Our country is being run by clowns

Two newspaper articles this weekend drove me mad this weekend.

Firstly, from Louise McBride in the Sunday Independent, Lenihan’s new property tax is hit by snarl-up, has this classic line as to why we can’t (thankfully) have a property tax for 2-5 years.

A property tax based on the value of homes would initially involve compiling a database of each home in the country — and then valuing each property.

As a database of homes across the country would also need to be put in place, this could bring the wait up to at least two years.

“There’s no database of individual properties in the Republic,” said Lavelle. “It would take a few months to put a database like that together. One-off housing causes problems.”

Correct me if I’m wrong, but doesn’t the Land Registry and the Registry of Deeds have this information already – the Property Registration Authority?

The second frustrating item was in a story by Ian Kehoe in the Sunday Business Post under the heading “Government subsidy to stop firms laying off staff”.

This story details plans within the Department for Enterprise, Trade and Employment to subsidise “at risk” jobs. According to the story:

With unemployment soaring, the government will move to try to protect jobs that are under threat, by diverting funding that would otherwise go on dole payments to a special subsidy. The scheme would effectively subsidise some of the wages of employees in threatened jobs, cutting the cost to the employer in return for the employee remaining in work.

How many times have we heard from our Governent that “Ireland Inc” had become uncompetitive and that one of the side benefits of the current economic climate would be that our costs would fall, wages would be cut and we would regain our competitiveness.

Businesses are cutting jobs now because their sales and income is falling.  Their customers aren’t buying anything, so they have excess capacity, so they don’t need so many employees and are cutting back. If businesses still had customers in sufficient numbers and were still making money, they wouldn’t be cutting staff.

So can someone please tell me then how can we regain our competitiveness by subsidising the jobs that a business owner deems unnecessary?

This is such a ridiculous idea – how can we justify paying businesses to keep on workers when they very likely would have nothing to do?

Competitiveness my arse! Clowns!

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2 Responses to Our country is being run by clowns

  1. Colm June 2, 2009 at 07:45 #

    The property tax is going to be extremely difficult to implement one way or the other.

    How do you estimate the tax due? If you do it by value how do you calculate that value? During the boom house prices increased every month. At the moment many houses are virtually worthless because banks won’t lend to prospecive buyers. However when it does start moving again we’ll be back to the month by month changes in value be that up or down. Say if you pay your yearly property tax in January and the following week a large factory opens in your area boosting rental market and house prices. Can the Revenue come back at the end of the year and charge you more? Or if a factory closes in your area can you claim tax back at the end of the year?

    If the revenue just take the lazy way out and tax by price paid then they are penalising people who bought in the boom and are already heavily burdened. You could have a situation with a young dual income couple living in a house they bought 18 months ago for €400,000 burdened with a massive mortgage and up to 40% negative equity living beside an elderly retired couple who bought an identical house back in the 60s for €2000 which has now long since been paid back.

    Of course one solution to that would be to tax the equity not the value. If your house value is equal to or less than the remaining mortgage then you pay no tax. However if your house value is more than the remaining mortgage then you pay a percentage of that value. However now we have the reverse of the above situation. Now the elderly retired couple get hit with a massive tax bill while the working couple next door pay no tax. Perhaps you exempt people on social welfare pensions from paying the tax but then you start to penalise people approaching retirement but not yet there or people who were sensible and invested in a pension over their working lives. The recent medical card debacle shows that grey power will not accept any extra burden put on their shoulders.

    So value simply won’t work when it comes to calculating the tax. Therefore we have to look at other methods of calculating the tax due.

    Perhaps you do it by floor size by square foot. The larger house you have the more tax you pay. That’s appealing at first glance but you actually quickly run into some problems. Do you include a garage in that calculation? If you do what happens if the garage is detached from the house? If you include that what about the garden shed? OK limit it to “permanent” structures only. Well what about block built garden sheds? OK so limit it to permanent habitable structure. Well what about a house that has had an attic conversion, garage conversion and conservatory added since it was built. Is a patio or deck a habitable space? It is of great benefit to a house on a fine bank holiday weekend. None of these required planning permission so there is no record with the land registry. Therefore the only way to fairly and accurately measure the floor size is to send someone out every year with a tape measure to inspect every house in the country.

    Say you tax it by number of bedrooms. What happens if you have two houses in an estate with one using a downstairs spare room as an office and the other using it as a bedroom? Then we are into room size. Is it really fair to tax a box room at the same rate as a king size master bedroom? So if we tax it by number of rooms we’re back into the garage/conservatory/attic issue and of course there is also the problem of “open plan” spaces. Is an open plan Kitchen-Dining-living space one room or three? These are common in many apartments and could not be classified as three rooms but they are also common in many new architecturally designed modern mansions as featured on grand designs and form vast living areas.

    But lets say they can agree some way of measuring house size is it fair to tax a family with 4 children living in an 1800 sq foot 4 bed house more than a single person living in a 1400 sq foot 3 bed house? If you give an allowance per person living in the house (say the UN allowance for basic human rights of 300sq foot) that now penalises the elderly widow living alone in a 4 bed house whose family have all moved away. We’re back to the grey vote again

    So lets say you look for other methods of calculating the tax. How about the old fashioned famine era window tax. It is actually a good example of another problem we run into. Different planners. You see in Co. Clare the planners are said to favour larger windows thus resulting in fewer windows. But in South Tipperary Planners are said to favour smaller windows thus resulting in more windows. Once you get into factors that are influenced by the planning department you run into problems with the fact that there is no unified nation wide definition of good design. It is down to the personal taste of the planner who processes your application on the day. Thus you can’t tax on any factor that the planners can have influence over.

    So what about site size? Is that a fair way of determining the tax rate? The larger the site the larger the bill. But now you could have a three bed one off bungalow on a 1 acre site now getting taxed more than a 5 bed house in an estate on a qtr acre site. Also many one off houses have a large site size because they have to have a septic tank that is kept a large distance from the house. The house owner has to pay to manage that septic tank while someone living in an estate in a town just flushes it away into a council managed sewage system. The one off house owner pays more property tax for a service they cannot avail of and still have to pay a private contractor to perform the service. More on this later.

    Of course that assumes you can calculate the site size. Many farmers have built their houses in large fields. There is no landscaping around the house and often just a long gravel driveway up to the house from the road but the “site” is the whole field. If we tax by site size then hundreds of farmers will be out fencing off the space around their house to make the “site” size as small as possible. If they do that has it really devalued the house or the quality of life from living there? And if you do it by “site size” what about common areas in an estate. Should a house tax include their share of the landscaped green space they overlook?

    As mentioned earlier a lot of the above depends on the location of the house. Boom or bust a house in a city will always be worth more than a house in an isolated rural area. During the boom we had a situation where 2 bed apartments in Dublin were worth more than 5 bed houses in Tipperary. If you tax by value you effectively tax people for living in the city. Now there could be a justification for that as people in cities normally have better infrastructure (roads, broadband, sewage, water, public transportation, etc) much of which is paid for by the taxpayer. However at the same time more people live in cities so it will be political suicide to tax by value. If you tax by house or site size then you are penalising people for living in the country with little or no services. In fact in many estates around cities you also have management companies providing services that the tax funded council provides for “free” in the estate next door. You are back to the situation where a person could be paying a property tax for services that they cannot avail of and then have to pay for a management company to provide those services. Will management fees be deductible from the tax bill? Will the councils be obliged to take over all estates in return for a property tax? What about the one off rural house where there is no service from either the council or a management company? How can we tax these for services not given?

    And finally there is the issue of stamp duty. Many people have already paid tens of thousands or euro in tax on their houses it was just up front as a “charge” to stamp a form. Stamp duty was always a dubious tax more akin to something you would get in a tin pot dictatorship than a western democracy. We won’t stamp your form unless you pay us. It was a tax that basically said if you can afford to buy a house we must not have taxed you enough the first time so here is a bill. But the government justified it by saying we didn’t have property tax. What’s the line going to be now? We had our fingers crossed when we said that? Should stamp duty be deductible from the new property tax.

    The reality is property tax cannot be fairly implemented. Whatever the mechanism it is either unworkable, uncalculable or discriminatory. Whatever happens someone is going to be unfairly targeted and I would expect to see it appealed up through the courts and all the way to Europe if necessary.

  2. Robert Browne September 10, 2009 at 03:58 #

    All these taxes are just a tax on the public for political failure. If people pay them they will encourage more taxes and more failure! Tax the roof over your head, the water from your tap, your child’s education etc and then, shortly it will be the air you breathe. We don’t need more taxes like property taxes, we need radical political reform. A failed political system will just give rise to more and more failures until we are finally bankrupt. NAMA is a huge step towards state bankruptcy.

    Colm McCarthy, yesterday, wednesday the 9th of September told anyone willing to listen that the country was “bust” if that is not frustration coming from An Board Snip chairman I don’t know what is. Mr. McCarthy knows that we are borrowing 67 million every 24 hours and that 32 million of this is being diverted daily to pay our public servants. How mad is that? You pay over inflated salaries and then you pay interest payments on the money you borrowed to overpay those salaries.

    Instead of a stimulus package the government intends to invest in every useless property and field from Malin head to Mizen head. How mad is that?

    If I was offered sites for free by NAMA I would find it next to impossible to make a profit on them and I am a builder! What would I build on them, more houses more apartments or would I just keep them as green fields? This entity NAMA will lead to ructions and probably riots once the public realise what is happening. What is happening is that the clowns who have bankrupted the country realise that the value of their investments in property and bank shares have been shredded and they intend to get their money back, and their friends money back, at the tax payers expense! If that means, hundreds of thousands unemployed and the country in ruins for 20 years, then, so be it! That is what is going on and no amount of obfuscation, spin doctoring will erase the unvarnished truth.

    The Irish economy needs to issue licenses to Canadian banks and others healthy banks allowing them to immediately operate in the state. Why was this not done 12 to 15 months ago. It suited the government to make the situation worse because the planned NAMA medicine would then be easier to administer.

    This is a common tactic used in Ireland make things dire then declare the solution to be NAMA or in the case of Dublin City Council make the traffic problems dire and then declare a Congestion charge to be the answer.

    The Irish people need the money that will be squandered on NAMA to be used instead as a stimulus package. Why has the shrewdest investor in the country, Dermot Desmond, divested himself of all his AIB and BOI shares, if NAMA was going to be such a good thing for the banks and for us would he have sold? In short, he knows that the banks will be mired down for years to come! This government are clowns but who is it that elected the clowns, time and time again?

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