… is on Ireland today. It’s written in hard-hitting language.
However, this paragraph slightly undermines the authority of piece;
When a country has gone bust in such spectacular fashion, the causes for its crisis are bound to range far and wide. Primary among them we might count an overreliance on property prices both for the feelgood factor and for public revenues. During the boom, Dublin cut income and corporation tax and relied increasingly on property taxes.
We never had a property tax, at least not a residential property tax. In fact, if we did it probably would have cooled things down and stopped the bubble inflating to the extent it did. I’d guess the author was referring to stamp duty… but that’s a once-off payment, not a tax. Or perhaps I’m being too finicky and should accept ‘property tax’ to mean taxes raised from property development as opposed to property purchase.
Either way, the lack of taxes on property – and the multiple loopholes and tax breaks made available to developers – is what inflated the property market. The banks loan ‘policies’ contributed too, obviously. I’m not sure where property taxes came into it. Perhaps “Dublin cut income and corporation tax and relied increasingly on property development to keep money flowing around the economy”, would be more accurate. Or perhaps I’m wrong. Let me know, if so.
Footnote: this paragraph raised a smile;
As Pete Lunn of Dublin’s Economic and Social Research Institute notes, the elite directing the Irish economy is more tightly closed than an oyster shell – so that the top civil servant in the department of finance would normally expect his tenure to be followed by a stint as chief central banker. Policymakers shrank from calling the property bubble a bubble until it had popped. And when it had burst, they accepted too easily the bankers’ claims that they were merely short of liquidity rather than utterly bust.
You read that right, the ESRI lamenting that an oyster-like elite was allowed to form a group-think which resulted in a lack of dissenting voices.
Actually we DID once have a residential property tax-it was a mild and ineffective measure used to sugar-coat the deal agreed between Dick Spring and Garret Fitzgerald in their short 81-82 Coalition, to give some credibility to the notion that Labour was actually influencing fiscal or taxation policy.
The deal with the property taxes (they do mean stamp duty) was simply that the DOF relied on cyclically-sensitive transaction taxes to keep the country afloat rather than taxing people’s incomes like a normal economy. Thus when activity on the property market collapsed, so too did tax revenues. They’re not talking about how this caused the property bubble, but why the effects of its implosion were so dire.
VAT on sales of new properties aka a tax on property, raised a lot more money that stamp duty did