Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

The local property tax is designed to provide a more sustainable system of funding for local government and place the provision of local services on a sounder financial footing. The local property tax is also a significant base-broadening measure. The level of income expected to be generated by the local property tax in 2018 is in the region of €470 million.

Deputies will be aware that, under the terms of the Stability and Growth Pact, Ireland may not introduce discretional revenue reductions unless they are matched by other revenue increases or expenditure reductions. This means that the Government must consider carefully any tax changes as any reductions will have to be offset elsewhere.

As regards abolition of the local property tax, LPT, it is now well established that the taxation of property through an annual recurring tax is less economically distortionary than the imposition of tax on either income or capital. This is supported by economic literature and OECD analysis which underscores how an annual tax on land and buildings has a relatively small adverse impact on economic performance. Both international and domestic research indicate that property taxes are more growth friendly than taxes on labour.

The introduction of a property tax is part of a broader approach to the taxation of property. The aim is to replace some of the revenue from transaction based taxes, which have proven to be an unstable source of Government revenue, with an annual recurring property tax, which international experience has shown to be a stable source of funding.

In the local property tax we have a stable source of funding which is fair and progressive with the owners of the most valuable properties paying most. The tax is equitable, has reference to ability to pay, conforms to international norms and significantly broadens the domestic tax base.

We have seen in the past how over-reliance on revenue from transaction-based taxes, such as stamp duty, capital gains tax and capital acquisitions tax, led to a significant fall in tax revenue when the number and value of transactions decreased sharply from 2007 onwards as a result of the economic and banking crisis thus creating enormous problems for Ireland’s fiscal position. I understand that a tax on second and subsequent non-family homes levied at €600 for the second homes and €1,000 on all subsequent properties would have an annual yield in the region of €229 million. This is based on those properties indicated to be non-principal private residencies by their owners in their LPT returns. I am also informed that the estimated cost of abolishing the LPT in 2018 would be in the order of €470 million, based on my Department’s latest official forecast of LPT receipts for next year.

The difference between these figures is over €240 million. As I have outlined earlier, that amount would need to be made up for in other taxation measures, and as such I oppose the Deputy’s amendment.