Will the Property Tax be the reason for a government falling

In the 2013 Finance act the Irish Government are bringing into law a property tax, The first such tax in Ireland in many years. The British empire imposed a window tax in Ireland in 1696 which was in effect a property tax.This needed a shocking amount of detailed legislation to impose because as you would expect the people of Ireland did all kind of adjustments to their windows in order to avoid it. Further on in the  1800's the payment of taxes to land owners which was then sent over to London left Ireland  in the grips of a crippling famine in a country with the some of the most fertile land in the world. So will the current Irish government have any more success with imposing this property tax.
 You only have to look at the main street of any small town in Ireland and you will see a scene that you would see in any horror movie where the streets are deserted of humans. Then if you drive through any of the housing estates you will see cars in all the driveways during the daytime, a sign that people are at home rather than at work. The government is constantly talking about its efforts to attract foreign investment which is all great. However to me it appears to be ignoring Irish indigenous business. Small Irish business are been devastated with a lack of trade. It is in this context that the government is imposing a high property tax which will take even more money out of the Irish economy. There is nothing wrong with high taxes if that tax is reinvested in the economy through government spending but this is not the destination of this tax  because all government spending is been reduced or frozen at present. Therefore all additional taxes are ultimately going to be used to repay the debts of either the banks or the government or to repay bondholders. This tax will reduce the amount of money people have to spend in the local shops and businesses. This will further suppress the economy and reduce the amount of vat collectible from businesses, It will also reduce the amount of people employed and the amount of tax from employees and the amount of income tax and corporation tax collected. In other words the amount of tax from the property tax will be offset to a large extent from a reduction in other taxes. Regardless of the government saying the tax will be targeted to local authorities this effect will still happen because the expenditure on local services is to be maintained at current levels or lower levels. Therefore the spin that the tax will be used on funding local services by the local authorities will have no net effect on local output (because it would have been spent anyway) but conversely the reduction of money in people’s pockets will have a dramatic effect.

This tax is in my opinion a fundamental shift from the way tax has been imposed in Ireland in regard to PAYE workers. Self-employed people are used to paying taxes out of the money they have received. However Paye workers get their wages net of tax. This also applies to social welfare recipients. Up to this people can spend their net income in whatever way they want to. However now the property tax will have to be paid out of their net income’s. This means for the first time a lot of people will have to pay tax themselves. It can be argued that motor tax is similar but there is one big difference, motor tax is only due to be paid if you decide to own a car and it is not imposed in the fashion that this property tax is proposed. The majority of Irish people have had very limited exposure to the revenue commissioners. But this is about to change with the property tax and people will discover that if you owe the revenue money then they will do everything to make sure you pay it and will not take no for an answer. In other words everyone who is due to pay this tax will end up paying because it will be deducted from social welfare payments or from net income by your employer, Even if you can avail of the deferral option you will still eventually pay it. However I feel that this may be the moment when Irish people finally stand up for themselves and the resistance to this tax will be significant, as evidenced by the huge percentage of people who have not paid the household charge from last year and also because people are in such a poor financial position that they simply can not afford to pay it.

I do believe that a country should have a property tax. It should be part of an overall tax system. I should be very progressive with normal value homes been at a very low rate of for example €100 per year and then higher value houses owned by high net worth individuals should be subject to much higher property tax charges. The tax however needs to be linked to take account of people’s incomes and levels of assets other than the family home.   The spread of income in the world is represented by a Lorenz curve with very few people holding most of the wealth therefore this should be reflected in the overall tax system. This means people are responsible for paying for their local amenities but not to a level where there is a negative effect on the economy.   There is a lot more issues involved such as using the taxes of the country on proper government spending in the economy rather than paying back bonds to banks and bondholders who are seemingly the only ones in the world protected from the risks associated with business.  Maybe a tax once again will topple a government like the vat on children’s clothes did in the 1980’s