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

The local property tax will deliver significant structural reform through broadening the base for taxation in a manner that does not directly affect employment, and will thereby contribute significantly to meeting the immediate financial requirement of the EU-IMF programme. 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 will encourage greater efficiency by local authorities on behalf of their electorates.

I thank Deputies who took part in this debate and would like to reply to some of the points raised. Deputies Michael McGrath and Catherine Murphy gave the impression that the amendments in this Bill are a consequence of rushed legislation before Christmas. This is incorrect. It was essential to pass the original Act before Christmas to give appropriate powers and certainty to the Revenue Commissioners to implement the local property tax. The amendments before us arise mainly from commitments I gave during the passage of the previous legislation. There are also a number of technical amendments, which I outlined in my opening speech.

Deputy Doherty said the House only got to consider one amendment on Committee Stage of the earlier legislation. Considerable time was given to Committee Stage on the floor of this House but Members of the Opposition used the occasion for a re-run of Second Stage, to the extent that there was insufficient time to deal properly with Committee Stage, and I was not given an opportunity to respond to the issues raised.

Deputy Ross suggested there would be social disruption if this tax was imposed on an asset from which one could not extract liquidity. There are property taxes in many other countries without a noticeable impact on social cohesion. Many Deputies objecting to this legislation have properties abroad for which they quite willingly sign cheques to pay the property tax to the Spanish or French authorities. There is a level of hypocrisy here which can be quite astounding at times.

The tax applies to the current value of a property and not what was paid for it, which is particularly relevant to houses that were bought in recent years.

Various comments were made in regard to the exemptions for special accommodation. I thank the Deputies who made these comments and the points with regard to the disabled and I thank Deputy Ross for his recognition of these and other amendments. Section 7 provides that properties of approved housing bodies will be exempt where the properties in question are used to accommodate people with special housing needs. "Special needs accommodation" is defined as accommodation provided to persons who by reason of "old age, physical or mental disability or other cause require special accommodation and support to enable them to live in the community" - that is, a particular need in addition to a general housing need.

The Minister of State at the Department of the Environment, Community and Local Government, Deputy Jan O'Sullivan, recently launched the Government's homelessness policy statement. This is an issue of real priority for Government and puts a housing-led approach at the heart of policy in this area. Notwithstanding that there is no specific reference to it in the Act, a range of support services associated with accommodation for the homeless are provided. An exemption will apply to those categories. A pragmatic and reasonable approach will be taken by the Revenue Commissioners in assessing applications for exemption in this regard.

To avail of an exemption, a housing association must operate as a charity and must have a general tax exemption granted to it by the Revenue Commissioners. The Revenue Commissioners are currently developing guidelines to clarify what constitutes special housing needs and support in order to assist housing associations and other social housing providers in determining whether their properties are exempt from the charge to local property tax. The Revenue Commissioners have sought and received input from representatives of housing associations in connection with the development of the guidelines and are actively engaging with the Irish Council for Social Housing, Focus Ireland and other charitable bodies in regard to this.

Deputy Paschal Donohoereferred to flooding. There is no specific exemption from local property tax for the flooding cases outlined by the Deputy. I am aware of many cases where properties are affected by flooding and have also heard anecdotally of instances where, reportedly, insurance companies have refused cover to entire townlands where claims had previously been made in respect of flooding, even for homes that have never flooded. As the local property tax is a self-assessment tax, it will be a matter for the property owner to calculate the tax due based on his or her assessment of the market value of the property. The impact of serious and regular flooding on a property would be one of the factors a property owner would and should take into account in valuing his or her property. In addition, one of the advantages of the banding system of values provided for in the legislation is to remove the need for precision in the market value, except for properties worth over €1 million. The Revenue Commissioners are preparing valuation guidance and developing a guide to assist liable persons in assessing the value of their property which will take account of location. Where these guidelines are used honestly, together with a liable person's own knowledge of his or her property, the property valuation will not be challenged by the Revenue Commissioners in accordance with its normal customer service charter.

Deputy Olivia Mitchell referred to the urban-rural issue. The Thornhill group was tasked to consider the design of a property tax that would be equitable, informed by previous work and international experience and which should ensure the maximum degree of fairness between and across both urban and rural areas. In designing the tax the Thornhill group was guided by the principles of simplicity, transparency, equity and efficiency, among others. It considered various options for use as a basis of assessment, including floor area. However, it agreed with the Commission on Taxation and recommended that market value of residential properties be the basis of assessment for the tax. Full market value is a tried and tested basis of assessment that is internationally accepted.

Market values of residential properties vary considerably throughout the country. This would lead to a variation in the amount of local property tax chargeable to residential properties of similar size and quality. However, the market value of a residential property is related to the characteristics of the building, 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. Taxable values based on market valuations would generally be higher in urban areas as compared to rural areas. This is equitable to the extent that the 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, local amenities and facilities, including transport infrastructure. The benefits of these services and functions accrue to all members of society.

While the national central tax rate for the first 18 months up to 31 December 2014 will be 0.18% up to €1 million in value and 0.25% on any excess value over €1 million, from 1 January 2015 local authorities will have discretion to vary the rate by 15% above or below the national central rate. When this comes into effect, it could be used to address variations in value throughout the country. Contrary to comments by Deputy Catherine Murphy, the intention is that in 2013, 65% of the receipts from local property tax will be spent in the local authorities where they are collected. This will increase to approximately 80% in subsequent years.

Deputy James Bannon mentioned the position on heritage properties. While there is no exemption or reduction from local property tax for such properties, there are income tax concessions for the owners of heritage properties, as I am sure the Deputy is well aware.

Deputy Michael McGrath asked about unfinished housing estates. The list of such estates to be prescribed for purposes of a waiver from local property tax is being prepared. It is being compiled by local authorities and will use the categorisation in place in respect of the household charge, updated by reference to the national housing survey 2012. The Department of the Environment, Community and Local Government will collate the data from local authorities in the coming weeks. My colleague, the Minister for the Environment, Community and Local Government, will then prescribe and publish the list of qualifying estates. Given that the Revenue Commissioners plan to issue a national communication on the local property tax in mid-March, the Minister for the Environment, Community and Local Government intends to have the list compiled and published by that date. Under the Finance (Local Property Tax) Bill, an unfinished housing estate will remain exempt during the first valuation period, unless it is completely finished. The idea that a partially completed estate which was excluded from the household charge will be included is not the basis on which the list is being compiled.

There were a number of comments on ability to pay and the Bill was criticised on that principle. Deputy Michael McGrath pursued this issue very strongly and said he would table amendments on Committee Stage. In recommending an income level of €25,000 for joint and co-owners, spouses, civil partners and cohabitees within the meaning of the 2010 Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 the Thornhill group had regard to the analysis it had commissioned from the ESRI at the beginning of its work. An income level of €25,000 for joint and co-owners, spouses and so forth is recommended in order to enable most households in the lowest 40% of income levels to have the option of deferral. This is considered appropriate, having regard to the findings of the ESRI study.

Deputies will be aware that the figures of €12,000 for a single person and €25,000 for a couple are pitched significantly above the contributory old age pension, probably the highest social welfare payment made to individuals or couples. Consequently, the capacity to defer is available to persons whose sole income is from welfare payments. In addition, those with impaired mortgages can add on 80% of the interest that they would pay. A couple paying €100,000 in interest, for example, will be able to allow for 80% of that figure on top of the exemptions already provided for.

Deputy Brian Stanley referred to the issue of poverty proofing. Where deductions at source are being used in regard to social welfare entitlements, the Department of Social Protection will not make deductions which would reduce income below the equivalent of the social welfare allowance. Therefore, even though there is the power to attach to social welfare payments, there is a saver in that the Department cannot deduct what would bring it below the equivalent of the social welfare allowance.

A number of Deputies raised the pyrite issue. Section 3 of the Bill provides for an exemption for a temporary period of at least three years for residential properties that have been affected by pyrite. The Minister for the Environment, Community and Local Government will make regulations to stipulate how residential properties are to be tested to establish if a property is so affected. Where suitable tests have already been carried out by homeowners, certification of these tests, together with certification from a geologist or engineer of damage, are likely to be acceptable together in respect of qualification for an exemption. My intention is to exempt any house that has incurred significant damage as a result of pyrite to the degree that the property is valueless. That is the situation in the case of many of them. I am prepared to discuss with Deputies on Committee Stage how we can simplify that process to ensure significant cost is not imposed on householders who are trying to claim that their house has no market value as a result of pyrite problems. It is self-assessment based on market value. If a house no longer has a market value, there is no liability for the tax.

I thank the Deputies who have made considered and useful contributions to the debate. I will consider some of the points and suggestions made between now and Committee Stage. I look forward to a fruitful Committee Stage debate next week.

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