This is a statement sent out from the IPOA, it makes a lot of very valid points and also raises the spectre of cost-push inflation in rental costs. Nobody stands to gain from the current increase in rental costs, not the tenant, not the landlord who is using the increase to set off higher costs from taxes and other state imposed costs and certainly not the people who manage or live in rented property. The only beneficiary of this is the exchequer.
It has been reported that rental rates in some parts of the country are increasing, but that is hardly surprising given the enormous direct and indirect taxation levied on landlords.
The landlords’ national representative body, the Irish Property Owners Association (IPOA), invented a new verb to describe the situation – to “taxsault”. And they said that is precisely what is happening now. “Private landlords cannot be expected to subsidise the rising costs of letting,” said the IPOA’s Margaret McCormick. “They have to cover their costs including heavy mortgages, try to earn a sustainable income and pay their taxes, just like everyone else. Private landlords are continually seen as easy pickings for the obsessive way in which the Government is seeking to raise revenue – but in the process, they are ignoring fairness and equity.”
The latest “taxsault” is the double taxation applying this year in respect of the now abolished Non-Principal Private Residence (NPPR) charge and the new Local Property Tax (LPT). The Minister for Finance told the Dáil that LPT would be deductible against rental income, but then very quietly announced that it would be phased in “at some stage”. The IPOA said: “It is either a legitimate expense in the business of letting property, or it is not. It is a bit like a woman saying she is a little bit pregnant, or like the familiar saying attributed to St. Augustine: ‘God, make me good – but not yet’”. The IPOA’s Stephen Faughnan added that if it is a legitimate expense, it cannot be just phased in “as if it is some fantastic concession”.
But the IPOA listed this as only the latest in a series of taxsaults “against all the rules of equity for private landlords”. This year, without any allowance against rental income, landlords had to pay one year’s NPPR charge of €200 per unit of accommodation, followed by their own assessment of LPT – ostensibly to pay for the ‘local services’ which are enjoyed by the tenant. This is due to be followed again by a so far indeterminate amount in Water Charges from 2015 (but backdated to September 2014).
Stephen Faughnan said: “We don’t yet know how the Water Charges will be levied – or on whom in the case of rental property. And all of this is compounded by the notion that landlords can somehow just absorb the 25% of loan interest which they are not allowed to claim as a business expense (even if they are operating at a loss), along with the imposition of PRSI on rental income (with no corresponding benefit for landlords) and the Universal Social Charge. And then of course, they have the normal income taxation without many of the allowances available to others.”
The proposed Broadcasting Charge is another reason for landlords to worry, he said, although he noted a direct commitment from the Minister for Communications that it would apply to households rather than owners – “but, given the sleight of hand over the property tax, we need to keep our eye on that ball too,” he maintained.
Margaret McCormick also noted that if private landlords “were not providing accommodation for 700,000 people, the State would have a much more serious problem in trying to house them”.
The Revenue Commissioners describe rental income as “unearned income” when the reality is that landlords are operating a business which has costs, just like other self-employed people. Stephen Faughnan said that the Minister for Finance was questioned in the Dáil last year about this: “All he could say was that the Revenue Commissioners designate rental income as ‘unearned’, as if he, as Minister for Finance, has no role in ensuring that taxpayers are treated fairly”.
The IPOA maintained that Ministers do not appear to fully understand the service provided by private landlords. “Which is rather surprising given that a large number of Ministers and Government backbenchers are landlords themselves,” said Stephen Faughnan. “Landlords cannot continue to have their so called ‘unearned income’ unfairly slashed at all levels. It is time that Ministers woke up to the fact that private landlords are actually partners in the provision of housing. When landlords are in a profit making situation, they pay their share of taxes. But remember, landlords also paid substantial Stamp Duty when investing in the provision of housing, and if they are lucky enough to make a profit and not be in negative equity, they pay Capital Gains Tax when selling.”