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July 28, 2009



You capital gains is also a once off tax - like stamp duty - and therefore prone to the 'shuddering halt' that happened to stamp. In other words, as the economy hits trouble it contributes to accelerating the drop off in revenue. A RPT is not cyclical and therefore more even (true, for those who loose their jobs the tax would presumably not be payable and therefore it would still drop off like all taxes but not in a step function like stamp).

You said it would stabilise the market because the 'lack of taxation' was a factor in destabilisation. But what is stamp only a tax. So there was a tax, just the wrong kind of tax. I cannot see the stabilising influence of a capital gains tax.

Plus I see a major disadvantage of both stamp and capital gains on primary residences. It punishes those who want to move. This is a serious limitation on people's choice of where to live and economically, a barrier to flexibility in terms of the labour market.

Yet for all that I appreciate the difficulty in levying a fair RPT. The 'tax d'habitation' in france was essentially an annual property tax, but like all french taxes it was hideously complicated to calculate. Having said that, if you want to take into account a fairly accurate picture of peoples' real ability to pay, you need to get a bit complicated.


I'd like to be educated Michael!

Is there anyone out there proposing a ‘flat tax’? Has anyone calculated where we would be if we simply imposed the same tax rate on all income / profit / capital gains / inheritance, with no tax avoidance loopholes, no tax deductible spending, no sales taxes and so on.

You start with a single person’s tax-free allowance, increase it fairly generously based only on the number of dependants you have then swipe the same proportion of what’s left regardless of who you are or how you come by your income.

Does it ever get suggested in this country? Would it work?

Michael Taft

Tomaltach - I am in general agreement with your comments. I referred to the fact that taxing the sale of houses is tansaction-related. Going forward, we will have to find ways to limit the boom-bust cycles that we experienced recently. And, yes, no one tax can of itself staabilise a market - especially when you had a government doing everything it could to over-heat the damn thing. However, this is a measure that would truly 'broaden' the tax base to a source of revenue that up to now has been exempt. It will do so in a non-deflationary way. It is a long-term measure to address the structural deficit, not a short-term measure to address the cyclical deficit (which I don't think can be done through fiscal measures).

My real fear is that the Government has no vision of the future tax structure. They may well bring in a RPT. Then it will tinker around to off-set the worst effect of RPT. None of this will be done to any type of architecture.

As to stamp duty, its a pretty mangy levy with no internal consistency or, increasingly, logic. Does anyone pay it anymore anyway, so many exemptions and high thresholds does it contain. I'm not sure about scrapping it but clearly reform is needed to remove the step-effects. This is one case where removing all exemptions and thresholds would allow us to reduce significantly the rate of stamp duty on a cost-neutral basis.

Ultimately, the medium-term future isn't bad for the housing (or, at least, the residential construction) sector. We still have a young demographic. But before we go off with this tax or that let's examine all aspects of the market - in particualr those sectors that have been ignored for to long such as the rented sector, planning and land use, the rehabilitation and green sectors (its also about the quality of housing we buy and sell), etc. If after all that, we can make a RPT work equitably in a stable and affordable market, let's do it.

dealga - strangely enough, flat-rate tax never really took off here as an idea. The defunct Open Republic used to talk about it, the odd commentator would make references to it, but that's about all. The one organisation that pushed it was CORI - but that was part of their Basic Income proposals. A back of the envelope calculation - using Colm Keena's figures produced some time ago in the Irish Times - indicates that a flat-rate 15% would bring in the same money (on paper, anyway) as we got last year in income tax revenue. Throw in capital gains, acquisitions, etc. - the rate would be less.

Of course, that would mean a huge increase in taxation for the low-paid while a huge tax windfall for the higher paid. But there are things that flat-rate can teach us - namely the benefits of examing the regressive features of so many tax reliefs/allowance, and the principle of treating all income - whether labour or capital - the same.


Michael -

Would capital gains on a PPR not disadvantage lower income workers at the expense of those with higher incomes? You already have to pay capital gains on investment properties - so investors avoid paying any additional tax under this scheme. (A RPT also incentives actually using additional properties owned, Ireland has a high percentage of empty properties). Also on this point, investors played a bigger role in driving up Irish house prices than owner occupiers - paying over €100,000 per property extra in 2006 (from memory, but I think via Derek Brawn's Ireland's House Party book).

Also higher earners may avoid paying it, by keeping their PPR when they move house and renting it out instead.

Having to pay capital gains and stamp duty when you move to bigger house (because your family is expanding) seems harsh to me too. If Sean and Mary are in trouble now, let's pray there's not another bun in the oven!

Finally, Sean and Mary have a tax liability above of €69,000 in todays money. But if the residential property tax is of the order of €600 per year (increasing with inflation) over 30 years their tax liability is only €18,000 in todays money.


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Thank you so much for this topic.

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