Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

The Finance (Local Property Tax) Act 2012 was enacted into law, following its signature by the President on 26 December 2012. The Minister for Finance, Deputy Noonan, signed the commencement order bringing the Act, other than sections 19 to 21 inclusive, into operation with effect from 1 January 2013. Sections 19 to 21, inclusive, which relate to the local adjustment factor, will come into operation with effect from 1 July 2014.

The introduction of the Act met one of our programme commitments to the troika, which had to be completed by the end of 2012. Senators will recall this commitment was entered into by the previous Government. Given this troika commitment and the Government's determination to fix the national finances in a manner which supports job creation, we have chosen to implement the local property tax. The local property tax will keep taxes on jobs, such as income tax, unchanged. Recent ESRI research shows that a property tax has the advantage of being six times more job friendly than taxes on work and income. This Government is determined to do everything in its power to protect and support the creation of jobs. Yesterday's employment figures for the last quarter of 2012 were encouraging, representing the first annual increase in employment recorded since 2008.

This Bill is now being introduced to give effect to commitments that the Minister made during the passage of Finance (Local Property Tax) Bill 2012 through the Houses last December, in addition to some further issues that have since been raised as well as some minor technical amendments.

Before I go through the Bill in detail, I wish to draw the House's attention to the key positive amendments contained in it. I also wish to point out, in response to some comments in the Lower House, that the Revenue Commissioners are legally independent in the operation of their duties, which will include the administration of the local property tax.

The Minister for Finance has agreed with his colleague the Minister for the Environment, Community and Local Government, Deputy Hogan, that houses demonstrated to be subject to a certifiable level of pyritic heave should receive an exemption from the local property tax. The exemption may be claimed for three consecutive liability dates. The Minister for the Environment, Community and Local Government will provide regulations stipulating how residential properties should be tested for pyrite-induced damage. These regulations will also provide for the issue of a certificate in respect of a property that has been verified as having a level of damage significant enough to warrant exemption.

The Government is conscious of the difficulty some homeowners are experiencing in meeting their mortgage obligations. Under new proposed amendments, a person who has entered into an insolvency agreement - that is, a debt settlement arrangement or a personal insolvency arrangement under the Personal Insolvency Act - may qualify for a deferral of the local property tax that falls due for payment by that person during the period for which the insolvency arrangement is in effect, where a valid claim is made to the Revenue Commissioners. Further proposed new measures provide for the possibility of a deferral for owners who cannot pay the local property tax, when it becomes payable, without excessive hardship as a consequence of a significant and unexpected financial loss or expense. This deferral will operate on a different basis from deferral arrangements provided for in the original Act. A person must apply in writing to the Revenue Commissioners for the deferral and meet the criteria set out in guidelines to be published by the Revenue Commissioners. Deferral cannot commence until the Revenue Commissioners have received whatever information and documentation they require to make a decision and, having made that decision, notified the owner that a deferral is allowed subject to whatever conditions they may impose in accordance with the guidelines that will be published.

The Bill allows for a reduction in the chargeable value of a property that has been adapted for occupation by a disabled person where the adaptation has been grant-aided by a local authority. The reduction is limited to the lesser of the following two values: the chargeable value attributable to the adaptation work carried out on the property, and the maximum grant payable under the relevant local authority scheme. The relief will not apply after the sale or transfer of the property unless the person with the disability continues to reside in the property.

The Bill also provides an exemption for a residential property that is purchased or adapted for use as a sole or main residence by an incapacitated individual where an award has been made by the Personal Injuries Assessment Board or a court or where a trust has been established specifically for the benefit of permanently and totally incapacitated individuals. To be exempt, a residential property must be acquired or adapted to make it suitable for occupation by an incapacitated individual. To avail of the exemption, the adaptation costs must be greater than 25% of the chargeable value of the property before the work took place. The exemption will no longer apply if the property is sold and the incapacitated individual no longer occupies it as his or her sole or main residence.

The Bill allows a personal representative of a deceased liable person, where that person was the sole liable person of a residential property, to qualify for a deferral on making the required valid claim. The deferral may be claimed in respect of local property tax that was due and unpaid at the time of the liable person's death, local property tax that was deferred by the deceased liable person and local property tax that falls due in the three years immediately following death. The Bill limits the period for which personal representatives may qualify for a deferral to three years commencing with the date of death. However, if the personal representative is in a position to transfer the property to a beneficiary or to distribute the sale proceeds, where the property must be sold, the period of deferral ends at that point. In all cases, the personal representative may be responsible for payment of the deferred local property tax when the period of deferral comes to an end.

As previously indicated, properties used for accommodation purposes by groups such as the girl guides or scouts will receive an exemption from local property tax. This is on foot of a commitment given by the Minister for Finance, Deputy Noonan, during the Second Stage debate in response to a proposal set out by Senator van Turnhout, which we welcomed. The Bill now provides for an exemption for residential properties used by a charitable body for recreational activities connected with its charitable purpose where this is not done on a commercial basis.

The chargeable value of all properties for which the liable entity is a local authority or an approved housing body will be deemed to be within the first valuation band for the first valuation period - that is, up to 31 October 2016. Local authorities and approved housing bodies may also defer their 2013 local property tax liability until 2014. This is to allow such bodies to put in place arrangements for the payment of the tax and for the valuation of their properties.

An amendment proposed to deal with issues arising where there is a change of liable person between valuation dates has been the focus of much media and Opposition attention in recent weeks. Where the liable person changes between valuation dates the vendor will be obliged to provide the purchaser with details of the chargeable value that was established on the first valuation date, along with any relevant documentation. Failure to comply may result in the imposition of a fine of ¤500 on the seller of the property. The new owner is obliged to submit a revised return and chargeable value for the next liability date where it appears to him or her that the chargeable value declared by the previous liable person was too low given the circumstances that would have prevailed at the time that chargeable value was established. These amendments are intended to act as a deterrent against under­declaration of the chargeable value of a relevant residential property by a liable person who intends to sell the property before the next valuation date. Contrary to media coverage and other public commentary, the new provision offers a level of protection for purchasers. In the absence of this amendment a deliberate and serious under-declaration of a property's value could be binding on a new owner or liable person where a property is sold before the next valuation date. This amendment allows the purchaser to advise the Revenue Commissioners of what he or she considers to be the correct market value of the property, and relates only to the tax that would be payable by the purchaser. Any issues with the original value placed on the property would be entirely and solely a matter between the Revenue Commissioners and the former owner.

I will outline the details of the sections of the Bill. Section 1 defines the principal Act as the Finance (Local Property Tax) Act 2012. Section 2 amends Part 2 of the Act by providing exemptions from local property tax for a residential property used by a charitable body for recreational activities connected with its charitable purpose and for residential properties purchased or adapted for occupation by permanently and totally incapacitated individuals. I outlined these new exemptions earlier in my contribution. Section 3 amends Part 2 of the principal Act to provide an exemption for a temporary period of at least three years for residential properties that have been affected by a significant level of pyrite-induced damage. Section 4 amends Part 3 of the principal Act to clarify how it will apply in several situations in which an occupier has not taken steps to establish title on the property.

Section 5 makes several amendments to Part 4 of the principal Act relating to the charging provisions such as valuation of property and the rate of tax to be applied. Sections 5(a) and 5(b) make amendments to section 14 that are linked to an amendment made to section 35. As I stated previously, these amendments are intended to act as a deterrent against under-declaration of the chargeable value of a relevant residential property by a liable person who intends selling the property before the next valuation date. Sections 5(c) and 5(k) are a combination of minor technical amendments and amendments that clarify the operation of the Act with regard to the local adjustment factor. Section 6 proposes to insert a new section 15A providing for a reduction in the chargeable value of a property that has been adapted for occupation by a disabled person where the adaptation has been grant-aided by a local authority.

Section 7 deals with residential properties owned by a local authority or an approved housing body. The chargeable value of such properties is deemed to fall into the first valuation band - that is, from zero to ¤100,000 - until 1 November 2016, the valuation date for 2017. In addition, the payable date for the 2013 local property tax liability is extended to 1 January 2014. Section 8 makes several amendments to Part 7 of the principal Act regarding the return to be prepared and delivered to the Revenue Commissioners. Sections 8(a) to 8(c) are minor technical amendments. Section 8(d) is linked to the amendments in section 5.

Paragraph (e) substitutes more comprehensive provisions for section 38 of the principal Act dealing with the linkage between late submission of a local property tax return and the submission of a return for income tax or corporation tax. Late delivery of a local property tax return can result in an income tax or corporation tax surcharge under the Taxes Consolidation Act 1997. Paragraph (f) makes a minor technical amendment. Section 9 makes several amendments to Part 8 of the Act as regards estimates and assessments of local property tax made by the Revenue Commissioners. Paragraph (b) will facilitate notification of Revenue estimates by electronic means. Paragraph (c) facilitates appeals where an assessment is made in respect of more than one property. The other amendments are technical in nature.

Section 10 amends Part 9 of the principal Act to allow an appeal by an owner against a determination of the appeal commissioners to be heard by the Circuit Court. This is in line with appeal provisions in other areas of the tax code. Paragraph (c) amends section 63 of the Act so that the appeal commissioners can require a liable person to provide information on any property and not just a relevant residential property.

Section 11 makes several amendments to Part 10 of the Act as regards the deduction of local property tax at source by employers, occupational pension providers and the Departments of Social Protection and Agriculture, Food and the Marine. Paragraph (a) amends the definition of "net emoluments" in section 64 in two respects. First, it gives priority over local property tax to deductions by an employer or occupational pension provider under a court order, such as an order for the payment of maintenance, where such an order was issued before the direction to deduct local property tax was issued by the Revenue Commissioners. Second, it allows deductions of local property tax to be made from a repayment of income tax, PRSI or universal social charge by an employer or occupational pension provider to a liable person. Paragraphs (b) to (g) make minor technical amendments to ensure that the formulation used in several provisions is consistent and clear.

Section 12 makes several amendments to Part 11 of the principal Act in the collection and enforcement of local property tax by the Revenue Commissioners. Paragraph (a) amends section 119 to clarify that local property tax is due on a liability date but may be paid on or before a subsequent date. For example, the liability date for 2013 is 1 May but initial payments may be made on or before 1 July. Similar provisions will apply in respect of future years. Paragraph (b) amends section 120 in relation to a direction given by the Revenue Commissioners to employers, occupational pension providers and the Departments of Social Protection and Agriculture, Food and the Marine to deduct local property tax at source when making payments to a liable person.

New subsections (2) and (3) disapply the requirement for the Collector General to issue a demand for outstanding tax when such a direction is given and allow the direction to be given after the local property tax is due but before it is payable. However, tax need not be deducted until it is payable. Paragraphs (c) and (d) are intended to clarify the original provisions. Paragraphs (e) and (f) insert a new subsection (2) into section 126 to require a liable person who sells or otherwise transfers a relevant residential property after local property tax is due but before it is payable to pay that tax on completion of the sale or transfer. Paragraphs (g) and (h), which were introduced by a Committee Stage amendment in the Dáil, provide that any local property tax liabilities that were not established before a sale of a property will not be a charge on the property for the new owner. Instead, the Revenue Commissioners will pursue the previous owner for payment of such liabilities. However, such liabilities will continue to be a charge on the property where the new owner does not submit an honest opinion on the market value of the property to the Revenue Commissioners when required to do so on the first liability date following the sale. Paragraph (i) inserts a new section 147A that establishes a way of determining a liable person's local property tax liability for the purpose of charging a tax geared penalty, that is, a penalty which is a proportion of the outstanding tax rather than a flat amount.

Section 13 amends Part 12 of the Act to introduce three additional categories that may qualify for a deferral of local property tax. These include the personal representatives of a deceased liable person and an individual who enters into an insolvency arrangement - I have already outlined the provisions in this section. Section 14 deletes sections 140 and 143 from the Act. Section 140 is not a substantive provision and merely contains a definition of "authorised person" that is used in section 143. Section 143 provides for the inspection of a residential property for the purpose of establishing the market value of the property by a person who is suitably qualified to do so and authorised to do so by the Revenue Commissioners. This section was introduced as a Committee Stage amendment in the Dáil. Following from concerns expressed by various Deputies and Senators during the passage of the Act through the Houses last December, officials of the Department and Revenue have, in conjunction with the Office of the Attorney General, reviewed section 143 of that Act and the Revenue Commissioners' power to inspect an individual's assets. In light of advice received from that office, the Minister decided that section 143 should be repealed. In conjunction with this, he has provided for a new general provision in section 98 of the Finance Bill 2013 that applies to the various taxes and duties under the care and management of the Revenue Commissioners in the valuation of an individual's assets, including property. The effect of the amendment being made by section 98 will be to require a person who has been authorised by the Revenue Commissioners to value a particular asset to obtain a warrant from a judge of the District Court where the occupier of a private residence does not consent to the inspection of the property or of any assets in the property. This general provision will also apply to local property tax and to the inspection of residential properties.

It is anticipated that the need for the Revenue Commissioners to seek to inspect a residential property without the consent of the occupier should only arise on very rare occasions. If the need for an inspection does arise, it is not anticipated that the occupier's consent will be withheld. As a practical matter, it would be difficult to resolve a difference of opinion between a taxpayer and the Revenue Commissioners about the value of a property without the Revenue Commissioners procuring a professional valuation of the property and this would necessarily involve an inspection.

Section 15 amends section 1094(1) of the Taxes Consolidation Act 1997 to ensure that outstanding local property tax liabilities are taken into account when tax clearance certificates are being sought in respect of the issue of certain licences, for example, licences for the sale of alcohol. Section 1095, containing the general tax clearance certificate provisions, already applies to outstanding local property tax liabilities. Section 16 makes minor technical amendments to several parts of the principal Act. Section 17 contains the Short Title of this Bill, the Finance (Local Property Tax) (Amendment) Act 2013.

As I stated earlier, this Bill is being introduced to give effect to previous commitments made by the Government made on the new local property tax. Senators will be aware of the upcoming May liability date and filing deadlines. In advance of these dates, and commencing on 11 March, the Revenue Commissioners plan to do a bulk mail issue of local property tax guides and return forms to all homeowners to assist them in their preparations for the new tax. The passing of the legislation at this time will provide certainty to the Revenue Commissioners. It will give homeowners time to consider the guide, assess their liabilities and make their returns on time, as well as assist in the smooth implementation of the tax. I commend the Bill to the House.