Emer O’Siochru: Land Value Tax in Ireland: Recent Failure and Future Prospects
Emer Ó Siochrú Economics for Conscious
Evolution London July
The Boom …
Increased economic activity in the 1990s, due to higher
productivity, created wealth that was recycled to boost
consumption through the widespread ownership of land.
Continued economic activity in the 2000s, due to higher
consumption, fueled a Ponzi property bubble by a
handful of developers backed by the banks.
Transaction taxes on property funded the Social
Cheap easy credit augmented the static incomes of
By 2007, the Irish banks had bet most of their
resources on the speculative deals of less than 10
Property prices and sales slowed. Economists
predicted ‘a soft landing’.
Skeptical international lenders withdrew
deposits, sold Irish bank shares and precipitated
the banking crisis.
The Irish government then famously, gave a State
guarantee to all bank depositors and bondholders
thinking it was a liquidity crisis.
The problem was solvency ; the EU were asked for
help. ‘Austerity’ was the price of the bailout
Lax planning regulation
Local councilors, supported by their officials zoned
between 3 and 5 times the land area required to meet
Irish housing demand by any conceivable criteria.
Zoning is not a prerequisite to get planning permission
for new house construction in Ireland. 30% of new
houses in the boom were built in the un-zoned open
Some of the best zoned and serviced housing sites in
urban areas were withheld from development in the
boom and are now empty or derelict
Lax of banking regulation
Better regulation would undoubtedly have helped…but
The Irish government could only regulate Irish banks
and non-national banks operating under its remit.
Under free market rules, international banks could
continue to lend recklessly
Other European countries such as Germany, France and
Italy did not suffer the same level of imprudent property
lending even though they have a shared currency and
similar banking regulations
Home ownership incentives
“Imputed income from housing assets is not taxed, mortgage interest is tax
deductible and capital gains on the principle residence are exempt from the
tax applying to realised gains on most assets. There was no local tax or
charge collected on residential property. Many countries pursue
some of these policies but Ireland appears to have been
the only one to pursue all four simultaneously”
Economist Com McCarthy, Preface to the “Fair Tax” 2012
“(Property) Taxes that would otherwise be paid to the
government will be paid to bankers. The result – what you are
seeing today in Europe and North America – is an economic grab that is in
many ways like that which gave birth to European feudalism. But this time
round it is financial not military. “
Economist Michael Hudson, MMT conference, Rimini 2012
Unsuitable sites were developed i.e. on flood plains
All urban housing and apartments speculatively built
Ghost estates in the outer commuter belt
Derelict key urban sites
Many empty homes scattered over the countryside
Poor design and construction quality
No innovation in local energy and waste systems
Impacts on Irish Housing
Lack of employment: investment was diverted from
productive activities into property
Retirement poverty; pension saving in bonds and stocks was
neglected in favour of ‘buy to lets’
Intergenerational inequity; older people who sold in the
boom or got social partnership deals gained while families
with children are stuck with un-repayable debt and higher
taxes. Young people have had to emigrate.
Damage to farming and tourism; impacted by the scattered
rural houses abandoned by their owners in search of work
History of land reform 1
1850s: The Irish land struggle influenced by Henry George started with the
3Fs Fair Rent, Fixity of tenure and Free sale of tenants improvements but
led instead to ‘tenant right to buy’ and the 1903 Act.
1916: The transfers of land to tenant farmers was substantially complete.
Padraig Pearse wrote that the land should belong to the people of Ireland not
just the farmers.
1950s: Economic underdevelopment after the 2nd
World War was the result
of a frozen land market, under-investment and insular economic policies.
1960: Irish economist Raymond Crotty recommended a land value tax. His
call was ignored as Whittaker and Lemass opened the economy to foreign
direct investment and industrialisation began.
1970s: Politically connected developers made fortunes by speculating on
land rezoning. Fianna Fail abolished domestic rates. The Kenny Report
recommended compulsory purchase of development land at agriculture plus
20% prices. It was never implemented.
History of land reform 2
1990-: More tax reliefs for property and first time buyers. More EU aid
and FDI. Social Partnership set up. Ireland joined the Euro. Property
transaction taxes filled government coffers.
2003: Housing had become unaffordable. Feasta hosted conference ‘The
Irish land Struggle, Unfinished Business” and warned of a property bust
2007: Property boom ends. The Coalition government agree a site value
tax on residential property.
2008: The Coalition government announced the Bank Guarantee. The
Taxation Commission was set up. Smart Taxes was set up.
2010: The Troika arrived. The Coalition government fell. New Fine Gael /
Labour government set up the Property Tax Expert Group.
2012: The Expert Group rules that SVT was too difficult to understand.
The new government brought in a conventional residential property tax
Mixed group of
architects and social
Land valuation map
Publication of ‘the Fair
Faults of the Residential Property Tax
Development land and sites that comprise 30% of the total
housing area owned by developers and banks is not taxed by
RPT. So homeowners who paid too much in the boom have
to pay again
The new 80% Development Land Tax does not apply to
already zoned land of which there is a surplus for many years.
It will never be collected.
The RPT penalizes improvements that homeowners make for
for energy efficiency or for more space for their family.
The RPT discourages construction when workers are idle
Call for an agricultural land tax
Under the new CAP (Common Agricultural Policy), farmers
will get payment for simply owning land
Active farmers cannot buy or even lease enough land to
More Irish farmers are over 80 than under 35
Tom Barry Fine Gael TD calls for a land tax on inactive farmers
Windfarm protests growing
Ireland has excellent wind energy resources
Developers are doing deals with landowners to rent their land for
wind turbines for up to €18,000 per annum
Community groups are being offered ‘swimming pools and
Commercial Rates are circa €5-7000 per turbine and can be 30% of
total receipts for western local authorities
Residents health is likely to be affected and their properties
Owners of windy Natura designated sites get nothing
What have we learnt?
Accept that taxation reform can only come with monetary (or
at least banking) reform. They are two sides of the same coin.
Engage ‘Progressives’ as allies not rivals.
Stop work on economic arguments for land value tax already!
Reform is a political project.
Make common cause with youthful movements ie. Occupy,
Pirate Parties, Anonymous, P2P, Arab Spring etc. under a
‘reclaim the commons’ banner
Be more flexible and opportunistic i.e. renewable energy is a
‘land value tax’ / ‘reclaim the commons’ issue
Recognise our natural and social commons
and charge appropriately for their use so
as to protect them for the future