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

The Government has decided, as part of our 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 was 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 following subsequent reviews agreed by all programme partners. The memorandum provides 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." Therefore any proposal to alter the proposed composition of tax or expenditure measures would need to be substituted with measures of equal value.

It should be noted that the arguments in favour of a property tax go beyond the memorandum. The introduction of a property tax is part of a broader approach to the taxation of property. The aim is to replace some of the revenue from transaction based taxes, which have proven to be an unstable source of Government revenue, with an annual recurring property tax which international experience has shown to be a stable source of funding. The taxation of property through a recurring annual tax is less economically distortional than the imposition of tax on either income or capital. This is supported by economic literature and recent OECD analysis. The OECD has highlighted that annual taxes on land and buildings have a relatively small adverse impact on economic performance.

It is a longstanding practice of the Minister for Finance not to comment in advance of the budget on any tax matters that might be the subject of budget decisions. The property tax forms part of a long-term policy to broaden the tax base, provide a stable funding base for local government and assist the strengthening of democracy at local level. Due consideration will be given to a wide range of issues, including fairness, equity and ability to pay, in any measures that may be announced.

Additional information not given on the floor of the House.

Regarding mortgage arrears and negative equity, the Government is conscious of the difficulty some home owners are experiencing in meeting their mortgage obligations. The main focus of attention is on those mortgage holders who are experiencing genuine difficulty in meeting commitments in respect of their home. A range of measures is being advanced in this area including personal insolvency reform, the implementation of the mortgage to rent initiative, engagement with mortgage lenders on the development and implementation by them of mortgage arrears resolution strategies and provision of a mortgage advisory function.

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