There could never have been a better time than 2012 in Ireland for the introduction of LVT or Site Value Tax as they prefer to call it. Back in 1978 there had been the hurried decision to abolish domestic rates following a rash promise at an election (!). It was soon realized that this was a mistake and a form of property tax needed to be re-introduced. The result of the 2007 Irish General Election was a coalition, with the Green Party as one of the junior partners.
All agreed that there should be a property tax, but it was the Greens who specifically advocated Site Value Taxation (SVT). By 2009 a Commission on Tax had reported which saw merit in SVT, but opted for Property Market Value as the basis for the new tax.
In early 2010 a new coalition government made its proposal in its Renewed Programme for Government. This time, under pressure from all parties, SVT was the preferred option.
Then in late 2010 the Great Financial Crash exploded on Ireland. The economy shrank by 8%, revenue from property taxes, mostly Stamp Duty on sales, collapsed. Government finances looked dire.
This is the classic Shock Doctrine territory made famous by Naomi Klein. This is when, in the wake of the crash, the neo-cons move in to pick over the stricken economy, advising governments to privatise utilities, reduce taxes on the rich, crush the power of the trade unions.
When, in post-crash Ireland a high powered outside group (which became known as The Troika) started issuing edicts, they included the ill-fated introduction of water charging through a privatized company. More promising was the Troika’s requirement to introduce a property tax.
Conditions in 2011 then, could not have been more promising for SVT/LVT. There was a crisis, and more tax revenue was desperately needed. The two previous coalition governments had plumped for a property tax based on SVT. A big bad external group (The Troika) was pressing the government to introduce some form of property tax, so could be blamed if anything went wrong. So what happened next?
In July 2013 the ‘Local Property Tax’ was introduced at 0.18% of the property’s value, payable to central government. But what had happened to the coalition government’s enthusiasm for SVT. The design practicalities of the new tax were handed to an ad-hoc Inter-Departmental Group of Civil Servants. They produced a Report Design of a local property taxfor the Irish Government 2012. They were well aware of the political impetus behind SVT, yet in their wisdom and experience they produced the following rebuttal of SVT. I reproduce here in full, because I think every land-taxed and Georgist should know what hurdles must be overcome before SVT/LVT is implemented.
If we cannot overcome these objections at such a propitious time then the project that we hold dear — Land Value Taxation — is a Dead Duck.
So why did Ireland flunk the introduction of LVT/SVT and bring in a property-value(price)-based tax instead? Read on..
