LEGISLATION TO introduce a new property tax on at least 260,000 dwellings throughout the country is at an advanced stage and is expected to be brought to Cabinet in the next few weeks by Minister for the Environment John Gormley.
Under the terms of the property tax bill, the levy will be paid to local authorities for their own use, on a system similar to the collection of motor tax.
The tax of €200 a year per home, which was originally announced in last year’s budget, should bring in about €52 million a year to the exchequer – and possibly more.
The tax will apply to all homes that do not qualify as a principal private residence. It will cover investment properties including each individual apartment in an apartment block, holiday homes and other homes not qualifying as a principal private residence.
The department estimates that there are about 200,000 investment properties in the country to which the tax will apply. A list of these properties should be available from the Private Residential Tenancies Board with whom landlords are obliged to register.
There are also about 60,000 holiday homes in the country, according to the most recent census records, to which the tax will also apply.
On top of that there are another 200,000 or so vacant dwellings in the country, a significant proportion of which are also likely to qualify for the tax. It will not apply to building sites or incomplete dwellings.
Property owners will be legally obliged to pay the tax this year, with financial penalties for those who do not pay.
The payment system is currently being drawn up in the Department of the Environment, and it is expected to operate like motor taxation.
Individuals who are liable for the tax will be able to pay their local authorities by phone, internet or through council offices, just like the annual car tax.
While it may take some time for local authorities to impose the system in a comprehensive fashion, officials are confident that the tax will work.
Given that investment properties are already registered and the owners of many holiday homes benefited from tax breaks, the State has a reasonable record of properties which will qualify.
With a range of penalties for non-payment being envisaged in the legislation, the department is confident that full compliance can be achieved relatively quickly.
While the legislation is almost complete, the final detail of the charge will be worked out between Minister for the Environment John Gormley, and Minister for Finance Brian Lenihan.
While there has been some speculation that the property tax per home may be greater than the €200 a year announced by Mr Lenihan in the budget, it is unlikely to be significantly more.
Announcing the introduction of the charge in the budget last October, Mr Lenihan said the demand for local government services was increasing all the time, and it was important that local authorities could operate on a sustainable financial basis.
He said the charge would be collected by local authorities and would be used to support the provision of local services.
How it's done elsewhere
In those EU states that levy property taxes, the responsibility for their calculation and collection usually falls to local authorities, and the income then contributes to covering the cost of street cleaning, waste collection, youth facilities and other local services. A variety of factors are used in setting rates, from location and type of housing to the property's size, age or condition. Secondary-home taxes such as those mooted in Ireland this week are rare, and in countries that do apply them – such as Germany – its local or regional authorities that benefit.
FRANCE
In France, homeowners are subject to two local property taxes: taxe foncière and taxe d'habitation. Although collected centrally, both are distributed to the local region to pay for rubbish collection, street cleaning and other community services. The taxes are calculated according to the notional rental value of the property, and must be paid whether the property is a permanent or holiday home. The taxe foncière, the higher of the two, is payable by the owner; taxe dhabitation by the occupier. Rates are determined by the local authorities of the region, department and commune that receive the benefit. Their size varies considerably from one place to another, but exemptions are in place for people over 75, those on disability pensions and over-65s on low incomes.
ITALY
The imposta comunale sugli immobili is an annual council tax that must be paid twice a year. The tax is levied at between 0.4 and 0.7 per cent of a propertys value, the exact rate being decided by the local municipality according to factors such as a propertys size, location, age and condition.
GERMANY
A property tax is levied by the local authority in each region, and specific rates on secondary homes vary across the country. In Berlin the second home tax is 5 per cent. In most cities the rate is about 10 per cent, although some Bavarian cities go up to 20 per cent. The first such tax was introduced in 1972 and is now quite widespread. In rental accommodation, the tax is calculated as a percentage of the rent. In a bought apartment, the tax is calculated as a percentage of an area-typical rent.
SPAIN
The standard property tax in Spain is the impuesto sobre bienes inmuebles (IBI), a municipally levied rate calculated from the value of a property. It varies significantly depending on the location and type of home. One could pay as little as €50 a year for a small house in a rural area, while a luxury home in an expensive neighbourhood might cost as much as €2,000 in taxes. Homeowners are also required to pay yearly rates, which contribute to street lighting, maintenance and local facilities.
BELGIUM
Property tax is calculated as a percentage of cadastral income – an official estimate of the value of a property – and is levied by the regions. Rates are a combination of the general regional rate (2.5 per cent for Flanders, for instance) and the local municipality rate. Reductions are possible if there are children or disabled people in the household.
PORTUGAL
Homeowners are subject to the imposto municipal sobre imóveis, a locally levied tax determined by the registered value of the property, its location and the local services provided. For rural properties the rate is 0.8 per cent, while in urban locations it can be up to 1.3 per cent.
Compiled by Ruadhán Mac Cormaic, Derek Scally and Jamie Smyth
