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Debate Needed on Property or Site Value Tax
Author of "Boom Bust: House Prices, Banking and the Depression of 2010" speaks on Site Value Tax
In an interview today on DriveTime on Radio 1 today (~6:30pm), author of "Boom Bust: House Prices, Banking and the Depression of 2010", Fred Harrison was discussing Site Value Tax which is a different form of Property Tax. He was actually speaking later at 7:30 pm in Trinity at a talk: "A FAIR PROPERTY TAX ? – A PUBLIC DEBATE" organised by the 'Smart Taxes Network'.
Harrison says we need to remove the incentives to speculate on land says that is what a Site Value Tax can do. He says the Property Tax in use in the UK and USA doesn't work and that kind of tax leads to boom-bust cycles as it does not cool the market. He says we should place the charge on the site value so that it is based on the location and the services people use. He said Denmark has this and they have the best houses in Europe, compared with UK where they are pretty bad. Property Tax penalizes people for developing or improving their property whereas Denmark site value system doesn't.
When asked about how the scheme might work, he said the starting rate needs to be very low and it would be scaled up from there. The important point is that Ireland needs to re-balance the tax regime so that at the same time that a property tax is introduced that the income tax is reduced so that the overall effect is tax neutral Clearly the government is unlikely to do this and it is thus no wonder why so many people are resisting the household charge as they know too well, it will not be tax neutral and besides the household charge is a flat fee based system and totally at odds with a Site Value Tax system.
Harrison went on to stress that the idea is to raise revenue from Site Value Tax but reduce Income Tax on people's wages to encourage employment and to increase the incentives to employ people. He stressed that the Govt should not copy failed states but copy Denmark or Taiwan who have the Site Value Tax.
When the discussion moved to his opinion on the global financial crisis, (he accurately predicted the sub-prime bust), he said that he sees no sign of recovery occurring in Europe or USA and says the governments don't know what they are doing. All we see is governments piling debt upon debt desperately trying to fend off the inevitable. We are 5 years into depression and there is no recovery in sight. And he continued that we need to restructure something internally in the economy and that is the tax regime. And there is a viable alternative to breakthrough the morass and that is the work of the Fair Tax group
He pointed out that the boom - bust cycle is based or caused by speculating on unearned income from land and the present system encourages people to buy for capital gains rather than productive use. If instead as value of land increase so does the Site Value Tax, and hence via tax revenue to govt, then everyone shares.
It seems the talk this evening (Mon 24th Sept) was in conjunction with the launch of the new book: "The Fair Tax" (see image)
The blurb for the event and the book says:
The tax regime in Ireland, has been very favourable to property owners, but especially to developers who, with their banks, took maximum advantage, says Colm McCarthy in the preface to a new book on Site Value Tax published by the Smart Taxes Network. The system fueled the disastrous development-site debts of a handful of testosterone-charged developers and led directly to the Irish state’s guarantee of the collapsing banks.
The Irish government is belatedly introducing a property tax under pressure from the Troika rather than from a conviction of its merits. Instead of targeting irresponsible developers, speculators and banks, the government is planning to bail them out again by excluding their land hoards and undeveloped sites from the new property tax. Ordinary home owners will pay at least 20% extra tax every year so that speculators can continue to pay nothing. Only a Site Value Tax can make them pay their fair share.
Speakers in this pubic debate will explain how a second massive transfer of wealth from the 99% to the 1% can happen again due to the ignorance of politicians, the hubris of the Department of Finance, and the continuing backroom influence of the developers and bankers. They can explain the real advantages of a Site Value Tax over a conventional property tax and convincingly show how easy it is to assess and implement.
Leaked reports suggest the government believes that the Irish public could not understand a Site Value Tax and so plan to impose a flawed property tax. Do the Irish people deserve this assessment of their intelligence by their leaders? Come along to the debate and make up your own mind.
The Smart Taxes Network is hosted by Feasta which is The Foundation for the Economics of Sustainability
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They are talking now about "deferring" the tax payment
This is essentially taking away the houses of the poor by stealth.
They build up unpayable taxes on family homes then when the house is passed on, the tax has to be paid , or presumably the house has to be sold to pay.
Many Poor families will become homeless within a generation as the family home is taken from them to pay this vile tax on the family home.
It's the old "boil the frog slowly" method of stealing from the poor.
This is a tax on a tax on a tax
We pay tax on our wages. Then we buy a house and pay tax. Then the house is taxed.
No tax on basic family homes below a certain reasonable threshold. People have to live somewhere. It's a basic human right.
Until politicians and non frontline upper administrative civil servants bloated wages are cut below 50k, the poor should not be paying any property tax! I'll consider "taking the pain" when they do too!! Until then they can fuck off.
Can you clarify your argument. Were you at this meeting of the Fair Tax crowd last night in Trinity and can you indicate what you mean by: They are talking now about "deferring" the tax payment. Who said this?
on the frontline last monday 24th sept. they discussed deferring the paymentys for those who couldn't pay.
From what was said, It's clear that they are going down the route of quietly building up huge charges over time for those who can't pay which will result in families losing the family home after a parent dies
I didn't see the Frontline programme but are you sure they weren't discussing the Household Tax on it. The above article is about a Site Value Tax and how that differs from a property tax. I would be surprised that the Frontline programme was discussing this. From what you are saying that they talked about "deferring" the charges, this can only mean existing charges -i.e. the Household Tax.
As mentioned in the main article above, the people who launched the book on the Site Value Tax say that have rejected the idea of it. (See the underlined text in main article).
They also make it clear that introducing a Site Value Tax should have a simultaneous reduction in Income Tax -i.e that the overall amount of tax to the revenue is neutral or the same. However we all know that the present government or any future likely government is unlikely to do that and they would just raise all taxes. The Site Value Tax is effectively a wealth tax.
The Household charge is clearly just a flat tax and disproportionately affects the lower paid. It is unjust and I am against it.
I think the Left in general and the Anti-Household Tax campaign won't want to discuss a Site Value Tax it because even though they talk about a wealth tax and the Site Value tax can be just that if done correctly AND at the same time Income Tax is lowered; the compliant mainstream media and the government would completely twist and distort whatever they say on this and put words in their mouth to the effect of saying that they agree with a property tax which would of course be taken out of context. I might also add that I think the mainstream media are generally compliant to the demands of whatever the EU/ECB-IMF want while the government at this stage (and any future government) is simply acting as local technocrats for the financial elite who dictate policy to the ECB and IMF. Lets us not forget this is the same media that sold us all the various wars of aggression and still pimps the War of Terror, the same media that completely hyped the so-called Celtic Tiger and the Irish Property and scared the crap out of many people in their 20s and 30s that if they don't get on the property ladder then they never will and a huge number of these people fell for this propaganda and now face crushing debts for the rest of their lives. One could go on further but I won't.
Thus I think there is not a hope in hell that we will ever see any fair resolution or any useful or equitable measure taken whether it be via a Site Value Tax or any other. Nevertheless I think it is useful for people to read what it is about so they get some understanding of the dynamics of various tax structures and how they can generate or subdue various financial forces and (good + bad) incentives within the economy and society.
The flat household charge tax of 100 euro is just a small charge in comparison to what they are proposing for a property tax. I think it's something like 0.5% of house value which for a very average dwelling valued at 250,000 is 1,250 per year.
they were discussing this upcoming property tax and how they propose to deal with those who can't pay. They would NOT give exemptions for people on low income or negative equity, but only "deferrals". These would build up until the house was sold / passed on to the next of kin.
After a death, the outstanding debts would most likely force a sale. Over time this would mean poorer people who live in the family home with parent or parents would be faced with sale of the roof over their heads to pay government property taxes
watch the programme. It's clear that this property tax "deferral" is how they are thinking.
The general approach is related to the notion in business of "leveraged buyout" I think.
You leverage the person with unpayable debt forcing a sale / transfer of their assets, often at firesale prices.
Quite aside from the government taking their cut from those who can't pay, what annoys me about the negative equity situations is that essentially, banksters create money out of thin air, loan it to someone who buys a real asset. The person then can't pay because the loan was unsustainable in the first place.
The bankster squeezes as much real money earned from work as possible from the person, then takes the real asset into their balance sheet.
It's like money laundering isn't it?
If the banksters just created money out of nothing then used it to directly buy hard assets such as property and houses, we'd all get our knickers in a twist and object.
But if they do it through a third party (us!), we don't get quite so suspicious of the scam.
The banks are essentially getting our hard assets such as land and property by proxy through us using money they made up out of thin air.
Then we "bail them out" adding insult to injury and in doing so, cripple our real economy.
Apologies, I have since watched that segment of the programme and they do indeed mention a Site Value Tax, but most of the discussion was about the current Property Tax that the government is planning to introduce and I do agree it is completely unfair. Later in the segment, that economist chap Fred Harrison who was interviewed the other day on radio 1 about Site Value Tax and gave the talk on it in Trinity, actually says the type of Property Tax they are introducing is just going to continue the property boom-bust cycles and he refers to it as a failed property tax which they have in the UK. In his radio interview he clearly identifies such a tax as plain wrong.
I think his idea of a Site Value Tax would have had merit before the bubble started, but now that we are on the other side of it, it would probably unfairly affect people in 'high value' locations who are in negative equity. Nevertheless and I stress again people should give it some thought but keep in mind that the idea (as per interview with Fred Harrison) that Income Tax should be reduced at the same time so that it is tax neutral. That Harrison guy is very clear about targeting developers holding land banks etc.
Anyhow, just for the record, I think we should NOT pay off the banking debt, even though most of the original bond-holders have in fact been paid over with the money we borrowed from the ECB/IMF. On the FrontLine programme, RBB is I think right when he says this money is not going to be used for council services (since they are and will continue to be cut) and will simply be used to close the deficit.
So really all these extra taxes are a mute point. Until the debt is cancelled, there should be complete resistance to all these re-arranging of the deck chairs. One way or another the country will default.