Consistency is the main objective of the Commission on Taxation's property tax recommendations. The Celtic Tiger's "over reliance on expenditure and transaction taxes" has resulted in the crisis tax revenue deficits experienced over the last twelve months. An annual property tax on all residential property is therefore proposed by the Commission to introduce stability to Irish tax revenue system.
Annual Property Tax
The key features of the annual property tax are as follows:
- the tax should apply to a wide tax base with some exceptions including houses rented from local authorities/social housing providers and residential facilities provided for the elderly and disabled.
- while the Commission does made a recommendation as to the appropriate rate for an annual property tax, it does recommend the annual property tax should be calculated by reference to market value using valuation bands. For example a house valued at €490,000 would fall into to the €450,001 to €600,000 valuation band and if annual property tax of 0.25% is applied on the midpoint of the valuation band i.e. €525,000, then a tax liability of €1,313 is generated.
- an online accessible valuation database should be made available to assist the taxpayer to value their houses.
- the tax should be a self-assessment tax with a wide variety of payment options and should be administered by the Revenue Commissioners.
It is recommended that the annual property tax should be a national tax but should over time become a source of local government financing replacing the recently introduced second home €200 levy.
Chartered Accountants Ireland notes that our recommendation for the need to take account of Stamp Duty already paid by home owners during the height of the property market boom in the charge to an annual property tax is also endorsed by the Commission.
The Report acknowledges that the success and equitable application of the annual property tax is largely dependent on appropriate data systems being put in place as soon as possible. The set up of such systems may prove to be the ultimate challenge for making the Commissions property tax recommendations a reality.
Stamp Duty
The Report recommends that Stamp Duty for purchasers of principle private residences should be zero-rated. However, investor purchasers of residential housing should continue to be liable to stamp duty but at the lower Stamp Duty rates as currently in place for commercial property.
Additional CGT on Windfall gains
An additional capital gains tax charge on gains is recommended in respect of gains arising from increases in land values due to rezoning.
Recurrent Property Tax on Zoned Development Land
The Commission recommends the introduction of a recurrent property tax on zoned development land where the land is not being developed. The reasoning for such a tax is to discourage land hoarding with consideration taken of anomalies such as a farmer with zoned development land who wishes to continue farming the land.