal constituency).

so if prices had of risen instead of fallen,
then the rate of stamp duty paid back in 2006 or so
might be below that of which would be paid today,
in which case they would pay a higher rate of property tax than everyone else.

of course they would have :angry:

So, Stamp Duty was a tax on buyers then?

I still think it is political suicide to try and introduce value based property tax where a large proportion of people who will be asked to payare in huge negative equity. Stamp duty based exemption for a year or two may be used to ameliorate the political damage.

If people won’t pay a two quid a week charge not sure if they’ll pay multiples of that without a very big stick

The big stick must be the threat of losing the house; ‘Family home’ be damned, pay the tax or lose the asset !

Hold on, just because some people bought with debt, doesn’t mean that they are special. They get tax breaks already for buying with debt, more if they are investors. Meanwhile those of us who bought/built with cash have seen our ‘assets’ collapse in value along with everyone else.

Where’s my bailout?

(Not that I want one, but fewer than 40% of occupied houses have mortgages. About 15% of those are in trouble, about half, I reckon, in serious negative equity. So we are about to benefit 20% to the detriment of 80%?).

Not the first time governments have done this…

But assuming the target is to raise €Xm then if this cohort of people are exempt it increases the amount others need to pay

Same shit, different tax XX

We live in a sound bite world where your logic would be drowned out. Politicians don’t make hard decisions.

I think its pretty logical and consistent that the net asset value ie value less loan needs to be the basis for a property tax.

On the income tax side the taxable income is calculated as the rent less the cost of servicing 75% of the debt.

It is consistent, that a wealth tax, which is what a property tax based on home value is, should take into account the connected leverage against the asset.

No it isn’t. The purpose of property taxes are to pay for services supplied to that property. Whether the property is owned outright or has debt associated with it is irrelevant.

What you’re talking about would be inventive for people to not have a debt free home - at some point they’d cross a threshold from not having to pay the tax to paying it and would seek to avoid it.

People still think they paid stamp duty when buying their home. It was the sellers who paid it through a lower price paid to them than if stamp duty didnt exist at time of sale. They may also have paid CGT if it wasnt a PPR. Economist Marc Coleman is a big offender is claiming he paid a huge lump of stamp duty to government when he bought his house in 2005.

Property doesn’t use services, people do. The moment you differentiate based on “value” it becomes a wealth tax. If its a wealth tax the net position is the relevant figure.

And what’s another property incentive in a market still stuffed with them. PPR exemption for cgt being an inexcusable one that hasn’t been addressed yet…