Delay Household Charge Until September 30

It is now clear that compliance with the household charge due on March 31 is going fall well short of the government’s targets.

I think it would be a big mistake at this point for the Irish government to continue pretending that the March 31 deadline is a good idea. Financially, the gains from this year’s €100 per household charge are very limited but the problems caused by having a tax that is seen to be widely avoided are very serious.

In my opinion, the main problem with the collection of the charge is not the fact that it is unfair (true enough as that is). The TV license is also a flat fee paid by almost everyone in the country and there is no campaign of protest against it.

The problem with the collection of this tax has been organisational. Unlike, for example, the Universal Social Charge, which is deducted from people’s pay packets, payment of the household charge is a voluntary effort on the part of individuals.

One of the main lessons of behavioural economics is that people generally need to be “nudged” into undertaking various socially desirable tasks. The designers of this tax seem to have forgotten this or perhaps never knew. Even when people do decide to pay the charge, they face various difficulties. The principal vehicle for payment is an ugly-looking website. I haven’t used the website but I’m told by those who have that it is very complicated and asks additional questions about water supply and so on that probably discourage completion.

Nudging activity from government has been minimal. Each household was supposed to receive an explanatory leaflet. I didn’t get one and I live in a South Dublin suburb that would hardly be difficult to reach. (Apparently the firm printing the leaflets went bust.)  I’m told there was a radio ad but I didn’t hear the ad even though I listen to a lot of talk radio.

This is an issue that requires a quick judgment call. My recommendations are as follows:

  1. Announce that the date for the charge has been delayed until September 30. This has no effect on the annual state budget figures but will provide time to rectify what has been a PR and planning disaster up to now.
  2. Identify as many named individuals eligible for the tax as is possible and send each of them a polite letter explaining that they are due to pay the tax and how this can be done. Ensure that all letters are sent by June 30. Send the letter again six weeks later if they haven’t paid, accepting that this is a new tax that may be having some difficulty paying but reminding them that they will incur penalties if they don’t pay.
  3. Spend April providing as many ways as possible for people to pay the tax in simple and easy ways and amending the website. In particular, drop the “water-related” element of the site.
  4. Launch a widespread advertising campaign during May about the tax. Explain to the public that this is just a “holding measure” and the aim is to set up a system in which those who own expensive properties will contribute more to the running of the state

If these actions end up costing as much as the tax is going to take in, it hardly matters. A property tax that is well organised can be a progressive and sensible measures capable of bringing in billions of euros of tax revenues every year once it is up and running. It is well worth taking the time and care to see that such a measure is introduced in a manner that ensures long-term success. Thus far, the government has failed to take either the time or care required.  A change of tack is required and it is required either today or tomorrow.