Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The introduction of the local property tax will serve a dual function. First, it will provide a stable funding base for the local authority sector, incorporating appropriate elements of local authority responsibility. It will strongly reinforce local democratic decision-making and encourage greater efficiency by local authorities on behalf of their electorates. Second, it will deliver significant structural reform through broadening the base for taxation in a manner that does not directly impact on employment and thereby contribute significantly to meeting the immediate financial requirements of the EU-IMF programme.

Before I get to the detailed sections of the Bill, I wish to respond to some of the issues and concerns raised in the other House and elsewhere since publication of this legislation. There has been some criticism of the decision to give the Revenue Commissioners responsibility for the collection of the local property tax. I do not intend to apologise for giving the Revenue Commissioners responsibility for administering the local property tax. They have vast experience in the legislation, systems and collection and enforcement procedures necessary for the smooth running of the tax system. It has been claimed that the deferral system and the 4% simple interest rate will force people to sell their homes. This is a blatant exaggeration. The rate of tax is 0.18%. A deferral for 20 years would result in an outstanding charge of just 5.1% of the value of the property - 3.6% representing 20 years of deferred tax at 0.18% and 1.512% representing the accumulated interest. The level of progressivity and equity of the local property tax among those on the average industrial wage and those on ¤200,000 per year has been criticised. If such persons are liable for this tax, they will pay the same amounts if they have residential properties which are of the same value. In general, people on higher incomes will have higher value properties. A higher rate of this tax is being applied to properties valued over ¤1 million.

The local property tax has been referred to as being anti-Dublin. The market values of residential properties vary considerably throughout the country. The market value of a residential property is related to the characteristics of the building itself, the site on which it is located and the characteristics and amenities of the neighbourhood. There will be a relationship between the market value of a house and benefits to the owner in terms of enjoyment of the amenity value of the property. Owners of more valuable properties would pay more under a market value-based assessment scheme. Taxable values based on market valuations would generally be higher in urban than in rural areas. This is equitable to the extent that market value provides a measure of the value of a residential property to the owner, particularly in terms of its proximity to places of work and local amenities and facilities.

In relation to mortgage arrears, the Government is conscious of the difficulty some homeowners are experiencing in meeting their mortgage obligations. The main focus of attention is on those mortgage holders who are experiencing genuine difficulties in meeting their commitments in respect of their homes. A range of measures is being advanced in this area, including personal insolvency reform, the implementation of the mortgage to rent initiative, the engagement with mortgage lenders on the development and implementation by them of mortgage arrears resolution strategies and the provision of a mortgage advisory function. Each family in mortgage arrears faces unique difficulties. We must have a range of solutions which can be adapted to resolve each family's difficulties. A system of voluntary deferral arrangements focused on particular categories of householders will be implemented to address cases where there is an inability to pay the local property tax under specific conditions.

The lack of a relief against the local property tax for people who paid large amounts of stamp duty has been mentioned. The payment of a large amount of stamp duty at the height of the property boom was not recommended by the Thornhill group as a basis for relief, as it does not have regard to ability to pay. In making its recommendation the group was influenced by several considerations in regard to those who had paid large sums of stamp duty during the property boom, including the fact that the impact of such a relief on taxpayers would not be targeted on those in need. The system of deferrals provided for in the property tax is more closely targeted at ability to pay than any exemption for stamp duty paid would be.

The local property tax will apply to local authority houses. I note that domestic rates are charged on local authority properties in Northern Ireland and collected through the rental system. The Thornhill group considered whether local authorities should be liable as owners. Notwithstanding the economic arguments in favour of that approach, the group, on balance, did not favour creating a circular flow of payments. The Government's view is that issues of proportionality could arise if owners and local authority tenants were treated differently. While reform of differential rents would contribute to horizontal equity between local authority tenants and low income owners, anomalies could arise in cases where local authorities owned and rented out properties in otherwise privately owned housing estates. The tenants in such properties would not be subject to the local property tax, whereas the owners of other properties in the same estate would have to pay it.

I understand most of the various bodies that comprise the voluntary and co-operative sector in respect of the provision of social housing would have been approved for charitable status by the Revenue Commissioners. Indeed, such bodies must have such charitable status before they can be approved by the Department of the Environment, Community and Local Government for funding to be used in the provision of social housing.

The Government is aware of the important role played by the approved housing bodies in the provision of housing for those who face difficulty in living in our communities. To the extent that such groups are engaged in the provision of special needs housing, they should be eligible for the exemption for such housing, which is provided for in the Bill. However, such groups also provide general needs housing in the same way as a local authority provides such housing. Most of their funding is provided by local authorities, the tenants are taken from local authority waiting lists and a similar type of differential rents system applies. Depending on the level of local authority funding provided, some voluntary bodies may have flexibility to provide housing for those not eligible for local authority housing. To provide for a blanket exemption for such bodies would obviously be inequitablevis-à-vislocal authority tenants. For this reason, the Government decided not to accept the recommendation in the Thornhill report that all charitable bodies should be exempt but to restrict the exemption to those properties that are used to provide special needs accommodation to persons who, for reasons of old age, physical or mental disability, or other cause, need special accommodation and support to enable them to live in the community.

The Revenue Commissioners, who will be responsible for the administration of the local property tax, will publish guidelines to enable liable persons to complete the property tax return and, in particular, to determine whether their property is an exempt property, including whether it qualifies for an exemption on the grounds that the property is used solely or primarily to provide special needs accommodation. However, I acknowledge that Government policy places significant emphasis on the approved housing body sector as an important part of social housing supply in the future. The Government will actively engage with approved housing bodies to ensure the local property tax does not impact on their ability to deliver housing units.

In addition to the preceding commitments, I have also previously indicated my willingness to review the provisions of the Bill in regard to two other areas. There have been some requests for amendments to exempt those residential properties affected by pyrite or pyritic heave. The Government is conscious of the difficulties faced by owners of such properties and I have previously advised that I will address this matter in the Finance Bill 2013.

Under section 11(3) of the Bill, the personal representatives of a deceased person who was a liable person is also a liable person where the estate includes a residential property. The reason for making a personal representative a liable person is to prevent the avoidance of the payment of local property tax by means of unnecessarily delaying the distribution of the estate and the transfer of a property to the person who would become the liable person in respect of the property. However, I appreciate it might not always be possible for the personal representatives to fund the payment of local property tax, whether the tax was owed by the deceased person or by the personal representatives in respect of the period following death. Addressing this difficulty is not straightforward given the variety of complex circumstances that can pertain to the administration of an estate. I have already mentioned that my officials will be examining this issue with a view to formulating an appropriate amendment via the Finance Bill.

I will now outline the detail of sections of the Bill. Part 1, which comprises sections 1 and 2, contains the Short Title, commencement provisions and interpretation sections. Part 2, comprising sections 3 to 10, provides for definitions of "relevant residential property", on which the tax will be chargeable, and that certain properties will be regarded as not relevant residential properties and, therefore, exempt from the tax.

Part 3, made up of sections 11 and 12, contains the rules regarding liable persons. In general, the liable person will be the person who is the owner of the property. A person with a leasehold interest is liable if the term of the lease can equal or exceed 20 years, or where a person has a life interest in the property. In the case of property held under trust, the trustees and beneficiaries are jointly and severally liable for the tax. Where the property is occupied rent-free on a long-term basis but there is no proof of ownership or documentation establishing the interest that the occupier holds in the property, the occupier may be regarded as the liable person.

Part 4, comprising sections 13 to 21, contains the charging provisions of the Bill. The first valuation date will be 1 May 2013 and the valuation on this date will be valid from 2013 to 2016 inclusive. Thereafter, the valuation date that will apply will be 1 November in the year preceding each three-year period; so the valuation date for the period 2017 to 2019 will be 1 November 2016. Where the liable person changes between valuation dates - that is, where the property changes hands - the chargeable value will continue to apply to the new liable person.

Part 5, which comprises sections 22 to 26, contains the standard care and management provisions for Revenue, including the four year time limit on repayments, delegation of functions to authorised officers and allowing for electronic means of return. Part 6, covering sections 27 to 32, deals with the register of properties to be maintained by Revenue, including the obligation of liable persons to register with the Revenue Commissioners by making a return.

Part 7, made up of sections 33 to 46, relates to the making of returns of local property tax to the Revenue Commissioners. As indicated, the Bill provides for a self-assessment system and allows for electronic submission of returns by owners of multiple properties and for submission of returns by agents and lessees. This part will also provide that a failure to submit a local property tax return will lead to a surcharge for late submission of income tax and corporation tax returns.

Part 8, comprising sections 47 to 60, deals with Revenue estimates and assessments. Revenue will make an estimate of the amount of local property tax due in respect of a property, and will notify the liable person. Revenue may amend this assessment if it subsequently considers it to be excessive or insufficient. If a liable person does not submit a local property tax return containing a self-assessment of the local property tax payable, the Revenue estimate will become due and payable. Revenue assessments will be subject to the normal appeal procedures.

Part 9, comprised of sections 61 to 63, contains the usual appeal procedures for taxes under the care and management of the Revenue Commissioners. Part 10, which covers sections 64 to 118, contains provision for "deduction at source" of the local property tax from Irish wages, salaries and pensions, from certain payments made by the Department of Social Protection and from certain payments made by the Department of Agriculture, Food and the Marine. This part also provides that the "deduction at source" provisions may, by order of the Minister for Finance, be extended to cover payments made by other Government Departments or State bodies. Deduction at source from salary or other regular payments will probably be the most convenient method of payment of the local property tax. Where an employee opts to have the tax deducted from his or her salary, employers will be obliged to pay the tax to Revenue in the same way as income tax and PRSI is paid.

Part 11, comprising sections 119 to 129, includes the collection and enforcement provisions for the tax, including the due date for payment, the application of the collection and recovery provisions in the Taxes Consolidation Act 1997 to the local property tax, and provisions allowing for payment to be made to payment service providers. This part provides that any unpaid local property tax will continue to be a charge on property, and that unpaid tax will be payable on the sale of that property. It also provides that an individual will not receive a tax clearance certificate if he or she has not paid local property tax, unless the individual qualifies for a deferral.

Part 12, which includes sections 130 to 139, provides for deferral of payment of local property tax in the case of properties occupied as a sole or main residence. The income thresholds for a full deferral will be ¤15,000 for a single person and ¤25,000 for a couple, whether married persons, civil partners or cohabitants. A person may claim a deferral if their income will not, "as can reasonably be foreseen at the liability date" exceed these thresholds in that year. A deferral of up to 50% of the local property tax liability will be possible where the gross income of the liable person does not exceed ¤25,000 for a single person or ¤35,000 for married persons, civil partners or cohabitants. An increased income threshold applies in the case of properties occupied as a sole or main residence and subject to a mortgage.

In such cases, the gross income thresholds may be increased by 80% of the mortgage interest payments. A deferral option, for qualifying cases, will apply until the end of 2017 and will assist individuals currently in mortgage distress.

Where a liable person no longer satisfies the necessary conditions, amounts deferred prior to the date on which eligibility ceased may continue to be deferred. Where the spouse or partner of a liable person dies and the income thresholds for a deferral are no longer satisfied, deferral may continue until the next valuation date. Where a property is transferred by way of gift or inheritance, the Revenue Commissioners may allow an existing deferral to continue if the recipient of the gift or inheritance would in his or her own right be eligible for and makes a valid claim for a deferral. Full or partial payments may be made against deferred amounts. Deferred amounts become payable on receipt of windfall gains such as an inheritance. Simple interest of 4% per annum will apply to any amounts deferred.
Part 13, made up of sections 140 to 144,includes the standard provisions with regard to the powers of the Revenue Commissioners, including the right of Revenue officials to make inquiries in relation to property and its ownership and inspection of relevant records. Part 14, comprising section 145 to 150,deals with offences and penalties. A maximum penalty of ¤3,000 applies for failure to submit a true and complete return. A similar penalty applies for knowingly making a false statement for the purpose of obtaining any advantage to which the person is not entitled. Interest on late payment of the tax is at the standard Revenue rate of 8% per annum.
Part 15, covering sections 151 to 153,provides that certain persons and bodies will be obliged to supply information on residential properties to the Revenue Commissioners when required to do so, including providers of gas and electricity, An Post, the Minister for Social Protection, the Minister for Agriculture, Food and the Marine and local authorities. The information from these bodies will assist in compiling the register of residential properties.
Part 16, comprising sections 154 to 156,contains provisions in regard to the household charge. The household charge will no longer be payable from 1 January 2013. Arrears paid before 30 April 2013 will be capped at ¤130. Amounts outstanding after 1 July 2013 will be increased to ¤200 and added to local property tax due on the property, to be collected by the Revenue Commissioners. This is an important assurance for people who paid the household charge that non-payment of the charge will not be ignored and that arrears will be collected.
Part 17, covering sections 157 to 159,contains various supplementary provisions, including a provision for payment of local property tax by the Minister for Finance into the Local Government Fund from 2014.

I hope that the Senators have found this explanation of the measures in the Finance (Local Property Tax) Bill 2012 useful. I would like to reiterate that the Government sees the necessary introduction of this tax as an opportunity for very real political reform at local government level. A small number of amendments are being considered for introduction to the Finance Bill 2013. I will, of course, also give consideration to any constructive suggestions put forward during our debate today. I commend the Bill to the House.