THE Commission on Taxation has called for property taxes to be levied on all homes in the State, with a few minor exemptions.

The tax would initially be a self-assessed tax, with home owners asked to file a tax return indicating the approximate worth of their property.

Homeowners would be told to indicate if their home, for example, fell within a band of between €250,000 and €500,000. Other likely bands would be between €500,000 and €750,000.

If the property tax proposals are implemented, the average payment would be less than €1,000 per annum and could be in the region of €600 to €800.

Also recommended is that stamp duty be phased out with the implementation of a new property tax.

A transaction tax like stamp duty has proved to be hugely unstable as large amounts of money were generated from it during the housing boom, but the stamp duty tax take collapsed when the property market crashed.

The commission does not specify what rate the property tax should be set at. Instead it indicates that the new property tax should raise around €1bn for the cash-strapped Exchequer.

To raise this much would require a property tax of between €600 and €1,000 on each home. Members of the commission have agreed the property taxes should be imposed on all homes - except those of the lower paid and the elderly.

The proposal is that the self-assessment system would be replaced, in time, with a comprehensive valuation put on every house in the State.

Problems

It is likely this would have to be carried out by a much expanded State Valuations Office. However, the proposed new property tax is expected to run into the same problems as the disastrous property tax in the early 1990s, which was seen as hitting Dublin residents disproportionately.

The commission, which is made up of a range of people from accountancy firms, unions, employer bodies, academia and charity groups, was aware that house prices were tumbling. This means that owners would be unsure of the value of their homes, but the commission expects house prices to stabilise over time.

Commission members were also aware that retired people and the low-paid would not be able to pay a property tax and this should be taken into account, the report recommends.

As with the recommendation for water charges, funds raised from a new property tax should be used to fund local authorities.

Any new property tax imposition on households should be balanced by lowering the likes of the income levy, the commission says.

IRISH INDEPENDENT, Charlie Weston: Personal Finance Editor