Irish Mortgage Brokers Blog

Karl was asked to appear on RTE’s ‘The Frontline’ because of his support of property tax. This is ‘the wrong step in the right direction’ in his opinion. Less income tax with local authorities supported by a ‘Site Value Tax’ is the way to go in his opinion. It was not a popular opinion.

We were happy to comment on the Keane report in this news piece by Martina Fitzgerald in RTE

Feasta and the Smart Taxes Network are holding a conference on the 22nd & 23rd of September in the Mont Clare Hotel in Dublin 2. The people who work in Feasta are ideologically diverse (that is one of the things I really like about them!) and a bright bunch, the delivery, debate and data are all sure to be excellent. Hopefully we’ll see some of our readers there! (details below)

It is sure to be a treat, there are great speakers from around the world, to name a few:

Marshall Auerback (Roosevelt Institute Fellow & global portfolio strategist for Madison Street Partners, LLC)
Prof. Charles Goodhart (member of the Financial Markets Group at the London School of Economics & former monetary adviser to the Bank of England)
Bernard Lietaer (author of ‘The Future of Money’ & international expert in currency systems)

And of course we have our home-side team of heavyweights too! Fergal O’Brien (Chief Economist – IBEC), Richard Douthwaite (Sustainability Economist and Author), Dan O’Brien (Economic Editor- Irish Times), Paul Sweeney (economist with ICTU), Prof Ray Kinsella (UCD, Michael Smurfit Business School.), Constantin Gurdjiev (Adjunct Prof. of Economics TCD) and David Korowicz (Physicist and Human Systems Ecologist

Panels will be moderated by David McWilliams (Economist), Peter Matthews TD (Banker and Fine Gael TD), Prof. Terrence McDonough (Economics Dept. NUIG), Karl Deeter (Irish Mortgage Brokers), Graham Barnes (IT Currency Consultant), Deirdre de Burca (Former Green Party Spokesperson on EU affairs) and Emer O’Siochru (Architect and Renewable Energy Developer)

Date:                Thurs & Friday September 22nd & 23rd
Registration:     1.00pm Thursday 22nd Sept.
Conference:     Thurs 2.00—5.30 p.m
Friday 10am – 4pm
Venue:              Mont Clare Hotel, Merrion Square, Dublin 2.
Conference Fee:  €80 full conference, €60 one day,
€250 Corporate Fee,
concessions for Feasta and IEN members.

Please submit enquiries to conference [AT] feasta.org. Advance booking is essential.

I’d pass by this bridge and see architecture and engineering, Fred sees a greater social ill that needs to be addressed, his idea of ‘infrastructure gifting’ is compelling and well worth hearing.

Primetime RTE, 5th April 2011- on Tax Relief for Mortgages from Irish Mortgage Brokers on Vimeo.

The U-Turn came last week.

Of the main changes we could consider in the near future from a national taxation perspective, none holds the potential for positive outcomes to the same extent as Land Value Tax (LVT) or Site Value Tax (SVT). Below are several points looking at why this is the case:

1. It is widely agreed that we need to spread the tax base to reduce taxes on employment to be replaced by taxes on assets, and to create a less volatile tax base. This can be achieved with Site Value Tax. In terms of ‘fairness’, it is important to remember that only 50% of properties in the country have a mortgage on them, and for that reason there is also taxable capacity in the market for this, in conjunction with a reduction in income taxes.

2. The Site Value Tax currently included in the Four Year Financial Recovery Programme, is such a tax. It applies only to land zoned for development, or already developed.

3. Land is a fixed asset. A high proportion of its value is dependent on its area, its location and its proximity to related infrastructure. Infrastructure which is created via public expenditure but rarely ever re-captured for the value it adds to surrounding areas.

4. Site Value Tax should therefore be a substitute for less sustainable forms of property tax, such as stamp duty income tax or other taxes on employment.

5. The provision of new infrastructure generally increases its value, and a site value tax yields increased revenue, which pays for the infrastructure over time rather than development levies at construction stage.

6. All land owners who benefit from the new infrastructure contribute to its cost, not just the owners of development land as at present – now not necessary after changes to previous point

7. For these reasons a land value tax should be used as the main tax source for Local Government, whose main brief is the provision and management of infrastructure.

8. It would eventually also replace Commercial Rates and Central Government contributions.

9.It could also be used to fund other Agencies providing national infrastructure, both environmental and social.

10.It will generate a higher tax return from wealthier citizens and a lower return from the poorest.

TV3 The Morning Show with Sybil and Martin from Irish Mortgage Brokers on Vimeo.

We were delighted to feature on TV3’s ‘Morning Show with Sybil and Martin’ on their monthly property slot alongside Angela Keegan from MyHome.ie

In the piece we discussed the property market as well as the financial side of it and how changes to both interest rates and taxation changes could affect buyers in the future.

found out that the PRTB was going to increase the price it charged to a landlord to register a tenancy and decided to email them asking for a justification for it (it’s going from €70 per tenancy to €90 per tenancy). Given that a tenant also benefits from the PRTB I thought it would have made sense to have them pay whatever the increase was over the landlords existing bill but first I wanted to ask why it was happening, my email is below

From: Karl Deeter
Sent: 22 December 2010 14:30
To: Registrations
Subject: re: change in pricing

Dear Sirs,

Can you write back and let me know what additional service is being offered in return for the additional fee or is it merely a price increase because you have the ability to do so?
Sincerely,
karl
–
Karl Deeter QFA, (LIAM)dip
Operations Manager

The reply I got is below…..

——– Original Message ——–
Subject:     FW: change in pricing
Date:     Fri, 14 Jan 2011 08:29:12 +0000
From:     Registrations
To:     karl deeter

Dear Sir,

I refer to your e-mail below. This is the first increase in the registration fee since the PRTB was set-up in 2004.

The PRTB is self-financing and is dependent on registration fees for income as we no longer receive an Exchequer grant.

The PRTB receives in the region of €6 million in registration fees each year whereas the operating costs exceed €7 million and it cannot continue to operate at a loss.

The PRTB has taken a number of steps to reduce its operating costs:
·         The staff of the PRTB have had two pay cuts in the past year.
·         All major contracts have been re-tendered publicly.
·         All Adjudicators and Tribunal members are doing additional hearings for the same daily fee.

Yours Sincerely,

Robert Allen
Private Residential Tenancies Board
—————————————————-

‘Costing’ €7 million per annum has nothing to do with a landlord, that is an internal budgeting issue, but unlike a regular business where you could just decide ‘I won’t deal with them because I don’t like their price’, you can’t do that with the PRTB because apart from being mandatory, there are no substitutions.

This doesn’t resolve well with me because if we ran a business that cost more than it brought in then we’d cease operations or have to do whatever it took to bring the service in line with the costs, the PRTB doesn’t have that issue.

The real rub here is that they haven’t even bothered to look at their existence and who their two clients are versus who pays the bill. The two clients are tenants and landlords, but only the landlord has to stump up the cost - the tenant who pays nothing stands to benefit only. In fact, the landlord who doesn’t pay is crippled because in any dispute the PRTB will represent the tenant for free and won’t engage with the landlord due to their failure to pay the bill.

Let us suspend reality briefly to enter into this world of cost being an arbitrary concept. The ‘cost’ of the PRTB is €7m+ p.a. but they only take in €6m so that is a deficit of about 14%, alternatively you could say that they need about 16.66% more in order to break even (€6m+ 16.66% = €6.99m).

So why has the price increased by 28.5%? That will bring them from €6m to €7.7m - and this at a time when they have apparently cut costs, the €7m+ figure is historic and for that reason the benefit of a full years cost reduction will only come through in 2011. It just doesn’t stack up, it doesn’t make sense and the maths behind it are wrong.

This one sidedness is disappointing and only made worse by the fact that a toll has been erected on only one side of the bridge (always whichever side the landlord is on). This is how a tax is introduced then driven up - and in time I expect they will rise their price again because of their ‘costs’, if only state agencies could come and work in the real world where an inability to cut your coat according to your cloth actually means something.

We felt compelled to seek an explanation of the change in rules surrounding Section 23 properties in the recent budget.

This is effectively retrospective taxation and the changes were never set out or implied in the original contracts for the properties.

Changing tax law after the fact is generally considered bad policy, and in some cases it may even be unconstitutional.

A copy of our letter to Kevin Cardiff (pictured inset) is below.

—————————————————-

Kevin Cardiff
Secretary General
Department of Finance
Government Buildings
Upper Merrion Street
Dublin 2

16th December 2010,

Regarding changes made to Section 23 allowances in the 2011 Budget.

Dear Mr. Cardiff,

Section 23 was set out to encourage urban renewal, which was duly provided and paid for by willing investors in return for certain contractual tax incentives which would have an effect of reducing an investors Case V tax bill in return.

The removal of this before the 10yr deadline and ring-fencing of same is effectively breaking a contract with the people who supported the Urban Renewal schemes. While we accept that they may have been continued for too long, we equally believe that reneging on this is flawed policy, sadly, flawed policy has tended to extend far beyond the scope of this latest tax grab, but that is an aside.

It was never set out in the conditions of a Section 23 contract that it was open to the types of changes that were introduced in Budget 2011, we therefore are asking for a return letter outlining the basis upon which this was enacted, not from Department of Finance perspective of being able to enact whatever policy they see fit, but from the perspective of the actual contract which was agreed upon in a Section 23 property.

Any reference to your own policy making abilities is obviously welcome, but not the core request of this letter.

We have a professional obligation to the many clients we have who took out mortgages on these properties to obtain these answers; your swift response will be appreciated.

Sincerely,

Karl Deeter
Operations Manager