Manage episode 250413640 series 91649
Seán Fleming, currently Fianna Fáil TD for Laois, if the gods of the ballot box smile on him he might become the Fianna Fáil TD for the reconstituted constituency of Laois Offaly. He's been a TD since 1997 and for 15 years before that he was Financial Director of Fianna Fáil at national level.
Gavin Reilly's twitter thread helped me in researching this interview:
This is the three-page form (plus three pages of explanatory notes) that you need to fill in, get stamped at a Garda station, and hand in to your local authority office during office hours if you want to get on the supplementary register. Anyone who is trying to work out if they are currently registered to vote might not find it possible. This is what I got:
Nobody likes taxes.
People don’t like paying taxes, but they also don’t like talking about, or even thinking about taxes. It stresses people out. You can even see that in the support for proposals for things like ‘flat taxes’ because people think that they will be simpler, even if they pay just as much or more.
Politicians know this, particularly when they make promises like this.
And, of course when those promises are broken, there are serious ramifications. Any politician going into an election promising to introduce a new tax isn't likely to prosper. But that’s just what the economist David McWilliams is recommending. And he’s right; in fact, he doesn’t go far enough.
McWilliams article on the topic is titled The party that taxes land hoarding will get my vote. I would argue that we need an wide-ranging property tax that covers all – well, all property. That would include houses, building land, agricultural land, commercial and industrial property, the lot.
Before you start saying that you don’t want to pay any more tax, bear in mind that I'm not advocating you should pay more tax. I'm saying that taxes should be levied in a different way. To be clear, this is not to collect more tax or less tax. This is to collect the same amount in a different way.
So why go to the bother of changing the system if you're collecting the same amount of money as before? The reason why is because incentives matter. Right now Ireland is almost unique in the developed world in that almost our entire tax take is levied on economic activity, with income tax, VAT, stamp duty, excise duty, VRT and others. Ireland has basically no taxes on economic inactivity.
And this matters. If you tax brown bread and don’t tax white bread, then people will eat more white bread. This has a real impact on people’s economic activity.
Right now, hoarding and speculating on property gets attracts no tax whatsoever. We have plenty of experience with tax exemption schemes for everything from nursing homes to the film industry, and the reaction to them is very predictable. When you make an area of the economy tax-exempt, you suck in not just capital, but also talent and initiative.
In Ireland, since the abolition of rates, we have been running a 40-year-long experiment to find out what happens when you make property holding into one giant tax-free scheme. The results are in. They aren’t too surprising. Making property tax-free in Ireland has sucked huge amounts of investment capital into the property market, giving us the highest house prices, and the highest land prices of almost anywhere in Europe, despite the fact that we have the lowest population density of any country in Europe.
Get that into your head. Normally more supply means lower prices, but Ireland, with the highest supply around also has the highest prices. But it’s worse than that.
Because of people hoarding land in places like Dublin 3, Dublin 7 and Dublin 8, people have been forced to build commuter estates out as far as Longford. Ghost estates are, without a doubt, a result of making property tax free. Most of those derelict sites in Dublin were bought up for a song in the 1980s, with hugely wealthy landowners drip-feeding the market to keep the prices high. It costs them literally nothing to keep those sites empty, but it’s sucking the lifeblood out of Dublin and other urban areas.
The fact that people can hoard land tax-free is the direct cause of the lack of housing, and the huge prices that people have to pay for it. That feeds into inflation in our economy. When you pay more in Ireland for a loaf of bread, or for a childminder, or for anything else, when you pay more for those than you would in France or Germany, it’s because the difference is to pay the higher housing costs for those workers, and sooner or later that difference is going into the pocket of property speculators.
If we want a modern grown-up economy, we are going to have to be grown up about reforming our tax system and that means taxing property like every other modern economy does.