Mr. Ruairí McGinley:

I thank the Chair. On behalf of the finance SPC, I welcome this opportunity to present to the Joint Oireachtas Committee on Housing, Planning and Local Government. I thank the Chairperson, members and secretariat for facilitating this presentation.

The issue of the LPT is a topical one and the finance SPC commissioned a study by Dr. Pat McCloughan, who joins us today, on the topic. This study covers much of the same ground as that covered in the report of the Committee on Budgetary Oversight on LPT revaluation published in March. However, there is significant additionality in the report commissioned by the finance SPC.

Our SPC took the terms of reference set by Minister for Finance and left aside arguments regarding the actual tax or possible alternatives to it. Our key focus was on the legitimacy of the tax as perceived by the electorate in the context of local elections and on the changes we see as desirable. In 2013, people were promised additional services that have not been forthcoming. Dublin City Council's net benefit from LPT is €4 million. To put that in context, Dublin City Council's total budget is €900 million, while €80 million is collected per annum through the LPT in its area. In effect, just 5% of the money paid by Dublin City Council households has been made available to fund new services. A key concern is that LPT receipts have been substituted for previously used tax revenues but that practice is only applied in the Dublin city area and other major cities. The true level of equalisation applied via the LPT is distorted and is far removed from what the electorate understands it to be.

Dublin City Council applies the maximum 15% discount every year. This flows directly from the electoral mandate of councillors in 2014 and reflects the opinion of the electorate. The CEO and some political parties, most notably the Green Party and the Labour Party, have sought to reduce the 15% discount on the basis of generating additional funds for services.

In terms of the legitimacy of the tax, two factors must be considered.

The two main factors affecting legitimacy of tax is the lack of local resourcing - that is the local spend from the tax - and the fact that 20% of the money collected flows by way of equalisation to other counties in what is seen to be an arbitrary and obscure fashion. Dublin City Council collected an additional €2 million last year but our income went down by €160,000, which was slightly difficult. This may give the committee an idea of the arbitrary nature of the distribution.

There is also a concern among the electorate that the local property tax, LPT, could become a tax on certain residential postal districts and that this tendency will increase in future. If people have a long enough memory it brings them back to the residential property tax of the 1990s. There is also disquiet around the lack of direct correlation between movements in property valuation and income, although the tax implies there is a correlation. The LPT framework, as structured, embeds the inequity between the living costs of similarly paid workers in the capital city Dublin, for example, as against rural Ireland. This perception could cause our capital to be avoided as a place to live.

One of the key points is the need for the removal of equalisation. In the past poorer local authorities were subsidised when we were in financial straitened circumstances, but now the removal of equalisation would be a positive step forward in making the tax easier to understand and in achieving tax efficiency. National government should fund this aspect of local government funding.

Dublin City Council contains some of the more affluent areas of the State and also some of the most socially disadvantaged areas. This is visible in areas of Dublin city centre where there are some 100 flat complexes alongside areas of affluence.

The progressive nature of the tax is dealt with in our report as is the high rate of compliance. The high rate of compliance leads the committee to believe that the tax will remain in place for the future. Removing the current exemptions, particularly for new builds, will increase the level of resources available for local government. We calculate that this measure has cost Dublin City Council more than €10 million to date.

Resources are still very scarce as can be seen by the condition of footpaths and road surfaces in the capital city. These spending areas were reduced by more than 80% during the financial crisis and they have yet to recover to levels needed for sustainable renewal programmes.

The area of deferral arrangements also needs to be looked at. The deferral arrangements were included in the context of a short life for the tax, foreseen as a period of three years. This does not really correlate to where we are now and there is a need for a general review. There are issues of people on low income living in valuable properties. Low income can be associated with ageing and also with disabilities, situations that do not distinguish between people living in small or large houses.

We agree with the recommendation that a revaluation takes place and that a valuation factor would be adjusted. This means that if the property prices have doubled, the current evaluation factor of .18 would need to be halved to .09. We have seen property price increases of more than 100%; they have nearly doubled since the low point of 2012. The tax should be fair to the greatest degree possible and the consultation process - which we are part of today - should be transparent.

Our committee operates on a cross-party basis politically and the report reflects the views of the members. I shall conclude with some figures to put Dublin City Council's LPT funding in context: Dublin City Council is 12% of the number of houses covered by LPT; it provides 16.5% of the money raised through LPT; and 42% of the money raised by Dublin City Council in LPT comes from properties that are worth more than €300,000. We would see the value of exemptions forgone as a very significant figure.

I thank the Chairman and I am happy to take any questions that committee members might have.