The publication by the Department of Finance of documents relating to the seventh quarterly review of the Troika Bailout has again put Property Tax back center stage.

Considering the process was once shrouded in secrecy, we now know, in broad brush strokes, what successive Budgets will do in terms of tax raising measures. The quarterly reviews provided to our lenders set out in these broad brush strokes the tax policy proposals of forthcoming Budgets. While the Department of Finance is quite correct in saying that there was nothing new published in the documents last week, the inclusion of a value-based property tax in the Budget proposals for 2013 had not featured in similar earlier lists of measures specific to the 2013 Budget. The issue is one of positioning and timing rather than anything else.

If a tax measure is to make any appreciable contribution to the Exchequer deficit, it needs to yield somewhere in the order of €400 million. That's the amount a property tax averaging €350 per annum might be expected to bring in. To put this in context, a 1 percentage point increase in the standard rate of tax to 21% might bring in a similar amount; a 1 percentage point increase in PRSI possibly a bit more. The overall target in additional taxes for 2013 is €1.25 billion, though this figure will be met in part from the spillover effect of the tax increases in 2012. In short, the Minister will not meet his tax budgetary target by introducing a property tax alone – there will have to be a significant additional measure in some other area. As further VAT increases seem to have been categorically ruled out, that leaves income tax or PRSI increases as the most likely possibilities.

Complicating the matter further is the likelihood that any new Property Tax will not show an appreciable yield until well into 2013. A 60% compliance level, as occurred with the Household Charge, is not tolerable and mechanisms will have to be put in place to ensure high levels of compliance. These will take time to achieve but when cash flow is a critical issue for government, this delay presents a real problem. There must be a strong temptation within government to reconsider whether or not a property tax is such a good idea after all.