SECOND-HOME TAX:THE OWNERS of second houses, including holiday homes and investment properties, are to be hit with a new annual property tax, which could net up to €80 million annually for cash-strapped local authorities.
Second-home owners will have to pay €200 per year for each additional property they own.
According to estimates from the Central Statistics Office (CSO), 200,000 people own buy-to-let properties and another 200,000 have second homes, 50,000 of which are listed as holiday homes.
The money will be used to compensate local authorities for a €25 million reduction in exchequer funding in 2009.
The introduction of the measure was described by Minister for the Environment John Gormley as a "watershed moment" in local government funding.
However, developers who have been left with surplus properties on their hands due to the downturn in the housing market are to escape the charge, as the measure "will not be applied to new dwellings as yet unsold", Minister for Finance Brian Lenihan said.
The new tax, while likely to be deeply unpopular with property investors struggling to maintain mortgages on rental apartments and houses which have suffered sharp declines in values, will come as a welcome relief to city and county managers who had been warned of cuts in funding.
Local authorities have already been ordered to reduce payroll costs by 3 per cent by the end of 2009 and to halve the money they spend on consultants advising on projects other than infrastructure and housing programmes.
Direct exchequer investment in the Local Government Fund, which along with motor tax represents the bulk of local authorities' money, has been cut from €545 million to €520 million, a reduction of 5 per cent.
Collection of the second-homes tax is likely to result in a smaller proportion of the Local Government Fund being made up by direct exchequer funding in subsequent years. Mr Gormley yesterday said he predicted a "warm welcome" from local authorities. However, some city and county councils could be less happy about how the money will be shared out.
The €200 will not be paid directly to the local authorities where the holiday homes or rental properties are located, but will go into a central fund.
"It has to go directly to the Local Government Fund. Each local authority will collect it, but you have to take into account that there has to be some form of equalisation.
"Clearly there are certain local authorities that would benefit more than others," Mr Gormley said.
