EU Commission calls for hike in property tax

Business Editor

The EU Commission has proposed the Government announce increases to the frozen Local Property Tax as early as the autumn budget and end different tax levels between diesel and petrol for drivers.

In its major annual assessment of the Government’s budget plans, the Commission said a “gradual” rise in the property tax next year would help prevent big increases in bills when the tax is next valued in 2019. The frozen tax is currently linked to 2013 property prices, but house prices have increased significantly since then. Tax differences in fuels was “environmentally unjustified”, the EU said.

The report will be pored over by whoever succeeds Michael Noonan as finance minister amid preparations to shape the 2018 budget. It was published on the day that Government met with trade unions at the start of talks aimed at striking a successor to the Lansdowne Road public pay agreement.

Though seeing no evidence that house prices were overvalued, the Commission urged the Government to devise a “spatial plan” that would “help to deliver new homes in the right places”.

And in one of its three major recommendations, the Commission said Ireland should tackle elevated levels of mortgage arrears and debt of “viable” businesses by writing off debt. It is believed to be the first time the Commission formally recommended banks here agree to debt “write-offs”.

Despite strong growth, the Government faces a “substantial fiscal effort” and has little room to increase its fiscal plans, the report said.

In what will be read as a reference to the proposed AIB shares sale, the Commission said any “windfall gains” should go to pay down government debt at a faster pace. Some opposition politicians and unions have said proceeds from the proposed sale — which could amount to over €3bn — should be used instead to help alleviate the housing crisis.

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