Business Irish

Wednesday 19 June 2019

Local Property Tax reforms won’t mean bigger bills for many households – Finance Minister

Paschal Donohoe. Picture: Collins
Paschal Donohoe. Picture: Collins

Shawn Pogatchnik

Plans to reform Ireland’s Local Property Tax in line with surging home values won’t result in higher bills for many households, Finance Minister Paschal Donohoe insisted Tuesday during questioning before an Oireachtas committee examining potential changes to LPT rules.

Minister Donohoe emphasised that LPT could play a bigger role in the State’s revenues principally by expanding the number of properties liable to pay the tax – most critically the many thousands of homes built and sold since the May 2013 introduction of the divisive levy. New properties sold over the past six years have been exempt from paying any LPT pending the next valuation date, currently set for November 2020.

Looking for change: Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Looking for change: Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins

Several TDs on the Budgetary Oversight Committee branded the prevailing situation fundamentally unfair because it often left one household paying the tax for the benefit of local services, while their neighbour in a newer home may have avoided this bill for years.

But Minister Donohoe - who in April delayed his own Tax Division’s recommendation that LPT charges should be recalculated in November to bring them in line with rising property prices - said when the change eventually does happen, an expansion of properties subject to LPT will allow the State’s tax take to increase gradually without imposing higher bills on many households already subject to the levy.

When asked whether he expected LPT reform to produce higher bills for most households, Minister Donohoe said he hoped to avoid this by broadening the base of taxable properties and potentially broadening bands and lowering the headline rate.

“Any changes have to be modest and affordable,” he said, suggesting that in his favoured scenario a typical existing LPT payer “doesn’t see a change. For some, if they do see a change, it’s a change by a single band.”

Finance Minister Paschal Donohoe. Photo: Tony Gavin
Finance Minister Paschal Donohoe. Photo: Tony Gavin

He said Ireland would expand LPT collections over time by tapping “the number of new homes that come into the LPT net. That is the way which we will over time see this yield grow.”

Labour TD Joan Burton chided the Minister for taking no action to bring purchasers of new properties post-2013 into the net already, arguing that even imposing a levy at the lowest band on that category of property would have been better than doing nothing at all. “It speaks of a blatant unfairness,” she said.

But Minister Donohoe said Finance Department tax specialists could find no calculation that would have avoided the risk of legal challenge.

“We do have to change it,” he told Ms Burton. “The challenge is, while I accept the inequity in one property paying the tax and another not, the other inequity would be taxing one on the basis of a 2019 property value and the other on a 2013 property value.”

The Committee was questioned the Minister about the Department of Finance’s latest recommendations for LPT reform contained in the Tax Division’s published March review. It outlined several scenarios for changing the rates and bands.

Some scenarios would pin current LPT rules to today’s higher property values and thereby raise State revenue by up to €300 million annually, while others would largely preserve the status quo on rates by broadening bands, lowering the current 0.18pc rate levied on properties valued under €1 million, and expanding the pool of taxed properties.

Nationally, property prices have risen more than 80pc since their 2013 trough, when LPT liability was set. In most cases this has left the 2013 self-assessed valuations of LPT liability at hopeless odds with current market reality.

The latest figures from Revenue suggest substantial compliance with the existing LPT regime, with 98pc of assessed households paying the tax in 2018. Revenue says it collected €482 million in LPT last year. The owners of around 49,000 properties nationwide applied for exemptions citing a wide range of issues, ranging from pyrite damage to charitable use.

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