Upcoming Irish property tax to cost 'on average' €1000 per house.(can you afford it?)

alastair

kr7 wrote: »

How about not taxing the life out of people for owning/paying for their homes and leaving them money to spend in the local economy, thus creating jobs, reducing the amount of people getting welfare and therefore reducing the deficit.

Mad,I know.

I wonder why the rest of Europe aren't up in arms given that their life is being 'taxed out of them'.

Chips Lovell

out da lough wrote: »

Can I present two alternative scenarios?

Scenario 1:

A couple, living in a house they purchased for €250,000 in an outlying suburb of Cork City. They have a mortgage of €220,000 and their house is now worth €160,000. They have to pay €1200 in mortgage repayments per month.

They each work and pay taxes. She is a Garda and he is a Mechanic. Their gross joint income is €85,000. They bought their house new back in late 2007, and paid stamp duty "on the transaction," but either way, it was money that they had to pay to the government when they bought their house. The government now suggests that they should pay anywhere between €300 and €800 per annum from next year "property tax," because they have an asset. An asset which is worth €50,000 less than what they paid for it.


Scenario 2.

The couple next door rent a house of identical size and design. Their rent is €1200 a month. They both work, she as a quality control analyst, and he as a software support person. Their cumulative income is €85,000. Because they are renting the house, they are not liable for the property tax. Because they do not own an "asset" they are not in negative equity.


****

This, to me, seems unfair.

What you've failed to consider is that couple 1 have an asset that they can sell at a later date or pass on to someone upon their death. Couple 2 don't. It is that asset that's being taxed.

Couple 1 stand to benefit more from local authority services. This is because those services contribute to the value of their property, whether it is road maintenance, parks, public libraries etc.

For me, it stands to reason that property owners should be asked to contribute more, given that they have a vested interest in the upkeep of the area.

alastair

Vladimir Kurtains wrote: »

What you've failed to consider is that couple 1 have an asset that they can sell at a later date or pass on to someone upon their death. Couple 2 don't. It is that asset that's being taxed.

The scare quotes on 'asset' is an indication that current negative equity somehow means it's not a real asset. Despite the fact it can be liquidated for whatever the current market value is.

Aside from the liquidation value of the asset, there's the post-mortgage value of ownership - where couple 2 will have to account for ongoing monthly rental costs into their retirement etc. while couple 1 just have ongoing taxes and maintenance to cope with.

dxhound2005

Plenty of stories in local papers round the country about how much councils will lose from their central grant because of non compliance in their areas. Google for your county.

But there may be hope that these cuts can be avoided with better compliance unless these people in Clare are making it up.

http://www.clareherald.com/news/146-politics/4249-service-cutbacks-could-be-avoided-mayor.html

out da lough

Vladimir Kurtains wrote: »

What you've failed to consider is that couple 1 have an asset that they can sell at a later date or pass on to someone upon their death. Couple 2 don't. It is that asset that's being taxed.

Couple 1 stand to benefit more from local authority services. This is because those services contribute to the value of their property, whether it is road maintenance, parks, public libraries etc.

For me, it stands to reason that property owners should be asked to contribute more, given that they have a vested interest in the upkeep of the area.

But the "asset" is worth considerably less than they borrowed from a bank to pay for it.


If you sell something and make a profit on it then you should pay capital gains tax.

Otherwise, if you are in negative equity then you should be exempt.

In the same way that the government exempts the banks from corporation tax because they are not making any profits at the moment.

If your property has fallen in value by 50% since 2008, how should that factual position be reflected in your tax bill?

donalg1

kr7 wrote: »

How about not taxing the life out of people for owning/paying for their homes and leaving them money to spend in the local economy, thus creating jobs, reducing the amount of people getting welfare and therefore reducing the deficit.

Mad,I know.

But there is no property tax at the minute and yet the above is not happening.

noodler

15bn deficit....not going away...change of Government won't do that....property tax is less than 2bn of the adjustment....etc etc

Chips Lovell

out da lough wrote: »

But the "asset" is worth considerably less than they borrowed from a bank to pay for it.

It may be worth less than you paid for it, but it is still an asset of value. An asset that non-property owners do not possess and will not benefit from further down the line.

Chips Lovell

dxhound2005 wrote: »

Plenty of stories in local papers round the country about how much councils will lose from their central grant because of non compliance in their areas. Google for your county.

But there may be hope that these cuts can be avoided with better compliance unless these people in Clare are making it up.

http://www.clareherald.com/news/146-politics/4249-service-cutbacks-could-be-avoided-mayor.html

That story contradicts some of the other things the government has said. I recall Hogan saying that LA grants wouldn't be based on tax compliance rates this year. Now Clare CC are saying they will be?

alastair

out da lough wrote: »

But the "asset" is worth considerably less than they borrowed from a bank to pay for it.


If you sell something and make a profit on it then you should pay capital gains tax.

Otherwise, if you are in negative equity then you should be exempt.

In the same way that the government exempts the banks from corporation tax because they are not making any profits at the moment.

If your property has fallen in value by 50% since 2008, how should that factual position be reflected in your tax bill?

The factual position in your property tax bill be that the tax is based on current valaution - not a historic one.

And your home isn't liable for capital gains tax - regardless of what profit you make on it.

out da lough

Another scenario:

Couple number 1 sell their house in Ireland, clear their outstanding mortgage and buy a smaller house in France near the sea. They rent this house out to a local French family and receive rental income.

This income, €1000, a month, they use to rent an apartment in Ireland.

Because they are not resident in the house they pay minimum tax in France. The tenants in France pay habitation tax to the local authority.

The value of the property in France appreciates in value by about 1% per annum.


The value of the property in Ireland decreases by about 1% per annum.

After ten years they stop renting in Ireland and move to France where they have an asset which is now worth ten percent more than they paid for it.

Meanwhile their neighbours back in Ireland where they used to rent have paid ten years "property tax" while their property has dropped in value.

Are you trying to tell me that the neighbours are better off?

When people start talking about property taxes elsewhere in Europe, they should really take into account that a lot of taxes elsewhere are levied on the residents of a particular area rather than just the owners or mortgage holders.

Dub XV

Vladimir Kurtains wrote: »

It may be worth less than you paid for it, but it is still an asset of value. An asset that non-property owners do not possess and will not benefit from further down the line.

What kind of asertion is that to make?

For all we know the non-property owners could benefit from now on.......

Who says property owners will benefit further? Am I in for some kind of windfall in the future?

What?

out da lough

Yet another scenario. (Last one, I promise, but I am just trying to throw out examples to get people thinking.)

A couple living in suburban Cork in a house worth €500,000. He is an accountant and she is a doctor.

They decide to set up a trust to provide for their children in the future. They sell their house to this trust for €500,000.

They then rent the house back from the trust for €2,000 a month.

But because they are now tenants they are exempt from property tax.

They are the trustees of the trust and as such manage the assets of the trust for the benefit of their children. When they die, the trust will be liquidated and all assets ( there is really just one: the house),will be divided between their children.

Chips Lovell

Dub XV wrote: »

What kind of asertion is that to make?

For all we know the non-property owners could benefit from now on.......

Who says property owners will benefit further? Am I in for some kind of windfall in the future?

What?

How are non-property owners going to benefit from the sale of assets they don't own?

noodler

Nearly every OECD country has a property tax.

I am sure these loopholes and queries have come up before.

Chips Lovell

out da lough wrote: »

They decide to set up a trust to provide for their children in the future. They sell their house to this trust for €500,000.

They then rent the house back from the trust for €2,000 a month.

But because they are now tenants they are exempt from property tax.

Surely the trust is then liable for property tax?

Dub XV

Vladimir Kurtains wrote: »

How are non-property owners going to benefit from the sale of assets they don't own?

They can't.

But the Homeowner may not make a cent on a sale so where does that leave you? Have you a crystal ball? How do you know what anybody's assets will be worth?

The profit from any sale is no use to me when I am dead by the way.

And they could benefit in that they won't have the Property Taxes Homeowners have

out da lough

Vladimir Kurtains wrote: »

Surely the trust is then liable for property tax?

Nope.

The trust writes off all property related charges, maintenance charges and depreciation against any profits at liquidation.

Chips Lovell

Dub XV wrote: »

How do you know what anybody's assets will be worth?

I've yet to see a property with the value of €0

Chips Lovell

out da lough wrote: »

Nope.

The trust writes off all property related charges, maintenance charges and depreciation against any profits at liquidation.

But it still pays the tax.

out da lough

alastair wrote: »

I wonder why the rest of Europe aren't up in arms given that their life is being 'taxed out of them'.

Greece, Portugal, Spain, Italy, and many other countries have seen protest marches and riots in protest against "the life being taxed out of them."

Dub XV

Vladimir Kurtains wrote: »

I've yet to see a property with the value of €0

You are trying to be smart and that's great.

I said also in that post that it is no good when I'm dead so as long as it's mortgaged and that exceeds the market value you're point is invalid.


You can't speak in general terms about this subject. The only way is if it has to be paid by every household be it Homeowners, renters, SH etc

Chips Lovell

Dub XV wrote: »

You are trying to be smart and that's great.

I said also in that post that it is no good when I'm dead so as long as it's mortgaged and that exceeds the market value you're point is invalid.

It is of use when you're dead. You're house doesn't evaporate when you die. It's an asset that is left to your heirs.

out da lough

Vladimir Kurtains wrote: »

But it still pays the tax.

No it doesn't.

Or in pantomime language, "Oh no it doesn't."

I can go into excruciatingly boring detail as to how easy it is for people to get the benefit of "their" assets without being technically the beneficial owners of them if you wish.

Chips Lovell

out da lough wrote: »

No it doesn't.

Or in pantomime language, "Oh no it doesn't."

I can go into excruciatingly boring detail as to how easy it is for people to get the benefit of "their" assets without being technically the beneficial owners of them if you wish.

What I'm saying is that regardless of whether a trust can write off the tax or not, it still must pay it.

If it is a loophole as you describe, then doubtless countless people will move to avail of it.

out da lough

The main beneficiaries of this new regime will be estate agents, valuers, property management agencies, solicitors and accountants.

The main occupations listed by Fine Gael TD's are estate agents, solicitors, accountants, farmers, and teachers.

Dub XV

Vladimir Kurtains wrote: »

It is of use when you're dead. You're house doesn't evaporate when you die. It's an asset that is left to your heirs.

I could be killed in it because it evaporated.


Get outta that

out da lough

Vladimir Kurtains wrote: »

What I'm saying is that regardless of whether a trust can write off the tax or not, it still must pay it.

If it is a loophole as you describe, then doubtless countless people will move to avail of it.

Most people could not afford to avail of it. They are too busy paying the mortgage.

Look: you have put forward a view that tenants of properties should not have to pay the property tax.

I have put forward a view that one can very quickly become a tenant of one's own property if one has the wherewithal and understanding to exploit the loopholes in the proposed legislation.

I believe that a fairer more equitable system should be put in place to fund "local services."

And it would appear that the vast majority of the people who voted in this poll will not pay the proposed tax when it is introduced next year.

Ray Palmer

Vladimir Kurtains wrote: »

Dub XV wrote: »

You are trying to be smart and that's great.

I said also in that post that it is no good when I'm dead so as long as it's mortgaged and that exceeds the market value you're point is invalid.

It is of use when you're dead. You're house doesn't evaporate when you die. It's an asset that is left to your heirs.

Who pay inheritance tax, cgt and stamp duty if they buy other people's portions.

Chips Lovell

So we should change the system because of a potential loophole that most property owners aren't actually likely to exploit?