Rónán Mullen (Independent)

Ba mhaith liom fáilte a chur roimh an Aire. This legislation comes to the Seanad on the day when the Minister for Finance will take to his feet in the Dáil to announce details of €1.6 billion in tax increases and extra charges in what is the second act of a tragedy, the 2012 Budget Statement. I say "tragedy" because that is precisely what it is for many hard pressed families the length and breadth of this county. The seemingly unending misery of the recession has physically and emotionally scarred individuals and communities. I know we will have the opportunity to discuss the budgetary measures later today, however the point needs to be made that the introduction of further charges and taxes will have an adverse impact on individuals who are struggling with debt and are just managing to put food on the table. To address the proposed household charge, the Minister has provided the following information. We know this new charge of €100 per annum will apply from 1 January 2012 to each house and we are told that it will raise €160 million to fund services provided by the local authorities. I am sure the Minister will agree that the charge, even at a seemingly low level of €100, will put further pressure on the people I mentioned.

Let us look at the issue of the fairness of the tax. Many mortgage holders are in negative equity and many more are at risk of unemployment in what is a contracting economy. Home owners paid stamp duty and VAT when they bought their houses. These large figures were based on a percentage of the value of the transactions and were charged at the point of the transaction, thus they are called transactional charges. People pay these large sums of money in the expectation that the tax, through the funding being dispensed by the Department centrally to local government, would be used to fund local services. Now they are being told that having paid their transactional charges at very high rates they are also liable for this new tax. It amounts to a form of double taxation and it is deeply unfair. For example, a couple in negative equity who bought a house in the past five years and paid a significant amount in VAT and stamp duty are now confronted with this tax. It is patently unfair. In terms of its operation and application, the very rich will pay the same amount as those living in modest dwellings, despite the vast disparity of income and the values of their homes. The rich are paying the same amount as the average or even the poor citizen. This is a form of regressive taxation. The Minister stressed that this in only an interim measure and that a full property tax will be established to replace it in the coming months.

Why allow such a charge to go ahead in the absence of a proper valuation system? This is a blunt instrument, devoid of any nuanced application to take account of circumstances. We are told that a full property tax requiring a property valuation system will take time to implement. Why introduce this measure in the absence of a graduated approach? The EU-IMF programme commits the Government to the introduction of a property tax for 2012, but makes no mention of any stop-gap measures such as this. People are tired of the ad nauseam references to the bailout as a blanket cover for political decisions by Ministers.

The charge will apply to most homes, with the exception of mobile homes, houseboats and housing not yet used as dwellings. This means that NAMA's new apartments and houses will be exempt for now, unless they are being rented. There are also exemptions for certain trusts, for property located in uncompleted estates and for the homes of the old or infirm where the usual occupant has been removed elsewhere, for example, to a nursing home. An exemption will also apply where the home owner is in receipt of mortgage interest supplement. In addition, there is a one-year exemption on properties where the owner has died.

These exemptions are all welcome but they do not go far enough. Tenants in private rental accommodation will find that landlords pass the charge on to them in higher rents. Pensioners, many of whom own their own homes, will be hit hard by this charge. People in receipt of social welfare and at risk of poverty will be similarly affected. This is where the flat-rate nature of the charge and its near universal application will cause the most difficulty. The fact that a multimillionaire and a pensioner at risk of poverty will have to pay the same rate flies in the face of even the most basic concept of fairness.

We all know that new taxes tend to go in only one direction as time goes by. Income tax was introduced by William Pitt the Younger almost 200 years ago in order to finance the struggle against Napoleonic France. It is still with us today. Not that I am objecting; there is a certain case for it. The annual household charge is being set at €100 on its introduction, but when the site valuation system is up and running we can almost certainly expect it to increase. We can only speculate where it will ultimately end up. Will it go as high as 0.5%, for instance, of the value of a property, which would equate to an annual charge of €1,500 on a property worth €300,000? I would be very surprised were the charge to fall in the coming years.

The Bill provides that local authorities will be able to demand information relating to a property in order to enable the Department to compile a database which will eventually be used to impose the successor to the flat charge. Will the Minister of State venture a guess as to the rate at which that successor tax will be levied? We are assured that the new tax will fund vital local services such as fire and emergency services, and provide for the maintenance of streets, public parks, waste services, libraries, open spaces and leisure facilities. However, at a time when many rural communities are seeing vital services being cut back, this promise will ring hollow. I urge that the Government reconsider the charge in view of its impact on struggling families at this difficult time.