Simon Harris (Wicklow, Fine Gael) | Oireachtas source

It is important that its position be maintained, as research and experience internationally consistently show that taxes on immovable property are among the taxes that are least detrimental to growth.

In the course of introducing this Bill on First Stage, Deputy Sean Fleming indicated that approximately 177,000 homeowners were affected by management fees. Now, he claims there are 200,000 home owners who are paying management fees. On the cost of his proposal, he stated that the maximum cost of the proposal would be in the region of €17 million. From our conversations with the Revenue Commissioners, we are not sure where the figure of 200,000 homeowners is derived from, as it does not appear in the 2011 census. The Revenue Commissioners have indicated that without some figure on the number of properties that are subject to management fees and their average charges, it is not possible to cast the Bill’s provisions, as there is no basis in the returns made to the Revenue Commissioners on which to make an estimate.

It is likely that a considerable proportion of those paying management fees are landlords themselves, who are already able to deduct the cost of management fees from their tax liabilities. The Bill does not exclude landlords from the partial exemption proposed, so it would result in a double benefit for these landlords. Will the Deputy clarify whether that is his intention?

If we accept that the local property tax is necessary to fund local services and we do not want to see significant hikes in the tax, who will pick up the slack for the €17 million cost? Who will have to pay more, and what services in what communities does the Deputy wish to cut?

Due to its importance, the Minister for Finance asked Dr. Don Thornhill to conduct a review of the operation of the local property tax, with particular emphasis on any impacts on local property tax liabilities due to property price developments over recent years.

Dr. Thornhill is a distinguished former public servant who chaired the interdepartmental group on the design of a local property tax in 2012. In his report on his review of the local property tax, which was published on budget day, Dr. Thornhill makes a number of recommendations. His central recommendation is for a revised system whereby a minimum level of local property tax revenues in each local authority area would be determined by Government, ideally having regard to the apportionment between local authority areas of the historic yield. This in turn would allow for the estimation of local property tax rates for each local authority area and the application of these by taxpayers and Revenue. Local authorities could adjust this rate upwards by a factor of up to 15%. This new system is recommended by Dr. Thornhill with a possible interim deferral of the next valuation date until November 2018 or November 2019.

As announced in Budget 2016, the Minister for Finance will be making a proposal to Government to postpone the revaluation date for the local property tax from 2016 to 2019. This postponement means that home owners will not be faced with significant increases in their local property tax in 2017 as a result of increased property values. This gives sufficient time for the other recommendations in Dr. Thornhill's report to be considered fully by the next Government.

I note the Deputy's comments about pyrite exemption. The Minister made very clear in his budget speech that he accepts the recommendations concerning pyrite exemption, which I think was recommendation 11 in the Thornhill report. Among these recommendations is that local authorities be more engaged in supporting the Revenue Commissioners and also that they provide the general public and individual households with programmatic and other useful information on how they spend the public funds available to them and the proportionate contribution made by the local property tax. This is a very important recommendation. If people will be asked to pay money directly to councils, they need to see where it is spent and what it is spent on and there needs to be transparency.

The local property tax was designed on the principles of equity, transparency and simplicity. Under the local property tax, a liability applies to all owners of residential property with a limited number of exemptions. Limiting the exemptions available allows the rate to be kept to a minimum for those liable persons who do not qualify for an exemption. The more people one wishes to give exemptions or partial exemptions to, the more one increases the burden on other people paying the local property tax. I am sure Deputy Fleming does not want to do that to the many people in his constituency who do not live in areas with management companies.

There is no specific relief from the local property tax for the payment of management fees and there are no plans to introduce such a relief. Issues such as ability to pay are addressed through a system of deferrals, subject to meeting the qualifying conditions. Those who are liable for management fees to property management companies may be exempt or eligible for relief from the local property tax for another reason or may be entitled to avail of a deferral arrangement under the provisions contained in the legislation.

Generally, properties in managed estates, to which such fees apply, would have been purchased by their owners in the knowledge that they would be taking these commitments- as Deputy Fleming says it is often included as a condition of planning - and that it was the intention that many such estates would not be taken in charge by local authorities nor in some cases, would it be appropriate for local authorities to do so. Management fees in these estates may in some instances include services such as refuse collection, maintenance of common areas and a sinking fund for certain repairs to the buildings. This is an important point that the Deputy did not make. These are costs which homeowners in many other developments would have to fund themselves for their own properties. When one pays the management fee, one might get bin collection and maintenance of common areas included in that and a sinking fund if repairs are needed within the building. These are costs that those who do not pay management fees or who live in housing estates that do not pay management fees must meet from their own means. When the Deputy talks about double costs and double charges, it does not stand up to scrutiny when one considers that the management fee often includes the payment of services that other people living in other housing estates in other areas must meet from their own pockets. People in management fee estates pay for it through the management fee.

The introduction of the local property tax provides an opportunity for political reform at local government level. The local properly tax will provide a stable funding base for local authorities and it can be altered in the future. This is a good reform in local democracy whereby for the first time funds will be ring-fenced for local authorities. This gives our counsellors an opportunity to decide the tax base that is needed for their community and the projects on which they want to spend that money. We have not had that since the misguided removal of domestic rates by the Deputy's party when it tried to buy a general election in 1977. I hope we will not see that again. Revenue from the local property tax will accrue to local authorities and will support the provision of local services.

Local authorities provide a broad range of services in the public realm, the proper functioning of which are important for the well-being of every community and household. These include fire and emergency services, road maintenance and cleaning, street lighting and spatial and development planning. The net issue is that the local property tax applies to everybody no matter where one lives. It funds services in all our towns and villages and it is not envisaged that there would be a special category or a special exemption for properties with management companies.

In certain circumstances, private estates will be taken in charge by local authorities in accordance with the Planning and Development Acts. This is, of course, a matter for the Minister for the Environment, Community and Local Government and the relevant local authorities. However, it is germane to this debate and I will say a few words about it. I am informed by the Department of the Environment, Community and Local Government that the requirements relating to the taking in charge of residential developments are provided for in the Planning and Development Acts 2000-2015 and the Multi-Unit Developments Act 2011. Normal housing estates fall under the provisions of the Planning and Development Acts while multi-unit developments, which are generally apartment blocks and gated developments of not less than five units, fall under the Multi-Unit Development Act.

The taking in charge of residential estates by local authorities is provided for under section 180 of the Planning and Development Act 2000, as amended. Section 180(1) provides that in respect of estates which have been completed to the satisfaction of the planning authority in accordance with the planning permission, the planning authority must, if requested to do so by the developer or by the majority of the owners of the houses involved, initiate the procedures for taking the estate in charge. With regard to estates which have not been completed to the satisfaction of the planning authority in accordance with the planning permission and enforcement proceedings have not been commenced within seven years of the expiration of the permission authorising the development, section 180(2) provides that the planning authority must, if requested to do so by the majority of the owners of the houses concerned, initiate taking in charge procedures.

The taking in charge of an estate is achieved firstly by a declaration under section 11 of the Roads Act 1993 that the road or roads in question are public roads for whose maintenance the local authority will then be responsible. This is a reserved function and is a matter for the elected members of a local authority. The Department of the Environment, Community and Local Government issued updated policy guidance to planning authorities in 2008 on the taking in charge of residential developments and management arrangements. This required each planning authority to develop or update, as appropriate, its policy on taking in charge by the end of June 2008 based on the following principles. They include certain core facilities or infrastructure to be taken in charge on request and the procedures for taking in charge to begin promptly on foot of a request by the majority of the residents in the development or by the developer, as appropriate.

In accordance with the Multi-Unit Developments Act, and this is also generally specified in the conditions attaching to the planning permission, developers are required to transfer ownership of the common areas of a development to an owners' management company which then assumes responsibility for the ongoing maintenance, management and refurbishment of the overall development. Property owners in a development are members of, and are represented on, the management company and are obliged to pay the annual maintenance and service charges applied by the management company.

Given the scale of the infrastructure maintenance and the range of other services provided by a multi-unit development management company, the annual service charges or management fees applied can be quite expensive. Without these service charges, the development would fall into disrepair. They are, therefore, applied for both the short and long-term benefit of the property owners in a development. They relate solely to the ongoing maintenance, management and refurbishment of a development - not the community, town or village, which is what the local property tax refers - and are confined to costs incurred by the management company within the boundaries of a development.

For people in unfinished estates, the Finance (Local Property Tax) Act 2012, as amended, provides that a residential property will be exempt from the local property tax where it is situated in an unfinished housing estate that is specified in a list prescribed by the Minister for the Environment, Community and Local Government for the purposes of the Act. The Minister for the Environment, Community and Local Government has prescribed and published this list, which is set out in the Schedule to the Finance (Local Property Tax) Regulations 2013 and was compiled by local authorities utilising the categorisation employed for the purposes of the national housing survey 2012.

For individuals on low incomes, the local property tax legislation 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 are €15,000 for a single person and €25,000 for a couple, regardless of whether they are 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.

Some property owners may find themselves unable to pay the local property tax but do not qualify for a deferral under the income conditions. For this reason, the Finance (Local Property Tax) (Amendment) Act 2013 provides that a person who has entered into an insolvency arrangement under the Personal Insolvency Act 2012 may apply for deferral of the local property tax that is due during the period for which the insolvency arrangement is in effect.

The 2013 Act also provides that a person who suffers an unexpected and unavoidable significant financial loss or expense, as a result of which he or she is unable to pay their local property tax without causing financial hardship, may apply for a full or partial deferral. The vulnerable are protected by these legislative arrangements.

I was somewhat taken aback by Deputy Fleming's question as to what we have against people in apartments, particularly in view of how the absolute economic chaos he, his Government and the policies they pursued and cheered on put those people living in those apartments in a situation where they found themselves in negative equity and losing their jobs. We are supporting them by getting them back to work and trying to restore the housing market to some level of stability after the chaos. I was also impressed by how the Deputy managed to mention the issue of water charges without blushing when we know his party leader sat around a Cabinet table and agreed with his colleagues to introduce a flat water charge of €500 per house. I presume - we will have to probe this further - that it would have applied to everybody living in an apartment as well. I do not know whether it is parliamentary to say he has some neck, but this new-found love for people in apartments and his new opposition to water charges are quite stark. I look forward to debating these issues.

The local property tax has been introduced, is achieving a high compliance rate by taxpayers and is providing a stable base of funding for our local authorities. If we introduce more exemptions, somebody else must pay and that pushes the burden onto other people. The Minister, therefore, is not in a position to accept this Bill, but I thank the Deputy for raising the matter.

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