An annual tax on residential properties should be introduced, and stamp duty on principle private residences should be abolished, the Commission on Taxation has recommended.
The proposed annual property tax recommended by the 17-member commission would be based on the market value of a property, using valuation bands, and would apply to all residential homes except local authority and social housing units.
However homeowners who paid stamp duty will be exempt from the annual property tax for seven years from the time when they bought their property.
The proposed annual property tax would also apply to second homes, holiday homes and rented properties and would replace the €200 levy introduced earlier this year, which currently applies to such properties.
Revenues raised from the new tax should be ear-marked for local government financing, it recommended.
In its 500-page report, the commission said that setting the rate of the annual property tax is a matter for Government, but it set out some scenarios to illustrate the potential impact of the tax.
For example, if a rate of 0.25 per cent were introduced, the annual property tax on a home valued between €150,001 and €300,000, (the most common category in the country), would be €563. This would rise to €675 a year if a rate of 0.3 per cent were applied.
The tax would be self-assessed, i.e. property owners would have to calculate the tax due themselves, rather than being directly assessed. The commission called for the establishment of a residential property database to help homeowners to value their properties.
It also recommended a waiver be provided to exempt home-owners earning below a certain income threshold from the tax. The threshold for the waiver should take into account criteria such as social welfare rates and the annual minimum wage, it said.
In other cases where the taxpayer is unable to pay the property tax, an option to defer and roll up the tax should be provided. The tax could be collected when the property is subsequently sold or transferred. “The principal target group for this deferral option is those on lower incomes with valuable properties who lack the case resources to finance the annual tax,” the report said.
A wide range of payment methods for the proposed property tax should be made available by the Revenue Commissioners so that homeowners will not face one single annual payment. “In particular we would like to see PAYE taxpayers have the option to pay their property tax through the PAYE system,” the report said.
Once the annual property tax is introduced, stamp duty for purchasers of principal private residences (i.e. a person's main home) should be zero-rated, but stamp duty should continue to apply to investor purchasers of residential housing.