Irish homeowners cry fould over property tax

Dublin: Five eye-watering austerity budgets in five years have elicited little more than weary resignation from Irish taxpayers forced to live under an international bailout following the bursting of a housing bubble. But the Irish government may have finally overstepped the mark with the sixth.

Michael Noonan, Ireland’s finance minister, told parliament on Wednesday that Dublin will next year impose an annual property levy. It would raise €250 million in 2013, a fraction of the €3.5 billion in new taxes and spending cuts to be imposed on an austerity-weary public.

Still, the property tax is hugely controversial in a country with an obsession with property ownership fostered, in part, by its colonial past, and with a generation of people living in negative equity.

“I’d rather go to jail than pay this latest tax,” said Caroline Lennon-Nally, a public servant, who cannot afford to pay her €320,000 mortgage on a house that is now worth just €150,000.

“My take home pay has fallen by more than 20 per cent due to wage cuts, a pension levy and tax increases since I bought my house in 2007. People really fear this tax,” she said.

Lennon-Nally is one of almost 400,000 mortgage holders living in negative equity following a 50 per cent fall in property prices since the bubble burst in 2007. And like many of these unfortunate buyers she paid thousands of euros in stamp duties when purchasing her home, heightening a sense of grievance at the new tax. “This tax will push a lot of people who are already in mortgage difficulty over the edge,” said David Hall, director of Irish Mortgage Holders Organisation, which advocates for people in difficulty. “There are already 170,000 people in Ireland who can’t pay their mortgages. This tax is creating more misery.”

Dublin is setting the tax rate at a relatively low level for homeowners, averaging about €300 per year. It will raise €250 million in 2013 when implemented for the final six months of the year and €500 million in 2014. The government is allowing the unemployed, people in mortgage distress and some pensioners to defer paying the tax until they or their estate sells their homes.

Commentators point to Ireland’s cultural obsession with property as a key factor that drove its disastrous property boom as well as a long-standing opposition to taxing property. Ireland is the only OECD country not to levy annual property taxes following its abolition of rates in 1977 and a limited property tax in 1997.

— The Financial Times