Household Charge and the Home Owners and Landlords revolt…

Heard of the Republic’s new Household Charge? Well few other issues demonstrate the mess Irish democracy finds itself in than the ‘quick, get it out the door’ re-imposition of a domestic rate that’s not quite a domestic rate.

It’s a flat rate tax, and will cost just €100 this year. But with a week to go before it’s due there is barely concealed panic in government over the poor payment rate. The Minister behind its implementation Phil Hogan sent his junior, a jittery Fergus O’Dowd in to bat on Friday on the Late Late Show. His message was, you have to pay it to keep the parks going.

With Ming Flanagan on the same show pointing out just how unaccountable local government is in the Republic (even as Mayor of Roscommon he was told by one of ‘his’ director of finance to stop asking questions on particular financial matters) to rapturous applause.

To say the very least, Mr O’Dowd had what might euphemistically be called an uphill battle.

Then yesterday at lunch time, Labour’s Joan Burton apparently broke ranks, suggesting that Saturday’s deadline for payment of the Charge, (some bright spark at the Indo has just calculated they need 9000 payments an hour to make that target) was ambitious. Whilst incontrovertibly true, she was blamed for mixing the government’s messages.

Whilst Hogan is denying there is a problem, two problems remain outstanding. Knowing with any certainty who owes and who doesn’t (you have to work that out for yourself). And having a convenient place to pay.

In the case of the former, the government is belatedly moving new protocols with the data commission to allow various government agencies to share data. Though, at this late stage it can only have a punitive use in chasing up non payers, rather than encouraging people to pay.

On the second, it seems the astonishment of the Postmaster’s Union last week may have been based on the assumption that An Post had already presented a cheap solution direct payment to Mr Hogan’s department three months ago. The Minister claims only to have heard about this two weeks ago.

In fact it can be paid in a number of ways here. But the measure is as much a dropped government ball as an occasion for a workers revolution (as it is being billed by some). The figure either way is not large.

It will only raise €160 million (€10 million less than the €170 extracted from the national budget). And the charge itself is the equivalent of only about £67 a year. Over and above that, it is only chargeable to home owners and landlords (who will in many cases seek to pass on the charge in rent rises).

In short, it’s a mess. Morally as well as politically. It’s a pretty safe bet that you will get away with non payment. Even if those non payers will be taking the risk that the government does not follow through and force through cuts on local government.

As Nuala O’Faolain noted back in 1988, in Ireland:

people are loyal to their families and loving to their families and sometimes to their mates. But that’s about it. I think if there wasn’t PAYE I don’t think anyone would pay taxes.

Don’t be expecting the emergence of the new Sweden of the western archipelago any time soon…

  • John Ó Néill

    The issue of An Post has been blamed on data protection issues and the statutory basis of various agencies (there are various related interviews during this mornings Newstalk Breakfast show which can be listened back on here, including union reps discussing proposed collection teams from local authority staff and reasons for non-payment). Briefly, it is claimed that the local authorities cannot share data with An Post (whether that is technically correct is a different matter). Registration also requires the inclusion of significant amounts of data that will form the baseline for deeper taxes to be rolled out over the next 2-3 years including [un-metered] water charges, etc. The subsidy of local authorities by central government will no doubt decrease in proportion to monies raised – thus negating the implication that this will be additional monies for local government spending.

    A wholescale re-organisation of local authority financing wouldn’t be out of place, but would have to publicly be off-set by reduction in the widespread stealth taxes that have taken it’s place to raise the revenue alternatively. The household charge is regarded as little more than another stealth tax. Many people believe they paid high stamp duty as an alternative to property taxes, which has caused significant resentment here (particularly when that property is now in negative equity). One explanation being given for non-payment is that people have to register for this rather than universally being billed directly and so the do-nothing scenario has become an opportunity for a form of passive protest.

    On the plus side – some campaigners have asked people to donate E100 to the children’s hospital then post in the receipt in lieu of the household charge.

  • Mick Fealty

    Yes, but that just goes to prove that the protest is largely devoid of politics. It’s a landowners revolt. Anyone who owns land of any description cannot afford £67 pa is taking the michael…

    Also there are actually some people who think that stamp duty and the business rate is adequate to keep local government going is self deluding. It also stretches the credibitliy somewhat of the idea that Ireland PLC can stay afloat by using indigenous taxation when the parties advocating it as cede to such a slender opportunity…

  • Accounts for a lot of very large houses built around the country because there is no ‘relative’ value or sqm charge on property. Fair enough, but PAYE clearly not enough to keep the govt going at any level.

  • Mick Fealty

    N an ideal world, where minutes were hours, the government could have said to the troika don’t make us do this in one year. Give us two and we’ll pull in a lot more than a measly 165 mill. But the Republic is low tax country where even the left pursue poujadiste policies.

  • lamhdearg2

    Ming, and that Beard, surely you are engaging in entrapment Mick!.

  • weidm7

    “people are loyal to their families and loving to their families and sometimes to their mates. But that’s about it. I think if there wasn’t PAYE I don’t think anyone would pay taxes.”

    Which people? What studies were done into this? Have you got names, records, published papers?

    PAYE is not the only tax in Ireland and it seems, based on the fact that the government still functions, that quite a lot of people actually pay taxes that aren’t PAYE.

    Perhaps we might leave the unsourced claims and silly generalisations to the tabloids?

  • Mick Fealty

    80% unpaid rate on the household charge?

  • PaulT

    Mick, is it fair to say that – reading this blog and the one a few days ago that you linked to – you’re not the mot clued up on this.

    Leaving your spin aside on the paltry cost of the charge (for this year) I’d like to make an obvious point that you don’t seem concerned about.

    Not many people in Ireland have bought houses since 2008.

    Anyone who borrowed to buy a house in the 10 years up to 2008 currently owe more to the bank than their house is worth.

    Therefore for a sizable percentage of households this is a tax on a debt.

    Why not create a credit card tax, or a overdraft tax. Your arguement stands, if you can run up a debit you can pay a few euros a year. Simples.

    Put simply there are a lot more taxes to be raised elsewhere and money saved before this one should happen.

    For example the the latest FF resignee Flynn is currently sitting on I think 4 pensions, I also think most people expect to see a 100% tax on him and several thousand others before any household tax is introduced.

  • John Ó Néill

    “Anyone who owns land of any description cannot afford £67 pa is taking the michael…”

    The issue isn’t land, it’s residential property. Those who own a second house already pay non-principle private residence payments of €200 per annum per property (see http://www.nppr.ie). As PaulT has pointed out – this Household Charge is being levied as a flat rate payment to all residential properties (i.e. for every residential property you own) other than those cover by a waiver. If you own a second property you are already paying a property tax for it via NPPR. So, if you own a €2m private residence outright or are in significant negative equity it doesn’t matter, you still pay. If you own a two-bedroom apartment is some suburban hell-hole of an apartment block you pay the same as the those living in Sorrento Terrace or leafy D4.

    As to the idea that the Republic is a low tax economy: tax bands are 20% and 41% for income plus a universal income levy of 2% progressing to 4% (levied on gross salary not after deductions), plus a universal social charge which also progresses from 2% to 4% then to 7% dependent on income (again levied on gross). On top of that you can add the 23% VAT levied on consumers across a wide range of goods and services, stamp duties (which are incurred on more than property transactions), VRT on cars, high tax on fuel (now pretty much the same price as in UK) and a general requirement for health insurance for any level of healthcare provision (with risk-equalisation for VHI keeping costs high regardless of age or health status).

    There is, of course, low Corporation Tax because you’d not want to kill an economy by taxing it just too much …

  • Mick Fealty

    I’m planning to come back to Paul’s substantive point about. It’s still just £67 though.

    I’m in sympathy with the criticism less on the unfairness principle than to the right of people to know exactly what their taxes get spent on. If it is raised locally, as far as is possible, it should stay local.

    I don’t know what Dublin City Council spend, but I am willing to bet it takes in a huge chunk of that €160 mill.

  • Mick Fealty

    Paul,

    I’d be careful about factoring in debt as such. You can have a high debt overhang and still be cash wealthy.

    The people it is hitting worst are pensioners and those on low incomes. Like VAT it’s a flat tax and therefore regressive. Which is one legitimate reason for resisting.

    It comes on top of the section of income tax (base rate 20%) reserved for funding local government and things like the bin charges which are charge exactly because the tax take is too low for the services that are delivered (or formerly delivered) via statutory bodies.

    Further, non of the charges or levies imposed on people since this crisis hit have been lifted or show any signs of being lifted.

    But the effect is cumulative. Ironically, the Irish left is leading a poujadist anti tax charge in a country that is already proactively involved in disguising the short fall between expenditure and income.

    Is it popular? Hell yes. Ireland not only does not like paying taxes it also likes to make a feature of the fact it doesn’t. And then, the icing on the cake, it hates the result of low taxation and often costly over reliance on the private sector contractors.

  • PaulT

    Mick, Pensioners fair much better in the Irish state than elsewhere, and its worth bearing in mind that pensioners are much less likely to have bought a property during the boom years, or if so that they also sold one at the same price ratio and therefore although on a low(ish) income do not have negative equity.

    I also take your point regarding carrying a debt and still been cash rich, however, I think that percentage is so small it can be discarded.

    For example

    “About 80 percent of Irish residential mortgage balances may be in negative equity when house prices bottom, based on a “crude extrapolation” of figures by central bank economists, according to Eamonn Hughes, an analyst at Goodbody Stockbrokers.

    Some 31 percent of mortgage properties, representing over 47 percentage of outstanding hoome loan balances were in negative equity at the end of 2010, ”

    http://news.businessweek.com/article.asp?documentKey=1376-LYTO0M6TTDSE01-4O3R9URNHV5ISBATOSLHC2UAM7

    So with regard to the household charge the Gov is largely taxing a liability, a negative asset, a debt.

    Or in the case of tenants an asset they don’t own, which is probably also a negative asset.

    Now this is my point, is it morally or ethcially right for a state to knowingly levy a tax on a debt.

    “Ironically, the Irish left is leading a poujadist anti tax charge in a country that is already proactively involved in disguising the short fall between expenditure and income.”

    Again its not that simple Mick, there are two Irish Lefts, the Public Sector Left which is the Labour Party which is in government and responsible for this tax. Their mandate is to safeguard the Croke Park agreement and pay lip service to socialism whenever it can.

    The other Left is mostly led by SF but is hardly united, this is the Left will is leading the charge on nonpayment, and will rip up the Croke Park agreement at the first opportunity and nail the higher end PS pensions and salaries.

    I’d also disagree generally on your comments regarding the Irish and paying taxes, your OP uses a 20 year old quote, times have changed greatly, the tax system reformed and I’d say the Irish state is prob better at hunting down the nonpayers than HMRC is

  • Greenflag

    Irish resistance has reached ‘international ‘ears and even brought back to mind Land League days, Captain Boycott and has even dragged Enda Kenny into quisling like subservience to Mr Obama’s paymasters (Goldman Sachs) .

    Is Irish stoicism finally giving way to justified public taxpayers revolt ? and exactly whose side is Gilmore’s pink salmon Labour Party on ?

    http://rt.com/programs/keiser-report/episode-265-max-keiser/

  • Mick Fealty

    PaulT,

    The way FG and Labour segmented the political market in the last election is not a bad explanation as to where the Irish left currently finds itself stranded, but it does not address the residual problem of under taxation

    Of the group under consideration (home owners and/or landlords) pensioners are most likely to be debt free, they are also most likely to be cash poor.

    For the most part, those who are not under direct threat of losing their homes (which, thankfully, is still the vast majority of those trapped in negative equity), £67 is neither here nor there.

    The fact that some people are offering to give it to charity is proof that it is not about the money.

    So if it is not about the money, what’s the principle? “No taxation without representation” would be appropriate in the circumstances. BUT, that’s not what I’m hearing.

    What I’m hearing is good/bad* old fashioned chancerist populism.

    * Delete as appropriate

  • claudius

    I think people are missing the point of this. its a tax on housing because Troika wanted something done and something done quick to show that Ireland were serious about their debt. It was a knee jerk decision to tax houses but in reality it could have been a tax on windows, fireplaces or socks. It was just a means of extracting money and showing commitment.

  • Mick Fealty

    True enough. But the wider truth is, and this charge does not change this or even promise to change it, local councils in the Republic have no binding fiscal or democratic obligations to their local electorate. It’s all divvied up out of centrally collected public revenue and doled out of a pot held by Phil’s Dept of Environment.

    http://sluggerotoole.com/2012/03/22/household-charge-and-the-problem-of-unreformed-and-unaccountable-local-government/

  • PaulT

    The way FG and Labour basically entered into coalition prior to the election was an honest approach, I can’t offer evidence but my gut feeling is that Labour picked up votes because of the fact they would be a junior partner in Govt not actually the Govt.

    Regarding stranded Party’s, Labour is hamstrung by Croke, FF are still sinking, the non-SF Left is flaky, only SF and FG are happy in their skins. Incidently, I can see the EU throwing Kenny a big enough bone in the future that will win them the next election and SF being the offical opposition.

    Why don’t people like the tax, well there’s millions of reasons on various threads on P.ie, that its not proportional is a big one.

    Me, I think subconsciously it needles people because its about property, it was property that created the boom, and what caused the crash, it was overpriced, lots of it substandard, it was fashionable to have as many as possible as an investment, and now they are worth 60% less !!!! it’s akin to bringing in a tax on flowers after the Dutch Tulip bubble burst really.

    BTW what do you mean by ‘under taxation’? or I suppose how do you measure taxation is a better question