According to the Nevin Economic Research Institute (NERI), property taxes should be raised drastically to diversify tax revenue sources and to address issues of rising wealth inequality. As the government prepares its 2020 budget for 2020, increasing property tax is considered.
The trade union affiliated think-tank proposed ideas that represent a major shift in the tax system and the Government has always manages to neglect changing property taxes because of the associated political unpopularity.
Currently, the Government collects much less property tax revenue than most other European Union countries. Revenue from property taxes equates to only 23.3% of gross domestic product (GDP), while the average tax revenue in the EU amounts to 38.9% of GDP. In comparison with the rest of the EU, Ireland is much more dependent on VAT and excise tax revenues. VAT and excise tax generally have a greater negative impact on the less well off than the impact on wealthy.
Property taxes are the most difficult for the extraordinarily wealthy to avoid according to NERI’s senior economist Tom McDonnell. He continued to denote that underlying assets lack mobility, are impossible to hide and thus are unable to avoid paying property taxes.
The NERI proposal’s involve a steady increase of property tax rates across the span of 10 years. The proposal specifically calls for an increase in property tax rate by .01% or .02% from the existing national central rate of .18%. Local authorities are able to vary local property tax rates by adding up to 15% to the national central rate.
The main objection to increasing property taxes has been older retired people living off of low incomes who live in valuable homes. These individuals would likely be forced to down size to a more affordable home. The tax burden of increasing property tax would greatly impact older individuals.
Tom McDonnell continued to state that tax exemptions should be held to a minimum to reduce loopholes in the tax system. Ireland has collected far less than the average revenue in the rest of the EU. The NERI estimates that Ireland collected around €1.6 billion less than countries in the rest of the EU.
Raising property taxes is not popular in regard to politics, but studies have revealed that property tax is better for economic growth than increasing other taxes such as stamp duty.
From an American perspective the way of determining property tax rates is very different in Ireland than the United States. In the United States, property tax rates are collected by local governments and are based on the value of the property. To calculate the exact amount of property tax owed requires a property value assessment and the property tax rate is determined by the property’s address. This method reduces income inequality because the tax is based on the assessment of property value.
