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Money Times - April 17, 2018

Posted by Jill Kerby on April 17 2018 @ 09:00

WE’RE ALREADY UNHAPPY ABOUT THE WAY OUR CARS ARE TAXED…

 

A recent survey by the tax refund company, asked 3,000 adults what they thought about motor tax.

Not surprisingly, 83% of respondents to Taxback.com said they’d support changing it or abolishing it. I expect the same might happen if 3,000 people (or 300,000) were asked their views about property tax and how it is already being predicted to be one of the most contentious issues next year when it is scheduled to be reset by the government. 

The motor tax survey results broke down this way.

27%    -   Those buying 2007 car should not have to pay up to 3-4 more for road tax than someone that buys a similar brand new €100,000 car
25%    -    I think the tax systems should be overhauled completed – scrap motor tax, increase tax on fuel so those who use their car pay more
17%     -   Motor tax should be based on the cost of the car
16%     -    I think that the current system is perfectly fair
15%      -   The system should be changed as CO2 is no longer the best measure of what’s good for the environment

Taxback’s director Barry Flanagan’s take on these findings focussed on what he thinks is really bothering the majority of the respondent’s – that basing the car tax on the emissions level is unfair.

“The emissions-based motor tax bands might bring cost efficiencies for drivers of [post July 2008] newer cars, but drivers who are just outside the cut-off point, are perhaps understandably frustrated by having to pay up to 3 times more tax than for a model just a year or two older.”
 
He noted that the road tax on a 1.2 Volkswagen Polo diesel/petrol car registered up to 01 July 2008 would cost €330 a year while the tax for the same diesel model registered in 2011, however would fall into motor tax band A2 and cost just €180 annually, a difference of €150. Someone with a 2008 BMW 525D (3.0 diesel) would currently pay €570 in motor tax while someone with the same 2007 registered car would pay €1494 a year in tax.

“It would appear, from these simple examples that, in effect, the current tax system rewards those with higher incomes, as they can afford post-2008 cars, and penalises lower income earners,” said Mr Flanagan.”

“Almost a quarter of respondents said that they believe motor tax should be scrapped completely in favour of tax increases on fuel so those who use their car pay more.

“The merits of this are not altogether difficult to see…a person who commutes by public transport during the week, only uses a car on weekends and clocks just 3,000km per year, pays the exact same amount of motor tax as a person with the same car, but who uses their car seven days a week covering huge distances, racking up 60,000km per year.”

This motor tax survey is worth noting because a far bigger debate – on the way property is taxed – is inevitable.

Should we tax residential properties at all given that they’ve been purchased with after tax income, interest-bearing loans (that do not attract any or much tax relief anymore) and for many who bought pre-2008, huge stamp duty charges?

Is it fair that owners of the same size property, but a very different value, pay the same rate of tax, and average of 0.18% of market value?  Should our homes be taxed on their size or their market value, regardless of their location? 

Should only properties that enjoy significant local services and benefits – mains water and sewerage, proper roads and street lighting, easy access to schools, shops and other amenities – pay property tax?

As the 2019 reset deadline approaches, all of these questions are circling political meetings at local and national level; they’re beginning to be raised by community groups and homeless services and charities, and by the thousands of homeowners who have ‘warehoused’ half their mortgage debt, but could see their tax double on a property that might even still be in negative equity.

Many city houses or apartments that were worth between €300,000 - €350,000 in 2013 have doubled in value since then, report Daft and MyHome. If the LPT is not reduced or revised next year, tax bills will at least double to €1,125 - €1,215.

The stakes are considerably higher on getting a property tax right than they are for getting a motor tax right. The tax issues are also at the heart of the ongoing ‘have and have-not’ property crisis. And it isn’t just the LPT that will be under the microscope, but all the other taxes associated with home ownership, from mortgage interest and capital allowance relief to our generous capital gains tax and inheritance tax rates and the subsidies that people with no property are paying to those who do.

The TAB Guide to Money Pensions & Tax 2018 is available in good bookshops. See www.tab.ie for ebook edition.

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