Lies, Damned Lies and …

The furore over Ireland's Household Charge has degenerated in to an argument about numbers: how many had or had not registered and paid by the March 31st deadline; how many attended the protest outside Fine Gael's ardh fleish over the weekend.

Spin and miss-information continues to characterise the debate with those opposed to the charge being the worst culprits. Their campaign is full of scaremongering about the supposed unfairness of the charge which will, they claim, bear most heavily on those least able to pay.

Many people who will quite genuinely find it hard to set aside €100 towards the cost of local government services are angry and distressed. The truth is that most of the poorest citizens are exempt from the charge so the cynical rabble rousing by various bodies of the extreme left in Irish politics is playing unnecessarily on their fears.

House owners are the only people eligible to pay this charge. Tenants are not. And organisations that provide social housing - local authorities, housing associations - are also exempt from the charge.

The protest leaders harp on about the need to tax the wealthy more heavily than the poor. Show me a landlord who is not wealthy and I will show you someone who thought he or she could make a quick buck out of property during the boom years; someone, in other words, whose greed got us into this mess in the first place.

Cynicism of the extreme left

The leaders of this protest are cynically manipulating ignorant and ill-informed people. The level of ignorance and distance from reality was illustrated for me by one of the crassest statements I have ever heard. It came from a woman following a protest meeting in Tullamore last week. Interviewed on local radio she likened the situation in Ireland to that in Syria. The clip was repeated on several news bulletins throughout the day so there is no question that I might have miss-heard.

Now you can argue all you like about the number of people attending protests or registering to pay the charge but I can tell you with absolute certainty how many Irish refugees are streaming into Northern Ireland as a result of having their homes destroyed by government shelling. And I don't think anyone would dispute the figure.

What motivates the leaders of this protest? There can be little doubt that for some it is envy. For others it is the desire to create a socialist republic in which wealth would be taken from the successful and used to shore up an already featherbedded bureaucracy. Have such people not read any history? Have they seen what life is like for ordinary citizens in the planet's only remaining socialist republic? The people starve whilst their government develops nuclear weapons.

I deplore the notion that some people are in receipt of rewards out of all proportion to their contribution to society. But it is too easy to forget that unless that money is buried in a hole in the ground it inevitably finds its way back into the economy, as its (temporary) holders spend or invest it. Both activities are much more likely to create jobs for ordinary people than is any programme devised by a socialist administration.

Property Tax Pros and Cons

The Household Charge currently being introduced in Ireland is an interim measure pending the introduction next year of a "property tax". It is argued that Ireland is one of the few countries in the developed world that does not levy a tax on private domestic property and use that levy to fund local public services.

The notion of taxing property, or more specifically, land, goes back a long way and is based on the belief that the land and the natural resources on and under the land should be held in common. It is not possible to make a moral case for ownership of land and natural resources to be held exclusively by a single individual or family. Any rent charged for the right to develop and use the land rightfully belongs to the community. A property tax is therefore justified on the basis that it returns to the community a portion of the value generated by use of the land.

Location, Location, Location

Whilst this can readily be seen to apply to commercial uses of land, how can it be applied to domestic property? Especially in the case of the ownership of a single dwelling? The answer can be found in the old estate agent's adage "Location, location, location". Homes that are established close to good public amenities command a higher value than those in isolated locations. It follows that the increased value that arises because of those public amenities should be taxed in order to contribute to the cost of providing those services.

In a paper produced at Dublin Institute of Technology in 2005 Tom Dunne enumerated these arguments and went on to highlight the practical difficulties associated with the implementation of such a tax. It makes interesting reading and we must hope that Enda Kenny and his advisors have studied it. [Land Value Taxation: Persuasive Theory but Practically Difficult, Dublin Institute of Technology School of Real Estate and Construction Economics, 2005]

Tax Bads not Goods

A more thorough examination of the case for a tax based on the increased value of land that arises from community provided services can be found in an earlier article by Nic Tideman which also discusses the practical issues and offers suggestions for ways to overcome them. Tideman also points out that such a tax could be developed in such a way as to benefit the community by taxing only "bads" rather than "goods". Thus a business that imposes burdens on the community such as pollution or traffic congestion, lowering the value of neighbouring property, could be taxed at a higher rate than businesses that are of benefit to the neighbourhood which might even be exempted from the tax. [The Case for Site Value Rating, T. Nicolaus Tideman, Date unknown, originally published by the British Liberal Party]

I found the Tideman article via a website called Wealth and Want. Although this is a USA based site geared to the US economic situation the articles that the site owner has assembled and to which he has provided links are from around the world and relate just as much to the Irish and wider European economy as to that of the USA. He has created an excellent resource for those seeking alternatives to our failed economic system.

I would urge anyone actively seeking solutions to our woes, rather than merely seeking to explain how we got here, to study these articles. In my humble opinion they make a very strong case for a complete re-thinking of our economic system with the potential of ensuring fairer distribution of wealth, at the same time providing greater rewards for wealth creators. As the site's masthead states "... democracy alone is not enough to produce widely shared prosperity"

Ireland's Household Charge - the Final Straw for Hard Pressed Citizens?

The first of January 2012 sees the introduction in Ireland of a charge of €100 per annum to be imposed on every occupied house in the land. In theory this is supposed to be a payment towards the cost of services received by the occupants of the house. In fact it is nothing of the sort. To understand why it is necessary to look at how such services are currently funded.

In Britain in the 1980s Margaret Thatcher attempted to introduce a similar charge levied from every adult member of a household. Officially called "Community Charge", it was quickly dubbed "Poll Tax" by press and opposition parties and was widely regarded as grossly unfair. It soon met considerable resistance with rioting and widespread refusal to pay. It was not long before the idea was dropped and replaced by a "Council Tax" based on the notional value of a property.

There are a number of differences between Ireland's new Household Charge and Britain's former Poll Tax but the most significant of these is the fact that whereas the Poll Tax was a replacement for an existing levy the Household Charge is entirely new.

In Britain householders have for many decades paid a contribution to the cost of operating local government. The Poll Tax was an, albeit unsuccessful, attempt to replace an unpopular tax called "rates" - essentially a levy based on the assessed rental value of a property. Rates provided a significant proportion of the funding for local government at a time when local councils in Britain had significantly greater powers than they presently do and far more than any in Ireland.

Unfair and Undemocratic

The system was regarded as unfair because based roughly on the size of a house whereas in many instances a large house that may once have been occupied by a family now grown up could still be occupied by a single elderly individual who would be paying more towards local services than a large family in a smaller house in a less salubrious part of town. The Poll Tax attempted to remedy this by charging every person of voting age the same amount. Families with grown-up children living at home suddenly had to pay more than they had been under the old system. Because it was possible to evade the tax simply by not registering to vote it was deemed undemocratic.

Council Tax was, and remains, based on the notional value of a property but was, and has been further, ameliorated by an increase in the contribution of central government funds to local authorities together with the removal of some of those authorities' more costly responsibilities. But the tax is set and collected by the local authorities.

Local government in Ireland is presently funded part by central government and part by business rates. Moreover County Councils in Ireland have far fewer responsibilities than their opposite numbers in Britain. People already pay for refuse collection services, for example, and in most areas these are privatised. There are charges for other services - libraries, leisure centres and municipal theatre performances - and whilst these are subsidised and therefore lower than corresponding private sector facilities there is an inevitable feeling that this new levy means people are paying twice.

Prisons Overflowing

This feeling is not helped by the fact that the new charge is part of a large package of increased taxes and charges levied in the recent budget and therefore not obviously a new way of funding local services. Unlike the British Council Tax it is set by central government so there is no sense of local control over the amount or the way it is spent. It is a levy that had been signalled by the previous government with an underlying assumption that it would be offset by a reduction in other taxes. The new government seems to have used it as a means of keeping their own promise not to increase income tax. Having broken so many other promises, it might have been better had they broken that one as well instead of introducing such a regressive tax at a time of widespread hardship.

Many citizens - including several members of the Irish parliament - have vowed they will go to prison rather than pay. In itself this is a frightening prospect for it is already the case that the only way our prisons can accomodate the people that the judiciary send them every day is by the early release of existing inmates. So we could see the imprisonment of innocent citizens whilst hardened criminals are released onto the streets. There is a growing movement to oppose the charge. Many see it as the last straw in an ever increasing series of impositions on a hard pressed population. It will do nothing to assist the achievement of a "yes" vote in any referendum on measures to defend the Euro. Time for a re-think, Mr Kenny?