‘Wat’er rip off! Yet another downside of market value based property tax

Not linking a property tax to the cost of running a local authority means we will have no idea of exactly what we are paying for. When it comes to how local government is funded it works (in simple terms) as follows, you have their costs, from that you take away ‘goods & services’ – this is income the local authority generates. Then you reduce it by the pension levy (local government workers fund this), and after that you traditionally had the local government fund and grants.

The local government fund is made up of car tax for the most part, and until recently it was a key component of funding, it was partially replaced by the household charge and the last portion of funding is made up of commercial rates.

The Dublin City expenditure position is below, note that a sizeable portion of it is spent on water, almost 16% – which is a significant cost.

An issue with a national market value oriented …

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Bank rates, onwards and upwards…

Something that is interesting is how people are amazed that banks are jacking up interest rates at a time like this… In fact, it is precisely because of the time we are in that they are doing it, and due to the market environment they face.

Banks have a choice at any time as to where they will put the money they hold, their job is to turn liabilities (deposits, debt, equity finance) into assets and at present there is a golden window of opportunity where any decent (almost any) assets can be lodged with the ECB and the ensuing liquidity recycled.

For the most part this has helped to support the bond market, part of the LTRO was based on this premise, but in Ireland while bond yields are attractive (still above 5%) mortgage rates are not as attractive. Currently the standard variable is less than 5% meaning a person can borrow for cheaper than the nation they live in is able to!

That won’t last, the likelihood is that sovereign rates …

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Dublin Chamber of Commerce on Property Tax

Dublin Chamber sent out an email yesterday with their opinion on introducing a property tax which we wholeheartedly agree with, a National Tax system will simply gouge some while subsidizing others and it belies the facts of costs which must be considered in delivering the services this tax is there to cover.

(from this point on it’s their release)

The Government’s plans for a property tax will fail unless it is applied locally, says the Dublin Chamber. The Dublin Chamber supports the introduction of a value-based property tax but believes that such a tax should ensure that the value of a property is set against local norms.

“The principle we set out in our submission on property tax was aimed at achieving regional fairness,” said Gina Quin, Dublin Chamber Chief Executive. “In doing so, the Government could ensure higher bills for those with bigger or higher valued sites so that neither urban nor rural households are unfairly targeted through a national system.”

“Location is a key component to a property and the government could see history repeat itself if they …

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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 …

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Are investment property owners ‘hard pressed’?

PTsb are going to take away investors tracker mortgages unless they go to capital and interest payments, that story was broken by Charlie Weston in the Independent today. That is a business decision by them, but for the business affected (landlords) it creates a new problem.

How can they do this? Isn’t it part of the new rules that banks can’t take your tracker from you? Yes and no, if you bought a property as an investment you are not covered by the Consumer Credit Act 1995 (you are not acting as a consumer) or the Code of Conduct for Mortgage Arrears. So any renegotiation can result in the loss of a tracker, staying on interest only (if you are with Ptsb – and others will follow suit) will require moving to a variable rate.

We’ll look at a standard example: Take Joe, he is married and earns €45,000 p.a. and his wife Kate makes €30,000 they bought an investment property with their SSIA’s (€30k deposit on a property for €300,000 in 2006). …

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The importance of Land or Site Value Taxation, Fred Harrison, Karl Deeter and Stephen Reed

Land Value Tax (part1)- Fred Harrison, Karl Deeter and Stephen Reed from Irish Mortgage Brokers on Vimeo.

This is a talk that was given at the School of Philosophy and Economic Science on Wednesday the 27th of October 2010. It covers the reasons for Land or Site Value Taxation being an important aspect of any normal and functioning economy, Fred Harrison gives the economic background, Karl Deeter discusses some of the general societal issues and Stephen Reed relates to his practical experience as a Mayor who used it to regenerate his City.

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Site Value Tax: What is it? How does it work?

I volunteer with a group called Smart Taxes who are a sustainable taxation think tank. This has post is taken from their site (original in link above), and it is well worth reading if you want to hear about the reasoning behind using site value or land value taxation as opposed to ‘property taxation’.

Site Value Tax is a taxation reform included in the Irish government’s current Program for Government. It levies an annual charge on the value of all developed and undeveloped zoned land including the site under every building in residential use.  It does not include un-zoned land i.e. agricultural land, forestry and peat-lands.  It does not include developed commercial property currently subject to local rates but it is expected that SVT will replace commercial rates in due course.  It does however, include land zoned for commercial uses not currently subject to rates.  Research by Smart Taxes and other groups has shown that SVT has clear benefits over other kinds of property taxes from a number of perspectives; macro and micro-economic, environmental and social. …

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