Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The Government has decided, as part of its obligation under the EU-IMF programme of financial support to Ireland, to introduce an annual recurring property tax. In the latest memorandum of understanding between the Government and the troika, a commitment is given to introducing the tax in the forthcoming budget. The introduction of a property tax has been a condition of the programme since it was first negotiated in November 2010, under the previous Government, and has remained a condition of the programme following subsequent reviews, which are agreed by all programme partners. As stated in the terms of reference of the interdepartmental group on property tax chaired by Dr. Don Thornhill, the property tax is to meet the immediate financial requirements of the EU-IMF programme. The fiscal consolidation conditions in the programme are set with a view to meeting the adjustment path agreed at the ECOFIN Council in December 2010 for the general government deficit, in order to bring it below 3% of GDP by 2015. For 2013, this adjustment path sets a deficit ceiling of 7.5% of GDP.

The memorandum of understanding for budget 2013 provides for overall fiscal consolidation of €3.5 billion, to be made up of €1.25 billion in tax measures and €2.25 billion in expenditure reductions. The memorandum of understanding does provide for substitution of measures in certain circumstances. It states that "without prejudice to the minimum consolidation amount referred to in the previous paragraph and to the requirements to achieve the agreed fiscal targets, the Government may, in consultation with the staff of the European Commission, the IMF, and the ECB, substitute one or more of the above measures with others of equally good quality based on the options identified in the Comprehensive Review of Expenditure (CRE)". Therefore any proposal to alter the proposed composition of tax or expenditure measures would need to be substituted with measures of equal value.

Furthermore, the memorandum of understanding states that the Irish authorities will "Consult ex-ante with the European Commission, the ECB and the IMF on the adoption of policies that are not included in this Memorandum but that could have a material impact on the achievement of programme objectives".

The property tax forms part of a long-term policy to broaden the tax base, to provide a stable funding base for local government and to assist the strengthening of democracy at local level. A Bill to introduce the tax will be published with the forthcoming budget. No final decision has been made as to the rate or basis of assessment of the tax.

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