Apr 012012
 

Ireland increasingly resembles a fantasy world, maybe a looking glass world, populated by strange and wonderful creatures, as the rest of us stumble around saying “should never have taken that fecking pill” and hoping that it will end soon.   Still, a Lewis Carroll world is perhaps better than say a world designed by Escher or HR Giger.

... but no matter how hard Alice looked, she couldn't tell the difference.

One of the things that makes me think it’s a Carroll world is the prevalence of memes. Many of the characters in Alice’s various adventures disposed of pithy sayings and cultural tropes, memes if you will.  Memes as we all know are little cultural viruses; small pithy phrases that encapsulate very little but are both immune to the prophylactic of evidence and are self-perpetuating.  Our governments have had lots of memes.

Ireland is not Iceland (no, they are growing and have 7.5% unemployment) ;

NAMA will get credit flowing (yes, if by flowing one means in the same way that glass, technically a liquid, flows) ;

the cheapest bailout ever (….what can we say);

It’s lLabour’s way or Frankfurt’s way (well, we know how that turned out) ;

Not another penny for Anglo (no, just several billions of the little copper buggers);

Politicians generate lots of memes : they are cheap, sound good, are devoid of content and are parrotable by the foot soldiers.

The latest meme is: we can’t have a decent property tax because we don’t have the data.  Attentive readers will suspect that this is not the unvarnished truth.  Give yourself a pat on the back, and then enjoy the 12-hour wait in A&E for the dislocated shoulder.

We have several databases; but don’t take my word for it, take the word of someone who knows. Take Ronan Lyon’s word.  Ronan is the economic guru of Daft.ie, and also a PhD student at Oxford. He is far far smarter than me, a gifted amateur historian and genealogist as well as a super (mainly but by no means only) property economist.  As part of a submission by the Smart Taxes Network he and Constantin Gurdgiev have … devised a property tax.  One that is very finely grained, breaking the country into 4,300 areas, each assigned one of ten bands, and allowing for the government to set a rate by a very simple approach.  It would be flexible, fair, progressive, simple to collect and administer, all the things that the present debacle is not.

Of course, being Ireland, where policy-based evidence is sought rather than evidence-based policy, it won’t be implemented.  Why take a perfectly good, soundly based, easily implementable policy FREE to the government when a series of committees can faff about for an interminable period to create a complex mess. Google, back in the day, used to have a motto: don’t be evil.  Maybe we should tell our governments: don’t be meme.

  22 Responses to “Ireland Through the Looking Glass. A Fairer Property Tax Than Big Phil’s Household Charge Disaster”

Comments (22)
  1.  

    We need a property tax in Ireland and it is not because the ECB, the EU or any other organisation says so, but it is because of where we are as a nation.
    Mr Lyons is wrong when he is of the opinion that we should have a property tax on all property,there should be no property tax on the home a person lives in, your home is as important to you as your health, it does not matter how big or how small your home is or where the location is.
    However all investment property should have a substantial
    Property tax on it, this includes 2nd houses and any subsequent houses does not matter if they are lived in or not.
    There should also be a substantial property tax on land that was bought by investors outside zoned planning areas, this is land that has not being used by the investor , but rented to farmers.

    We need to create the circumstance in Ireland where people are encouraged to own their own home, rather than renting it.
    Irish governments need to think of the future, not the interests of a powerful narrow minded lobby group.

  2.  

    Yep.

  3.  

    I agree

  4.  

    Read Ronan Lyons article. He specifically DOES NOT recommend a property tax. Rather a Site Valuation Tax. Different and appears to be much fairer. Is worth reading.

  5.  

    A property tax,a Site Valuation Tax. If it is on or relates to your home it is the same thing !.

  6.  

    I cannot see how a Property Tax and a Site Valuation Tax are the same thing.
    Two houses, two sites, house no 1 is 3,000 sq ft high spec, house no 2 is derelict, same size sites same location, value the property, value the site, which ?

  7.  

    Good man Brian, now all we need is that shower of politicians to get out of the way!

  8.  

    Was thinking of buying an investmentment property at the moment. A hefty property tax on this would effect the price I am willing to pay. Don’t think this will help the property market which is in free fall still despite what Charlie Weston and the Irish independent say. So in the short term this would not help Ireland. IMO everyone who owns a property should pay a tax on that property for services provided.

  9.  

    Norma, property is not confined to a building, you are getting mixed up with a wealth tax, a site is also property

  10.  

    Tommy, that is my point,the property tax on investment property will help keep the price at market value , not an inflated value, after all it was this inflated value that has the country where it is, and the inflated value has left so many in negative equity.An economy is not the buying and selling of property,it is based on production and exports,so it would be good for Irl if we create a climate that never allows a bubble in the property market again.

  11.  

    First, thanks to Prof. Lucey for a great article.

    To Kevin: while I agree with your comments that:
    “An economy is not the buying and selling of property,it is based on production and exports,so it would be good for Irl if we create a climate that never allows a bubble in the property market again.”
    Fair, market-based price signals without the distortions of leverage, tax incentives or the like are a good thing, and a focus on productive enterprise would be a huge benefit.

    You stated earlier that:
    “We need to create the circumstance in Ireland where people are encouraged to own their own home, rather than renting it.”

    Not picking a side, but why the priority to own rather than rent? Ownership promotes a greater investment in the local community, possibly. It also introduces inflexibility into a workforce that may need to show more mobility, surely? Is there a reason to prefer one over the other if they are priced fairly?

    I would be interested to hear Prof Lucey’s thoughts on this.

  12.  

    I think you put your finger on it there. Fair pricing means rent control, and that was found to be unconstitutional, wasn’t it?

  13.  

    Bock,

    I’m living overseas, so I hope you’ll pardon my ignorance on some of the details. I was not aware of the ruling on rent controls.
    I’m not also clear why fair pricing means rent control. Rents should represent a normal yield on the market value of a dwelling, which should in turn reflect what a person of average local income can afford, absent the the distortion of subsidies, tax breaks or excessive leverage.

    I’m not arguing for rent or ownership per se. At the right price, I’d like to own as an investment. At the wrong price, I rent.

  14.  

    Hello Spike, you say,
    Not picking a side, but why the priority to own rather than rent? Ownership promotes a greater investment in the local community, possibly. It also introduces inflexibility into a workforce that may need to show more mobility, surely? Is there a reason to prefer one over the other if they are priced fairly?
    If they were priced fairly, then everything would be ok.I have nothing against people renting either, I do not expect that people would buy a home in an area where there is no work for them so the idea of flexibility here , well up until now has not been a problem, although some people would have had to travel quite a distance to work but they would have been aware of that and accepted it.
    I would have worked allot outside Ireland and have met allot of people who were retired, they were receiving the state pension but had to try and find 3 to 4 days work each week to put towards paying the rent, I never looked at renting from that point of view before, but I thaught that it was a very sad position for an OAP to find themselves in and now that people are living longer it will only get worse, so that is one reason why I think that the Gov policies should encourage people to buy with priority over renting, but there are other reasons also.

  15.  

    Kevin,

    I agree that for most people who bought from the year dot until 2003 or so, it was a good way of saving for retirement. Part of this was due to rising prosperity and wages raising the real value and falling real interest rates / currency debasement increasing the nominal value further on top of that. Most of all, they were buying at reasonable prices (measured in terms of multiples of the average wage). Price paid matters.
    However, government policies are a tricky one. What most people think of when they say the government should “encourage” home ownership is to provide greater access to credit, tax relief, and so forth. This benefits current homeowners at the expense of prospective homebuyers by driving house prices up (I am not saying that this is what you’re advocating). Perhaps the best way to encourage home ownership would be to let prices fall to a level where they make sense, and to have a robust rental market so that prospective buyers are not forced to buy when prices are in a bubble?
    Of course, if the central banks continue to print money and debase currency, a house (or most debt-financed real asset) will eventually prove to be a marvelous investment even from these levels. But that’s another topic.

  16.  

    Spike, some good points,,,You say,
    However, government policies are a tricky one. What most people think of when they say the government should “encourage” home ownership is to provide greater access to credit, tax relief, and so forth. This benefits current homeowners at the expense of prospective homebuyers by driving house prices up (I am not saying that this is what you’re advocating).

    You are right, I do not advocate that, hence the reason I say the property tax should only be on investment property and not on a persons home, that is why I would like to see the Gov tax investment property,I do not think that there should be any other encouragement as far as credit etc, you buy what you can afford, but that would leavel the playing field for first time buyers

  17.  

    Kevin,
    Good points and a very an interesting idea to tax second homes and investment properties.

  18.  

    I thoroughly agree with Kevin Hamill on the family home status. If you have purchased one of these in the last thirty years, you have already paid any taxes due on it. Any investment property, by it’s nature, is a gamble. The simple view there is that, if you can raise the loan for the purchase, you get tenants to pay your mortgage and they end up pissing their wealth down the drain, while you get the re-sale value of the house in time. By definition also, you already have your own home. We must not forget that, when someone makes a goodly lump sum, others have to lose out. But a family home is for raising a family in safety and security, and produce the workers of the future that will provide the pensions of the future. To my mind, it should be scared, and free from attack by Government. We pay enough already !

  19.  

    No tax on the family home? Ok in principle I think, but I would set a cap on it, so that expensive properties would be taxed on the value that exceeds that of a normal family home. So, if your family home is valued at €1m, you’d be exempt from tax on the first , say, 250k, and the balance would be taxable. Fair?

  20.  

    Essodee,
    I can see your point, and at face value it would seem logical but the problem is that a person we will say in Dublin could be on the same wage as say a person in Monaghan but the person in Dublin house is worth more, but it has cost them more to buy, that is why it should not matter where your house is or what size it is.After all if someone has to or wants to spend most of their disposable income on their home, then they should not be penalised for that.
    That Is in my opinion why tax should be on income as it is more fair, however there should be property tax on all investment property, and that includes land, because in that suitiation someone else is paying your mortgage, and in allot of cases the State is paying the mortgage through rent allowance .
    So if people were encouraged to buy their own home, with out having to compete with investors, that can only be good for Irl, and it will go along way to stop the same suitiation as in 99 to08

  21.  

    All I want to mention is that glass doesn’t actually flow, which fits your analogy, I guess.

    ::

  22.  

    So you live in a home with three kids have no steady income no savings don,t know how your going to pay the esb bill ect next month good news your house you paid 750,000 is now valued at 400,000 you will have a new bill to pay 800 e per year to start ,ok you have to feed your kids so you can,t pay how much worse can things get .penaltys and interest will put the nail in the coffin for a lot of people . A person should be allow earn a minimum income to survive before they are imposed with a tax to pay for ridiculous bets taken by ridiculous bankers . It’s not a property tax we need its a few people with the qualifications and the balls to run a small country like ours , but unfortunately we have hundreds off very expensive TDs instead who need advisors to try help them justify to the people who voted for them there actually needed. Good night God bless

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