Patrick Nulty (Dublin West, Labour) | Oireachtas source

I am very glad to have the opportunity to speak on this legislation and will begin with some of its positive aspects. I welcome the Minister and congratulate him on making positive changes, particularly with regard to people who have received housing adaptation grants. It is important consideration was given to their situation. It is also right that consideration is given to people acting as executors of a will for a relative or close family member. It was also important to recognise the position of people who suffer as a result of pyrite in their homes. The State has abdicated responsibility over many years through the lack of policing of building controls and regulations. It added to this by dragging its feet in the case of pyrite infected homes. I know some of those affected by pyrite personally and have been in their homes. Subject to the criteria and regulations of the Government's policy on pyrite being published and examined in detail, it would be churlish of those who have not been campaigning for that exemption not to acknowledge and welcome the changes. I wish to do that now. I have been struck by the changes that have been made in regard to personal insolvency. This seems somewhat like providing people with an exemption when the horse has already bolted. People in this situation are already in strenuous and difficult insolvency or debt settlement mechanisms. The point those of us who have been critical of this form of property tax have consistently made is that it will force more people into financial difficulty and force more people into mortgage arrears and into a situation where they are falling over a cliff in terms of their finances. How can somebody who is already in mortgage arrears and who is already paying interest-only on his or her mortgage be asked to pay a property tax on what is called an asset, when in fact it is a liability because the mortgage is larger than the commercial value of the property? That is economically irrational. Saying people in this situation will get an exemption, when they are already in a dire financial situation and have been forced to enter into debt settlement arrangements, does not seem to grasp the argument being made. An exemption in this case certainly does nothing for people in mortgage areas and to pretend it does is disingenuous.

I have listened to earlier contributions suggesting a property tax is progressive. The suggestion has been that those of us who make no bones about being on the left in terms of political debate in Ireland should be cheerleaders for a property tax. I reject that. I and many others certainly support a wealth tax, but that is very different from what is being proposed here and the mechanism through which this tax will be collected exposes this. Shortly after the Minister took office, he said in response to a parliamentary question in the House - I am sure the Minister takes these questions seriously and analyses them with diligence and rigour - that a wealth tax based on the model applied in France would bring in nearly €500 million a year. I assume he stands over that and that the Department was correct on that information. When talking about a wealth tax, we are not talking about an onerous imposition on those who create wealth, but about fair taxation. We are talking about citizens contributing to their society based on their ability to pay. A moderate wealth tax on a graduated scale of between 0.1% and 1% on financial assets - less mortgages and commercial liabilities - of over €800,000 or more, as a solidarity charge, is reasonable. When François Hollande took power and was given a mandate by the people of France, he reversed Sarkozy's changes to France's wealth tax. Other countries have introduced wealth taxes and there is a growing drive across Europe for the introduction of wealth taxes. For example, the Labour Party in Britain, the Social Democratic Party in Germany and others are all looking closely at this option. Why would we not introduce a new, moderate form of taxation to bring in €480 million a year to the Exchequer? How many special needs teachers would that provide or how many hospital beds would it open? According to the Department, a wealth tax would raise €480 million. Why would we not consider that? What difficulty is there with doing that? The idea that every wealthy person would suddenly go onto Aer Lingus.com and start booking flights to leave the country within 24 hours or a week is farcical, because we are talking about financial assets, shares and commercial property. These are assets that cannot simply be moved. This wealth tax would be a much fairer way to generate revenue, but it is not even being considered or debated. The property tax will hit domestic demand and spending. I know of a small unit of shops in an estate where two of the units have closed their doors for the last time. January this year was as bad for them as it has been since the crisis started. This is because people know property and water charges are coming down the line and this is impacting on their spending and killing domestic demand. In addition to this, we are removing jobs from the public sector instead of protecting them and keeping people in employment to provide the services we need.

I profoundly disagree with the economic thinking and rationale underlining the Minister's strategy. Yesterday at Question Time, the Minister mentioned the need to look at the supply side and the promotion of innovation and new technology and products. That is important and welcome, but there must be demand and people must have the capacity to spend in their economy.

This property tax undermines and dampens that further. The average home will be hit with a bill of €300 or €400. The water charges are next down the line. All of these public services are provided to people. People have a right to expect that their local authorities will clean the roads, install ramps in their estates if needed and provide clean water. The local government fund, which was established to provide for that, was raided by the last Government and, unfortunately, by this Government. It is simply untrue to pretend that this is new revenue. It is simply an accounting trick.

My view is that for every €100 raised through the property tax, €75 will be sucked out of the domestic economy. Some 180,000 mortgages in this country are in some form of distress or difficulty. According to the Central Bank, more than 10% of private mortgages have been in arrears for 90 days or more. The level of Irish mortgage arrears debt reached €16.8 billion last September. The introduction of the property tax will exacerbate these problems. As I have said, none of the cheerleaders for this tax has explained how those who are already in mortgage arrears, many of whom cannot do a weekly shop because they are financially crippled from doing everything they can to pay their mortgages, will find the money to pay this tax. When they reflect on the matter deep in their hearts and souls, they know that the people who call to their clinics and are being crushed by this country's myopic and disastrous economic strategy of austerity will not have the money for this tax. That is the truth of it. When new taxation measures are imposed in a depressed economy on people who are paid average and lower incomes, it depresses the economy further and creates a more divisive and fractured society. When one compares the revenue gained from such a measure to the revenue lost in other sectors of the economy, which is the bottom line, one finds that one does not even generate the funds one claimed one would generate at the outset.

Some people have suggested that there is a progressive case to be made in favour of a property tax. This is based on the idea that one should tax assets that accumulate wealth. Of course I am in favour of taxing assets, for example to deter those who would seek to distort the property market. Following the collapse of property prices, people are starting to buy property as an investment again. In doing so, they bleed dry those who cannot acquire their own homes and have not been provided with social housing. As a corollary of that, the State pays people's rents through the Department of Social Protection's rent allowance scheme. Our housing policy is in absolute crisis. There are 100,000 people on the waiting list and we are spending hundreds of millions of euro on rent allowance. It is completely wrong that investors are now coming in to distort the market again.

The Minister has said that people in local authority housing will be on the lowest level of payment, which is to be set at approximately €90 a year. This is supposed to be a tax on an asset, but local authority tenants do not own these assets. They return their properties at the end of their lives. As there is no asset for them to be taxed on, how can it be said to be a tax on their asset? It is simply irrational and illogical to impose this tax as another charge on such people.

The decision to give the Revenue Commissioners carte blancheto collect this tax through people's wages and payslips reveals the truth that this is just another tax on PAYE workers and ordinary citizens. There is an ideological objection within Fine Gael to the taxing of higher incomes and that is why I cannot support the Government. We have no common ground when it comes to our analysis. I respect the Minister's mandate and I accept that he acts with sincerity. However, the manner in which this tax is being introduced underlines the fact that he is profoundly wrong in his analysis of the economy and the future direction of our society. I will oppose this measure.

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