The solution for Section 23 Owners

Section 23 properties have had their tax treatment changed, in effect the buyer honoured their side of the contract from the outset and after the initiation of this the Government reneged on their side of it. This is contrary to the idea of fairness, the concept of contractual obligations, and it undermines the faith any taxpayer can have in the state.

The state recently cut many people with income tax and reductions in entitlements, but these were never contractual and people certainly didn’t leverage up to obtain them. Landlords may not be a group worthy of sympathy, but at the same time recent changes to taxation on rent (Case V income) mean the amount of financing expense the business can offset has dropped by 25% (mortgage interest you can offset has gone from 100% to 75%), this is contrary to the rules of accounting when you look at any other business.

The only solution is a reversal of this policy, and perhaps the only way to ensure this is to apply the idea of mutual assured destruction. If there were 10,000 section 23 owners who all signed up to a commitment to go into 100% default on the 1st of April if this is not changed then you would see that the state would reverse this policy because it is flawed and because the 60-100m in savings that they would make would be eradicated by the ensuing mess the banks would be left in because of it.

When default becomes discretionary then a solution becomes necessity, and at this point, for many landlords default is becoming an option because they are being hit from all sides. Banks are looking for capital and interest payments at a time when rents are dropping, subsidizing the capital payments is often coming from earned income which is being subjected to more taxation, landlords are making imaginary profits because they can’t offset their expenses fully and now a lasing commitment regarding property taxation has been grabbed because it was easier than making the right decision.

The right thing would be to tax all property rather than just attacking those who hold investment property, they made this move before with the NPPR tax (€200 p.a.), and there was no resistance despite the fact that a flat tax of this nature was grossly unfair and didn’t distinguish between a mansion and a one bed apartment. Now there is an extension of this approach because it’s easy, because landlords don’t fight back, but that forgets the fact that you reach a certain point and people simply roll over or opt out, Atlas can always shrug.

Perhaps it was time that the Government found out that we do have an ace up our collective sleeve, and that it can be used to destroy the system they have fought so hard to save.

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