Ireland is one of the last countries in Europe that does not fund local services through local property-based charges. The EU/IMF Programme of Financial Support for Ireland commits the Government to the introduction of a property tax for 2012.
The Household Charge is an annual charge introduced by the Local Government (Household Charge) Act 2011 which is payable by owners of residential property. It is a matter for owners of residential properties to register and pay the Household Charge on or after the 1st of January 2012.
A property tax, requiring a comprehensive property valuation system, would take time to introduce and accordingly, to meet the requirements in the EU/IMF Programme, the Government has decided to introduce a Household Charge in 2012.
The new charge is separate from and in addition to the Non-Principal Private Residence (NPPR) charge. If you own a residential property in Ireland, you are obliged to declare your liability for the Household Charge and pay it by the due date, unless you are not liable.
If your house is rented you are liable for the charge and not your tenant. Virtually all private residential properties, including apartments and bedsits, are liable for the charge. There are a few exemptions that are not though; properties owned by an approved charity, government departments or by local authorities and under their schemes and mobile homes, are some of them.
A late payment fee of 10 per cent will be added if the charge is paid within six months of March 31st. This will increase to 20 per cent after six months and to 30 per cent after a year. Late payment interest of 1 per cent per month from the due date will also apply until the charge has been paid.
Since this new measure has been announced by the government, many political and social groups have been promoting their campaign opposing it, on social media, the internet and public demonstrations.
The Irish government and all of the main political parties support the new charge, apart from Sinn Fein. The party’s leader Gerry Adams TD has called on the Taoiseach to axe the Household Charge following the publication of figures which show that less than 7% of households have paid until the end of February.
The Louth TD also called on the government to put in place a plan B to ensure that local councils are adequately funded.
With only days to go before the March 31st deadline the government’s plan to generate €160 million for local councils appears to be in real danger of collapse, according to the Sinn Fein TD.
He called the government to accept that the Household Charge is an unfair tax which should never have been introduced. It is a flat tax that hits the poorest hardest and people on low and middle incomes are bearing the brunt of austerity.
Mr Adams believes that, the Household Charge should be axed and the government should introduce a cap on wages in the public sector at €100,000, as proposed by Sinn Féin. This would raise €265 million “more than envisaged by the Household Charge.”
Another Sinn Fein politician, Senator Katherine Reilly, also believes that the government got it wrong. “The tax scheme should be progressive, regulated to the ability to pay” she notes. This charge is in line with the EU/IMF austerity programme, as an interim measure to property tax, she explains.
The charge is completely unjust, according to the Senator. “People have massive mortgages repayments and the charge is not looking to the ability of a house owner to pay; it is completely unfair,” she says. “People are in the breadline, the households are squeezed with high levels of unemployment, while more and more charges are being introduced,” she continues.
But there are speculations that if house holders fail or decline to register and pay for the new charge, the government will eventually collect it directly from the existing utility bills of the household. At the moment there is an enquiry on the legality of such measure with the Data Protection Commission.
“If such thing happens, Sinn Fein will organize some sort of protest about it-like marching and campaigning against it outside the government buildings,” Senator Reilly said. “The government must take a serious look to that, it is not going to work; people are financially squeezed.”
Gerry O’Donnell from Virginia Co. Cavan suggested that the public should know how these funds raised by the new charge will be used by the government; “I think that our government should publish a list to out-line exactly what we will get in return for this payment; do we get a service? Will they replace and ensure that the roads to our homes are maintained for example,” he pointed out.
Many groups that are campaigning against the new charge are warning that once this charge is introduced, the amount will keep rising and it will also lead to water charges. In most other European countries, water and household tax is a reality for many decades now.
In France the municipal taxes are on average about € 1,800 per household, while in Norway around € 1,448 per annum. In Germany the average water bill is around € 750 per annum. Of course there are many differences between the Irish public services and those of our European counterparts. In many cases the services in other European countries are of higher level.
But how does the household charge is implemented in other EU countries and how does it affect their people? Thanos Kalamidas, an artist and free lance journalist in Helsinki, explains how the Finnish system works: “there is property tax in Finland and it is painful,” he says. “In Finland the idea is that the land belongs to the state and you just have the right to use it, however surreal this might sound in a capitalist world.”
Thanos explains that if you buy and sell property in Finland, your capital gains will be taxed at 28%. There is a separate real estate tax, levied by the municipality as well. Non-resident investors are not exempted from paying this. The property tax rate is based on the value of the real estate, but it generally ranges from 0.3% to 1% of this value. The rate is different for permanent residents, who pay only 0.15% to 0.50%.
Marianne Ranke-Cormier, a Parisian and editor of the on-line Newropeans Magazine, explains how the tax works in France; “in France this charge is called ‘Taxe foncière’ (Land value tax) and also ‘Taxe d'habitation’ (local residence tax) existing since the French revolution, which corresponds to the spirit of equality,” she explains. The rich landowners must also pay and it applies to all real property, built or non-built. However, the tax is levied by municipalities, so the richer the city then the tax is lower.
This is the case for Paris where the taxes are lower than in the suburbs, “which is unequal, as properties in Paris are more expensive, so the rich Parisian owners pay less taxes when compared with the owners of the suburbs,” she says. “It is time for owners of property of Greece and Ireland to contribute to the community for the services they exploit. The land belongs to nobody, it is a common good and I find it normal to pay back to the society for the right to ‘own’ a large or small part of it,” Marianne adds.
Ildiko Gonda, and artist from Budapest explains how this charge affects them, in one of the newest EU states. “In Hungary the tax differs, depending if it is a holiday home, family house or apartment, business premises, building site, etc. It also depends on whether the owner occupies the property, or it is a second real-estate property,” she says.
It varies in the different districts of Budapest and there are wavers, depending on the number of dependants living in the property. There is a penalty tax for sites, because the local government wants to force the owners to fill the gaps and build in the empty site.
In Hungary people live in their majority in their own property like in Ireland. For this reason there are social elements built into the taxation system. “But people are finding tricks to avoid taxation,” Ildiko comments. “From this year, there is such tax everywhere in Budapest, but it works similarly as in France.”
Last year the charge has been also implemented in Greece, as a condition of the EU/IMF bail-out agreement for the debt ridden country. But unlike the Irish, the Greeks were not “asked” to register for it in order to pay; the government there made sure that the charge will be collected as soon as possible.
The house hold tax is being collected through the property’s electricity bill and DEH (Public Corporation of Electricity). DEH is obliged to charge the home owners the new tax in four yearly instalments. The charge is not just € 100, but as in Finland or Hungary it is calculated according the size, value, age, use and location of the property and there are many different levies or wavers for single people, couples with kids, one parent families, etc.
If the home owners fail or decline to pay the tax, then DEH has the right to suspend the electricity provision to the property until the owner settles the bill. The owner has not the right to switch to another electricity provider until he/she has settled the fees. In the case that the owner does not apply for the electricity service reconnection and does not pay the charge, then DEH will inform the relative state authorities to proceed with further persecution of the owner.
Of course the reaction from the Greek public was strong and in many cases violent. According to many, these measures are being implemented the wrong time, when the people are losing their jobs and their salaries are being cut. Others view this as totally unfair, as they feel that they have to pay this tax to save the banks and the mistakes of the corrupt political elite. Water charges already existed in Greece, but the new house hold charge was something that many saw as another way for the government and the EU to rip them off their hard earned money.
Zoe Karasoultani, a journalist from Thessaloniki, Greece commented; “no Greek has agreed to this charge. Nevertheless it has been implemented, but some are still refusing to pay; others like my family have paid it, but with heavy heart. The ones who refused to do so now simply owe the amount to the revenue.” It seems that they will be dealing with them from now on.
If the EU and our governments are trying to harmonize the property taxes in all EU states, or provide the state with more resources to fund public services, it seems that they are doing so during the worse time possible. By using the current crisis in order to push for the desired reforms, they are only turning the public opinion against the new charge.
Introducing this charge maybe a step to the right direction as Marianne has put it, but in a climate of unemployment, austerity and a serious economic crisis, it is a recipe for protests; cutting jobs and salaries while raising taxes and even worse introducing new ones, is never going to go down easily with the public.