Adam Smith, that high-priest of free-market economics, believed that there were four principles for running a capitalist taxation system. Taxes should be equitable, non-arbitrary, convenient
to pay, and with some kind of return for citizens. These four ideas are said to underpin how capitalists think a taxation system should be run. It is ironic, then, that the new property tax proposed in this week’s budget fails to meet even one of these four principles. This is a government pursuing a form of nakedly neo-liberal capitalism that would make even Adam Smith blush.
This new tax does not recognise past taxes paid as stamp duty, takes no cognizance of those already struggling with mortgage arrears or in negative equity (they can merely defer payment, they will not be made exempt from it), and private landlords and owners of luxury holiday-homes will pay the same rate as ordinary owner-occupiers. That the tax will be charged at 0.18 per cent on properties worth up to €1 million but 0.25 per cent above that, a miniscule difference of seven hundredths of one percent, is nothing but a superficial sop to the notion of equality. This remains what Fine Gael and Labour clearly always intended it to be, a regressive and unequal tax with the barest fig-leaf of fairness.
An Arbitrary Tax
The property tax, we are told, we will be based on market values. But given that property prices in the Republic have been dropping for five years now, what are these market values? As the 400,000 homeowners in negative equity know all too well, property prices in Ireland are in a state of continuous free-fall. And any tax based on something so unstable will be equally arbitrary and detached from the actual value of a property or income of those paying.
Convenience of Payment
Half the homeowners in this country have already shown a clear unwillingness to pay any property tax of any kind. The Household Tax was partly an attempt, in the run-up to this property tax, to compile a database of all houses and apartments in the country (the absence of which is a by-product of the criminally-deregulated construction industry). This attempt failed and now the government has no efficient way to collect their proposed property tax. Thus, there were rumours in the weeks before the election, that homeowners would be asked to evaluate their own houses based on prices quoted on daft.ie or myhome.ie; two companies with a vested interest in property speculation and increasing house prices. This will be one of the areas where the government can expect serious resistance and lengthy legal wranglings, as homeowners seek to resist payment or dispute the valuations assigned to them by profit-seeking real estate agencies. That the government seems not to have done their homework on this is a clear sign of their lethal mix of arrogance and incompetence.
A Return for Each Citizen
One of the standard defences of property taxes, such as those payable in the United Kingdom, is that they fund local public services and as such are a good thing. Aside from the fact that citizens already pay into a central taxation system that should be funding these services, that is not what is being proposed here. The property tax is, of course, actually part of a raft of punitive taxes and charges intended to be used to pay off the gambling debts of casino capitalists. There were will be zero return to society for this tax. For this alone it should be strongly resisted.
Quite simply this is an unworkable, arbitrary, and, most importantly, completely unfair and regressive tax. Indeed, even the Financial Times, not usually a source for socialist economics, has criticised this tax, pointing out that it will heap yet more misery onto homeowners. What happens to a government that continues to pursue austerity policies that now even the Financial Times thinks go too far? The FT suggests that, with this budget, FG and Labour ‘may have finally overstepped the mark’; as opposition to the household tax intensifies into opposition to the property tax that may prove indeed prophetic.