Aideen Hayden (Labour) | Oireachtas source

I welcome the Minister. One of the matters with which I wish to deal is whether this is a local property tax or just a property tax. To provide some background and as most Senators are aware, there were property taxes in this country in the 1970s. From the 1960s onward, however, there was a trend towards sucking all responsibility at local level into what over the years has become Department of the Environment, Community and Local Government. This was not just done by Fianna Fáil Governments but a Fine Gael-Labour Party coalition actually removed local domestic rates in the 1970s. One of the difficulties with such rates in the 1970s was that they were a specifically urban charge and did not apply in rural areas. I remind Senators that income tax did not apply to a large part of the urban community in the 1970s either. There is a bad history with regard to local taxation in this country. The impact of this is that there is no real relationship between local services and taxation. This is because we levy taxation and make provision for local services centrally.

My second point is that there has been too much control at local level and this is because funding for local authorities comes from central government. The worst impact in this regard was felt during the era of the Celtic tiger, when poorer local authorities which could not raise money by levying commercial rates did so by imposing levies on developers. They also granted planning permissions in respect of areas in which such permissions should never have been forthcoming. We are dealing with the consequences of this today. What I am stating here, in very broad terms, is that I favour local taxation for local service provision. There are many benefits to be gained in this regard, particularly in the context of local democracy.

There are a number of other issues which arise. Successive commissions on taxation have advocated a broadening of the tax base. Our tax base has been acknowledged as being too narrow. Even if the troika had never said so, the reality is that the imposition of a property tax should have been considered before now. The fact remains that our experiences in attempting to deal with property taxes have, to date, been extremely poor. Some 75% of the income from the most recent property tax came from the greater Dublin area. I take issue, therefore, with his contention that this is not an urban tax. Richer people obviously own more valuable properties. As a result, they will pay more money in property tax. It is more difficult to hide a building or a parcel of land than it is to hide money in foreign tax shelters, etc. The property tax is, therefore, a better way of ensuring that we are levying moneys from those who can afford to pay.

I would urge caution in respect of a number of issues. The first of these relates to the need to be aware of the unintended consequences of the measure before the House. There has been a slight recovery in the property market recently but the reality is that everyone is suffering as a result of the fact that said market is actually defunct. I do not just refer here to couples with three children who are trapped in two-bed apartments and who need to moved, I am talking about the fact that any healthy economy needs a functioning property market. The Minister must be conscious of the fact that this measure may have a significant impact in the context of damping down an recovery in the property market.

The second issue which arises in this regard relates to the need to take account of the effect of this measure on aspects of the market. I refer, in particular, to the private rented sector. As I have indicated on many previous occasions, one in five families live in houses or apartments that are rented from landlords. It is a well known fact that more of these properties - in which real people live - are in negative equity and are distressed than is the case with properties in any other sector. I am of the view that a number of the measures introduced in or as a result of the budget - I include the Bill before the House in this regard - are going to have a negative impact on this sector of the market. The Minister must be aware of that fact.

On the main aspects of the Bill, questions arise in the context of the urban-rural issue. This is an important matter and no one should be fobbed off in respect of it. Property values in Dublin, Cork and Galway are higher than in other parts of the country. Ordinary families in these cities are obliged to pay out more of their disposable income in respect of maintaining their homes. These people could go to the cinema and do many other things if they were not obliged to spend their money keeping a roof over their heads. I do not agree that because people own properties which are more valuable, this should have any impact whatsoever on the services they receive at local level. This is a matter which will have to be addressed, perhaps not today or tomorrow but certainly in time.

As Senator Darragh O'Brien stated, no allowance has been made for the fact that many people live in apartments which they bought during the boom and in respect of which they are paying significant service charges. These individuals are actually already paying for some of the services which local authorities are, in theory, supposed to be supplying. I am surprised that more of those who live in apartments do not request that common areas be taken into charge by their local authorities.

Senator van Turnhout referred to the impact of the Bill on local authorities and voluntary housing associations. I am at a loss when it comes to gauging how the latter are going to be affected. I accept that the legislation refers to the chargeable value and that the word "unencumbered" is used. Research has been carried out by the Department of the Environment, Community and Local Government - I am sure the Minister's Department has carried out such research - by Indecon and others which indicates that, as a result of a number of factors, it is practically impossible to determine the value of local authority properties. The factors to which I refer include tenants' security of tenure, successor tenancy rights and, in the past, the entitlement to purchase.

This will require serious consideration.

As the Minister is well aware, the Government is placing a significant burden on the voluntary housing association sector to house people who are in most need because we no longer have local authority housing provision. That is not the way we see ourselves providing housing, certainly in the short term, given the financial difficulties in which we find ourselves. There is no doubt in my mind that Respond!, the largest housing association in the country with 6,000 units, and Clúid which has a significant number of units not far off that figure, are not in a position to come up with this money. It is facetious to say they can turn around and get it from their tenants, some of whom are among the poorest people in the country. Some measure needs to be found to deal with this issue, both for local authorities and the voluntary housing association sector.

The stamp duty issue is very difficult. I am a solicitor and was in professional practice a number of years ago. I am very conscious of the fact that people paid very significant prices for property during the Celtic tiger years. The bottom line is that stamp duty is a tax, yet we are asking the people concerned to pay once again. I ask the Minister to give serious consideration to alleviating the distress of those who paid very significant amounts of money to the Exchequer in stamp duty. I understand local charges are a better way and I ask him to take this into account in stamp duty legislation. We must reduce stamp duty to a nominal level, given that we are imposing local taxes.

We are a nation of home owners. I do not want to bore Members with statistics, but significant research by people such as Professor Tony Fahey and the ESRI shows that older people suffer less in old age in terms of poverty because they own their own homes. It is a fact that poor people are more asset wealthy than their incomes would suggest. Home ownership has been a serious income redistribution factor. I know the Minister has made allowances in the legislation for deferral and so on, but my experience of dealing with older people is that they are very cautious, very worried about the future and providing for themselves if they need care and so on. I am very concerned - I ask the Minister to keep this under review - about the impact this measure will have on them.

In general, a property tax is necessary. I take on board the figure of 15% allowable either way, while there is provision to pay into the local government fund an amount equivalent to local property tax. I live in Dún Laoghaire. Will the property tax raised there come back to it? How much of it will come back to it? What is the relationship between how much I will pay and how much my local authority will receive? I do not think 15% one way or the other will make an essential difference.