Tuesday 25 October 2016

Time bomb that could do real damage at the next election

Published 06/09/2016 | 02:30

Finance Minister Michael Noonan. Pic Tom Burke
Finance Minister Michael Noonan. Pic Tom Burke

The good news may be that your house is gaining in value again after the crash. But the bad news is that you may brace yourself for a hike in your Local Property Tax (LPT).

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The LPT was one of the indirect gifts of the EU-ECB-Troika following the 2010 bailout. After its introduction in 2013, with the Revenue Commissioners collecting, there was massive compliance.

The amounts due were based on property prices in summer 2013, which were still way below boom levels.

But an impending review of the tax may lead to a very different story, with some nasty news in store for some.

Last year, with one eye on the General Election eventually held on February 26 last, Finance Minister Michael Noonan decided that the LPT rates would be frozen until 2019.

A review of the LPT is under way but the portents are not encouraging for those of us hoping this tax would not escalate.

This one remains a potential political time bomb ticking down to 2019, perhaps after local and European elections. Voters may have astonished Fine Gael in particular in the February General Election by favouring the promise of better services over taxes returned to the pocket.

But that does not mean that middle Ireland has suddenly fallen in love with taxes. The LPT is particularly problematic and resented especially by those who have either cleared, or largely paid down, their mortgage and were looking forward to cost-free accommodation in their later years.

There are also big questions around some people's ability to pay. There are sensitive questions around older people being in practice forced out of the locality in which they have lived the bulk of their lives, as they seek smaller, lower-taxed properties.

There is a real prospect that homeowners could expect hikes of up to 150pc in their property tax bills after the revaluation. By now property prices have risen across almost all counties. That means the vast bulk of owners will pay more, and yearly increases of up to €146 could be expected in some places.

The local councils' power to adjust the LPT up or down by as much as 15pc in certain circumstances will very likely become a major political factor. Council candidates standing in 2019 on a promise of a 15pc cut could be ahead of the curve.

Unsurprisingly, the biggest potential LPT hikes are around Dublin, where house prices went up by between a fifth and a half in the past three years. The prospect may well see people studying house-price data, and, in a funny way, wishing their home was worth less. Homes in counties Mayo, Roscommon, Sligo, Donegal and Cavan - where prices have scarcely moved - may suddenly appear more attractive.

Another intriguing aspect of the LPT projection is that it is not clear which party, or group of parties, will get to decide upon the future of this tax. But it is a safe bet that voters will be reminded of which parties took what stance on the issue when next they go to the polls. There are no easy solutions.

Irish Independent

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