Property tax will be based on valuation, not square footage

A PROPERTY tax based on house valuation rather than square footage will be introduced in the budget, the Government’s latest submission to the International Monetary Fund and EU indicates.

A senior Government source said the “value-based” property tax to replace the household charge mentioned in the documents would be calculated on the basis of current market value instead of property size.

The Cabinet is expected to consider a detailed memo on the tax on September 4th. Water taxes are anticipated towards the end of next year, when a domestic metering system is due to be in place.

In December’s budget, measures to raise at least €1.25 billion will include “broadening” the personal income tax base, “restructuring” motor tax and increasing excise duty and other indirect taxes. The €1.25 billion includes a carryover from 2012.

On spending, “social expenditure reductions”, a cut in the total public service pay and pensions bill, as well as savings in capital expenditure, will be part of €2.25 billion in cuts.

The updated EU-IMF programme document was published on the Department of Finance website yesterday after the seventh review of the programme last month. Letters and memos from Minister for Finance Michael Noonan and Central Bank governor Patrick Honohan were sent on Monday to European Central Bank president Mario Draghi, IMF managing director Christine Lagarde and other senior figures.

The papers outline targets to be met by the end of the year, including detail on the publication of a budget for 2013 targeting a further cut in the general Government deficit.

A progress report on the transfer of water services provision from local authorities to the new State-owned company, Irish Water, is required by the end of the third quarter of this year. It must include an update on “the roll-out of a domestic water metering programme with a view to start charging by the end of the EU-IMF programme period”. The bailout is due to end in late 2013.

In health, the Government is committed to specifying “quantified measures to eliminate the spending overrun” by the end of this year.

The documents confirm Minister for Social Protection Joan Burton will soon present options to Government to plug the deficit in the social insurance fund “in the context of budget 2013”, having assessed a review that will warn of a significant shortfall. Ms Burton favours making up the shortfall by increasing PRSI contributions, a stance criticised by two Fine Gael Ministers.