The good news for middle class people who own expensive homes is that the Residential Property Tax is likely to be modified or abolished by the Government in the coming Budget; the bad news is that they will be required by law to pay the outstanding 1995/96 charges by next week.
Because the tax was designed to raise funds from the wealthiest and most articulate section of society, it has been subjected to intense and sustained criticism from its inception in 1983. But successive governments have retained it, in spite of its many glaring anomalies. Now, with Fianna Fail and the Progressives Democrats formally committed to its abolition in advance of the general election, the Government parties are reviewing their options.
Fine Gael advocated abolition of the tax in 1992 and neither the Labour Party nor Democratic Left is said to be enthusiastic about its retention. In political terms, the tax is no longer worth the public indignation it generates. One senior politician observed that "the Government received £100m worth of flak last year for a £10m financial return".
The RPT generates intense opposition for a number of reasons. Because of the nature of property values, the location, rather than the quality of the house, is the defining factor. As a result, almost three quarters of qualifying properties are located in Dublin. The RPT is also based on returned, taxable income, with the result that the great majority of compliant taxpayers are from the PAYE sector, rather than paying through Schedule D. Finally, enforcement of the tax has been inadequate.
While he was Minister for Finance, Mr Albert Reynolds commented that a messenger boy on a bicycle would identify more qualifying properties in an afternoon than were returned to the Revenue Commissioners. Of the 31,000 houses countrywide assessed as exceeding £94,000 in value in 1995, almost 11,000 were exempted on income grounds. The toughest provision under RPT requires an up to date clearance certificate before a property can be sold.
Service charges, for water and refuse collection, are also generating political tensions. And it is regarded as unlikely that the RPT will be dealt with in isolation. The combined taxes raise about £80m a year and the cost of abolition would be substantial, while narrowing the tax base. As a result, the Government may undertake to phase them out over a two or three year time period while, at the same time, putting new local authority funding mechanisms in place.
The removal or modification of the RPT is not, therefore, likely to bring an end to property taxes in this State. All Dail parties are moving slowly but inexorably towards the granting of real powers to local authorities. And with those new responsibilities will come the need for adequate funding. A succession of official reports recommended the introduction of a broadly based property tax as the optimum way to proceed.