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

It is unlikely to surprise Members of the House that on behalf of the Government, I am opposing Second Stage of the Finance (Local Property Tax Repeal) Bill 2013 introduced by Deputy Doherty. The introduction of a value-based property tax is part of our obligation under the EU-IMF programme. To remind those in the House who appear to have forgotten, this commitment was entered into by the previous Fianna Fáil Government, although Fianna Fáil has tried to fudge this by claiming it only agreed to a site valuation tax, which was a policy of the Green Party, its former coalition partners.

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 allowed us to 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. Recent employment figures show unemployment decreasing on an annual basis and unemployment has declined for the fourth consecutive quarter, with the seasonally adjusted figure falling to below 300,000 for the first time since 2010. The Government has put a priority on getting people back to work and the recent figures are positive in this regard.

Actions for the ninth troika review, which were completed by the end of 2012, included the introduction of a value-based property tax for 2013. While the Government has some scope within the programme to use alternative methods to achieve programme targets, the yield anticipated from the local property tax could only have been achieved by implementing measures which would have significantly reduced overall expenditure on vital public services, along with increasing levels of taxation on incomes and spending. Further such measures, if taken, would have come on top of actions already taken which, it is acknowledged, have a significant impact on the day-to-day lives of our citizens. The Government did not want to add to the already necessary cuts in public expenditure or to place additional costs on job creation.

The arguments in favour of a property tax go beyond our obligations under the EU-IMF programme. 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. Historically, the abolition of domestic rates followed by the ending of property taxes on agricultural land was compensated for by the imposition of levies by local authorities on new developments as well as by increases in stamp duties on the property transfers. These revenues were dependent on the value and number of property transactions in the economy. Previous over-reliance on this 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 we have seen, this created huge problems for Ireland's fiscal position.

Ireland was the only country in the OECD that had no recurring property tax and allowed tax relief on rent, on mortgage interest payments, on capital gains by way of principal private residence relief and on capital acquisitions by way of dwelling house relief. This was previously compensated for by way of relatively high rates of stamp duty. Government policy has seen this mix changed through the phased abolition of interest relief, radical reductions on stamp duty rates and the introduction of the local property tax. This is a much more sensible policy mix reflective of what is seen in many other jurisdictions.

This Private Members' Bill is particularly ill-timed given that so much has been achieved to put policy in this area on a much more sustainable footing. I am glad to report that Ireland's economic recovery is continuing with growth forecast at 1.3% in 2013 and just over 2% in 2014. Domestic demand is somewhat stronger than expected. The latest successful auction of the ten-year benchmark bond and strong investor interest is reflective of growing confidence in our fiscal policy and sustained economic recovery. The recent statement from the European Commission, European Central Bank and International Monetary Fund on a visit to Dublin following the tenth review of Ireland's economic programme noted that "Ireland's program remains on track, the gradual recovery is continuing and there have been further improvements in market conditions for the sovereign and the banks". Sustaining this fiscal recovery, along with strict implementation of budget measures, is essential to meet the Government's commitment to a 2013 deficit ceiling of 7.5% of GDP and is key to our ultimate economic recovery. The 2012 fiscal target was comfortably met and the budget remained on track in the first quarter of 2013. The local property tax is a key element of long-term fiscal planning in this regard. The Commission statement went on to say that "the key objectives of Ireland's EU-IMF supported program are to address financial sector weaknesses and put Ireland's economy on the path of sustainable growth, sound finances and job creation, while protecting the poor and most vulnerable". I stand over the introduction of the local property tax and I am satisfied that poor and the vulnerable are protected and that this represents a responsible revenue-raising measure which is a tax on assets, not employment, and so will not adversely affect job creation.

It is against this backdrop that the local property tax has been successfully introduced and we can now look forward to 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 will significantly broaden the domestic tax base. I congratulate the Revenue Commissioners on the successful administration of the tax to date. I understand that in excess of 1.55 million local property tax returns have been filed to date.

At the end of May, over €121 million had already been transferred to the Exchequer, which is a significant sum given that payment of the tax is not due until 1 July 2013. Further payments will be collected between July and December 2013 as the various phased and other payment options available to property owners are met. As Members are aware, local authorities and other providers of social housing are not due to pay LPT for 2013 until 1 January 2014.

I will now re-cap some of the significant features of the local property tax. The introduction of the local property tax provides an opportunity for political reform at local government level. The local property tax will provide a stable funding base for local authorities. From 1 January 2015, local authorities will have discretion to vary the rate by 15% above or below the national central rate which is 0.18%, up to €1 million in value and 0.25% on any excess over €1 million. This fact apparently came as a surprise to some Members recently, despite it having been announced in budget 2013. It was again announced when the legislation was published and it has been debated thoroughly in both the Dáil and the Seanad. One would wonder whether some Members come here at all or if they ever listen to debates. Allowing local authorities an element of responsibility for raising local revenue can increase the level of oversight of local authority operations. It will encourage greater efficiency by local authorities on behalf of their electorates. This will reinforce democracy in local government. I am very pleased that Deputy Pearse Doherty tonight committed his party to exercise the option to lower the property tax and to campaign on this basis in the local elections. That is how local democracy should operate. If people want more services they can propose increases in tax and if people think it can be run on a tighter basis they should propose reductions in tax. We welcome Deputy Doherty's initiative and we hope that local councils that can afford it will use their discretion to reduce the property tax.

I will turn now to the issue of ability to pay. For individuals on low incomes, the Finance (Local Property Tax) Act 2012, as amended, provides for the possibility of deferring the charge to local property tax in certain cases. To qualify for a deferral, the residential property must be occupied as a sole or main residence. The income thresholds for a full deferral will be €15,000 for a single person and €25,000 for a couple, whether married persons, civil partners or cohabitants. An increased income threshold applies in the case of properties occupied as a sole or main residence and subject to a mortgage. In such cases, the gross income thresholds may be increased by 80% of the mortgage interest payments. A deferral option in qualifying cases in this regard will apply until the end of 2017 and will assist individuals currently in mortgage distress. A deferral of up to 50% of the local property tax liability will be possible where the gross income of the liable person does not exceed €25,000 for a single person or €35,000 for married persons, civil partners or cohabitants. A deferral of 50% of the local property tax liability will also be available where gross income does not exceed the above thresholds of €25,000 single, €35,000 couple, as increased by 80% of the gross mortgage interest payments that a liable person expects to make by the end of the year for which the gross income is being estimated. This mortgage-linked partial deferral will also be available until 31 December 2017. It is interesting to note that of more than 1.5 million returns the percentage seeking deferral is nugatory, at less than 3%. That is a fair indication that the public regard this as a fair tax and that they have an ability to pay it because they did not seek deferral-----

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