Mark Daly (Fianna Fail) | Oireachtas source

I welcome the Minister of State. We have serious concerns about the format in which the property tax legislation is being introduced. It is not a tax on income nor does it take account of ability to pay.

Bringing in a property tax that does not correlate with people's income will put more people with mortgage difficulties into deeper and deeper trouble. That has been our essential point all along. In order to bring in a property tax, one needs first of all to look at the mortgage crisis where 30% of mortgages are either in arrears or have been restructured by the banks. This shows the depth of the crisis but what it does not show is how much worse it will get because we have the lowest central bank rate in Europe at the moment with the ECB rate below 1%. A total of 180,000 people are on tracker mortgages. These were introduced by the banks between 2004 and 2007, which was when most of them were taken out and the highest prices were paid. Those on tracker mortgages have the worst negative equity and the largest loans. They are lucky to be on tracker mortgages because the banks have free rein and were not controlled by this or the previous Government when it came to raising interest rates on those who were not on tracker mortgages. When the ECB rate goes up over the next three, four, five or six years, all those on tracker mortgages will become part of the group in arrears and difficulty and will need restructuring. We are taking money from people through the universal social charge and cutting public sector pay, levying more tax and implementing more cuts. When their mortgage bill comes in as the ECB bank rate goes up, we will have a larger mortgage problem. I said before in this House that the guy who told us we needed to solve our mortgage problem was none other than Bill Clinton. He said that at the Irish Global Economic Forum, the second anniversary of which is coming up in November this year. We have not really tackled that problem at all. We have brought in the legislation relating to debt and debtors yet we know this will only account for a few thousand people per annum. That does not take care of the hundreds of thousands of people who find themselves in mortgage difficulties.

I am also an auctioneer. Sending out estimate evaluations of properties will lead to widespread confusion. I am confused and perhaps the Minister of State could clarify this on Committee Stage. Will a scenario arise whereby if somebody honestly puts in a figure of ¤180,000 and sells the house in five or ten years' time, somebody from Revenue can decide that the person undervalued the house in May 2013 by ¤50,000 and, with penalties, now owes Revenue tens of thousands of euro? The reason I am asking for clarification is because I have read different accounts in newspapers as to what happens in those cases.

I have asked the farming bodies whether they received clarification from Revenue about what happens when it comes to farmhouses adjacent to farm buildings and apparently they have. As a valuer, I am well aware when one is adjacent to a farm building, one cannot sell a farmhouse without selling the farm buildings. We were told by Revenue that one values the farmhouse, an acre and buildings but I believe farm buildings are to be excluded. What that would mean is that any farmhouse adjoining slatted units or any of the commercial elements of the farm would be worth less than ¤100,000 because nobody will buy a farmhouse unless he or she has control of the adjoining sheds. By virtue of the valuations method about which Revenue is talking, the Government is automatically ensuring that every farmer will pay under the figure of ¤100,000. I would like clarification on that issue.

There are so many anomalies. The most significant issue raised on Committee Stage in the Dáil was the ability to pay clause. I know there are deferrals but those thresholds are not particularly high. Deferral means that one is, to use that famous terminology, kicking the can down the road. We have seen debt forgiveness for the multimillionaires and billionaires. Here we have all these mortgage-holders who are struggling to pay their mortgages. We levy a property tax and keep cutting child benefit and the income of gardaí, which is of serious concern. I am sure colleagues opposite are aware of cases where gardaí are finding it difficult to pay their mortgages. If a garda is taken to court for inability to pay, he or she loses his or her job because a garda cannot be declared bankrupt and still retain his or her job.

We have not tackled the core issue. If the mortgage issue was tackled, the Government bringing in a property tax would be seen as part of what we should never have done, namely, getting rid of the property tax in 1977, and would be seen as part of normal Government income and expenditure. However, this is not a normal situation so bringing in a property tax now does not solve the problem in terms of Government revenue. It just adds to the problem by ensuring people spend less money in the economy. They are afraid their mortgages will go up and the tracker rates will go up. We will then ensure that the economy continues to spiral downwards.

I would like to get the Minister of State's view on when and if Revenue can tell people their property was undervalued on day 1. As a valuer, I would find it very difficult to put an accurate value on people's houses. There are three methods of valuation. One does it by comparison. There is very little moving so, therefore, how does one compare properties, especially in rural Ireland where properties can be uniquely different? One can use a residual method where one gets the site value and the cost of building the houses. We all know that one can buy a house for less than it would cost to build it.