Is Ireland's Property Tax Revolt the End of Austerity? Don't Bet on It

A €100 tax on each household jolts the Irish out of their stoicism
Photograph by Niall Carson/PA Photos/Landov

As Europe’s debt crisis has ground on, with governments imposing drastic austerity measures, the Irish have taken the bad news with remarkable equanimity. While Spaniards marched through central Madrid and Greeks torched Athens, Ireland has been relatively calm.

Until now. A plan to raise €160 million ($212 million) with a new property tax of €100 per household has drawn massive criticism. Last weekend, demonstrators took to the streets to protest the tax, and the government has acknowledged that only about half of Ireland’s 1.6 million households had signed up to pay by the March 31 deadline.

So does this mark the end of Irish austerity? Not likely, says Philip Lane, an economics professor at Trinity College in Dublin. Given that Ireland hasn’t had a property tax for decades, Lane says, the anger is really about the introduction of a new, unfamiliar levy. “It’s not about austerity,” says Lane, who says he paid his tax. “There’d be the same protest if the economy was booming.”

Stephen Kinsella, a lecturer in economics at the University of Limerick, calls the implementation of the tax “botched” and says he was surprised at the number of people who have paid it. Because Ireland hasn’t had a property tax in recent years, he says, a big part of the exercise was to simply build a database of property that could be used to collect the tax.

Property owners were supposed to go to a website to sign up and pay the tax, but Kinsella says the site was poorly designed and difficult to use. “The lesson here is, don’t try to build a database and have people pay you to give you the information,” says Kinsella, who says he paid the tax “on the first day. I understand the perilous economic situation we’re in.”

Given that the penalties for nonpayment are small—just €10 for those who pay by June, Lane says—there’s little downside to not ponying up. “In reality, everyone can afford €100,” Lane says. Both he and Kinsella expect the penalties to increase and believe most people will ultimately knuckle under and pay the tax. They also expect a less regressive tax, which takes into account the value of property, to be implemented soon.

Still, the tax has become a “red button issue” and nonpayers are trying to register their discontent with austerity by not paying, says Jacob Funk Kirkegaard, a research fellow at the Peterson Institute for International Economics in Washington. But he also notes opinion polls that show relatively strong support for the government. These indicate “grudging acceptance that this is something we’ve got to do so let’s just do it and swallow hard,” Kirkegaard says. “It seems to be a way for people to vent their broader unhappiness with what’s happening, but it doesn’t really suggest that Ireland is turning Greek.”

    Before it's here, it's on the Bloomberg Terminal.