Ciarán Lynch (Cork South Central, Labour) | Oireachtas source

-----and other matters but left-wing parties opposing the principle of a property tax beggars belief. In a meeting of the Joint Committee on Finance, Public Expenditure and Reform before Christmas, every economist from the left and the right spoke about the progressive nature of property tax as opposed to income tax. Even spokespersons invited before the committee by Sinn Féin agreed with the concept of a property tax.

The Labour Party has made a mistake on property tax and it made it in 1997. Back then, a property tax was introduced on the market value of houses over £101,000, which is what we were dealing in at the time. It equates to just under €130,000 today. A further requirement was an income in excess of £30,000, which equates to just under €40,000. The average industrial wage at the time was some €17,000, so this was a benign tax. However, following massive media pressure headed by Gay Byrne, which Fintan O'Toole referred to during the presidential campaign, the Government backed away from the tax. What a pity. The type of gatekeeping that would have been in place, if the tax had held, would have caused the abatement of the bubble. At the time, mortgages were issued at a ratio of 2:1 or 3:1 with regard to household income. If people had seen house values approaching €100,000 but wages remaining static, they would realise that something was wrong and that the property sector was getting out of control. In terms of normalising and managing a housing market, which is something the Government is doing through the insolvency legislation and other ways because of the need to have a housing market, the property tax is a critical part.

Who does the tax apply to? There are 1.6 million households in the country. Some 129,000 households are living in local authority houses, according to 2011 figures. Some 25,000 are in rent free accommodation, 15,000 are living in voluntary housing co-operatives, and 300,000 people are renting in the private sector. When talking about hardship, we are referring to the mortgage sector, people whose principal residence is their home. Some 1.1 million people are in that sector and the amazing thing is that half of the people who own their homes do not have a mortgage. In fact, they have not had a mortgage for years and the percentage is now greater than it was in 2011 because new mortgages have been at an all-time low since 2011 but people who entered mortgages in 1993 are now exiting. The proposal by Sinn Féin is not to tax people who can afford to pay a property tax. Half of the homeowners in the country do not have a mortgage and Sinn Féin does not want to tax them.

There is an issue of hardship and it is regrettable that the Bill did not look at equity and progressiveness. In that case we could talk about people in real difficulty rather than the approach of wiping the slate clean and finding €250 million elsewhere. That debate did not happen this evening and that is why we have Darby O'Gill politics coming from our colleagues in Sinn Féin.

The Fianna Fáil contribution last night was very interesting. It appears the Fianna Fáil finance spokesperson does not understand the deferral system. The deferral system is based on simple interest, so that people defer the sum and it runs for ten years. We are now arriving at the point where housing inflation is beginning to return. Even at a rate of 2.5%, if someone defers for ten years, the house will be worth more in ten years time than it is now and the sum deferred will be one third of the value added based on a 2.5% rate. It makes sense for an elderly person to defer because he or she is not leaving a debt but leaving an asset that acquires value at a modest rate of 2.5% over the next ten years.

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