Designing a Site Value Tax for Ireland

Date:

Wednesday November 9th 2011

Topic:

Designing a Site Value Tax for Ireland

Speaker:

Dr Micheál Collins, ERU

Venue:

INTO Training Centre, 38 Parnell Square, Dublin 1 (map attached)

Time:

4-5:15pm (Tea and coffee from 3:50pm)

Contact:

info@eru.ie to register or for any further information

Abstract:

Ireland’s Memorandum of Understanding (MoU) with the EU/IMF requires government to introduce a recurring annual property tax from 2012. While the MoU has not specified the precise form this new taxation measure will adopt, commitments in the National Recovery Plan 2011-2014 and Fine Gael/Labour Programme for Government have pointed towards the introduction of an annual Site Value Tax (SVT). Budget 2011 suggested that the yield from this tax source would grow from €180m in 2012 to reach €530m in 2014. Similarly the MoU commits government to raising additional taxation revenues of €1.5bn in 2012 and €1.1bn in 2013 with both to be partly funded by a property tax and increases to that tax.

To date assessments of the feasibility of a SVT (by the Commission of Taxation and the Department of Finance) have pointed towards a series of practical difficulties associated with its introduction. This paper outlines a proposal to overcome these difficulties and to introduce a credible, fair and reliable annual SVT from January 2013. The paper uses the land registry database of the Property Registration Authority of Ireland (PRAI) to outline the structure and administration of a SVT.

13 thoughts on “Designing a Site Value Tax for Ireland”

  1. Too late – the horse has bolted – we need to recognize the malinvestment has already happened.
    You need money in a system before you can tax / destroy it.

  2. I don’t see the point of taxing people for assets which for the majority of owners generate no income or value whatsoever. I also don’t see how a tax can be based on something so nebulous as the “estimated value” of a site, instead of something concrete like square footage, no. of chineneys, etc.

    If you want to fund local government, give them a cut of PAYE. Otherwise, we should stop relying on holdovers from the mediaeval taxation systems.

  3. OMF –
    Isn’t that the point?
    The tax should incentivise those who are sitting on assets to either sweat them or dispose of them

  4. fergaloh – “Sitting on assets?” You mean like the people who have mortgages worth more than the property? Banks are charging higher interest rates (in spite of the ECB rate dropping) and now the gov’t wants money from property as well – and meanwhile thousands of people owe more on their property than they could sell it for since property prices are less than 50% of what they were at the peak.

    Keep it up and people are going to decide that politics doesn’t work and look for another way to change the system.

  5. The tax should incentivise those who are sitting on assets to either sweat them or dispose of them

    Not everything is an asset. The world isn’t a balance sheet you know. The majority of the population has little to nothing to with that world view and imposing it upon them is a recipe for trouble.

    The tithes to the Establish Church were a cause of great resentment in the past. The tithes to the Established Banks probably won’t go down any better.

  6. The obsession the state has with seizing assets is because it did not divorce the money supply from private debt – it follows that it must devote scarce resourses paying lawyers and taxmen who do not create any net wealth.
    The assets that people own generally do not create any wealth by themselves – they require other inputs.
    There is a certain accountants perspective to our economy which is hard to explain.
    The state is no longer limited yet powerful – it is now unlimited but useless – although Ireland I guess was always like that – just more so now.

  7. Actually it’s remarkably easy. Agricultural land has been valued accurately. There may be the odd anomaly, but the good land 100 years ago hasn’t suddenly changed to scrub nor Connemara into the Golden Vale. Then classify housing in the countryside up to smaller towns by sq ft or number of rooms. City property could have the tax set by a percentage of the rental property nearest of like style. One bed flats- one bed flats and so forth. This will self regulate for if you live in Ballsbridge or cheek by jowl with Enya the less it will be the further away but it will take in local insanity like down in happy valley or out by Howth.

  8. I don’t see any sense in this site value tax. As appropriate people can/do pay rates/service charges.

    And of course capital gains on asset sale.

    So why single out property assets ? The family who saved to buy a large house…vs the family who got a smaller house,but invested in a classic Ferrari ….one family is taxed more ? Worse still if someone developed a site, they’re liable to more tax, even if the demand didn’t follow through.

    There really is no logic to this, and our conveyancing/land registery system remains a disconnected shambles, so I anticipate high cost of admin, or else capricious calculations.

  9. And dont forget we still dont have a property sales price database (how hard can it be? i would do it for them given then data for free!) imagine the same crowd then trying to design “site value tax” it would endup a hundred million disaster along the lines of evoting and ppars

  10. “Worse still if someone developed a site, they’re liable to more tax, even if the demand didn’t follow through.”

    This is a land value tax. It doesn’t matter whether the owner bulldozes the site or builds an office block on it, the amount of tax paid is the same.

  11. Kevin
    Whaddya mean? do you prefer the NAMA style situation of attempting to preserve inflated property prices?
    the prices have to come down
    Protecting negative equity is part of the problem
    It would be better to focus on reform of bankruptcy legislation which is the obvious consequence of chronic negative equity

  12. Good luck with talk and please post your findings. This land value tax is essential to bring into our system. It would pay for local government directly once up and running, thus reducing the money to go through central coffers to waste. Local governments would have more say, people would be more critical of local government services and demand more for their money.

    This tax system also reduces speculation. If you have money for a site in suburb of Dublin or provinical town, you should have to pay for the services that link your site to society via an annual charge. One upfront charge doesn’t make sense, increases speculation and land holding. If you don’t want to pay it then rent. This charge is on landowners. Also it can effectively tax tax exiles, as they can’t take the land they own with them abroad. There have been numerous studies into how this tax makes more sense than a regular property tax. A regular property tax will for example discourage a property owner building and improving on the land, as the property will be worth more and hence have to pay more tax for the improvements they’ve made , however a site tax will not.

    Remember this one principle, land gets its value through the efforts of society at large, not the landowner. If I own land in middle of meath with no services, towns etc near by, it won’t be worth much, if a town gets built around my land, the value of that land has increase hugely though no effort on my behalf. Where is the fairness in that scenario. i could go on but you should go to talk before you discredit a policy you don’t know much about, have researched in detail, rather than, as is common, shooting from the hip. That is how policies are made in this country, through touchy, feely politics rather than based on research and data.

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