Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank the Deputies for raising this matter.

The programme for Government includes a commitment to bring forward legislation in relation to the local property tax on the basis of fairness and that most homeowners will not face an increase in their local property tax liability. In addition, there is a commitment to bring new homes, which are currently exempt from local property tax, into the taxation system.

Accordingly, yesterday the Government gave its approval for the general scheme of the Finance (Local Property Tax) (Amendment) Bill 2021. This Bill will now be drafted to give effect to a package of measures addressing the programme commitments and related matters.

Perhaps the most significant proposal is a revised method for calculating local property tax, LPT, liabilities. The new approach maintains the number of bands at 20. Band 1 is expanded from €1 to €200,000 and band 2 contains values in the range of €200,000 to €262,500. The LPT charge is fixed at the current charge for bands 1 and 2, which is €90 and €225, respectively.

A 75% increase is applied to all thresholds which is broadly consistent with the 74% increase observed in property prices up to 2020 and a forecast 2% increase for this year. In addition to this, a lower rate of 0.1029% is applied and the existing charging structure is maintained.

There is currently a higher rate for properties valued above €1 million with the first €1 million charged at 0.18% and everything above at a higher rate of 0.25%. Properties are charged on the self-assessed value at individual property level.

Under the proposed methodology, it was likely that owners of higher value properties could benefit from reductions in LPT liabilities due to the widening of the bands and the reduced rate. To address this, we propose that a higher rate should be applied to properties above €1.05 million by charging a higher mid-point rate on bands above that level and a third rate be applied to properties above €1.75 million. Properties in bands 12 to 17, inclusive, between €1.05 million and €1.75 million, will be charged a mid-point rate made up of 0.1029% on the first €1 million and 0.25% on the balance, and properties in band 20 will be charged on individual property prices up to 0.3%.

Residential properties built after the current valuation date or 1 May 2013 remain outside the charge to LPT. These properties will now become liable at the next valuation date of 1 November. Previously exempt properties purchased during 2013 and trading stock of builders and developers unsold on 1 May 2013 or sold in the period 1 January 2013 to 31 October 2021, inclusive, will now be brought into the charge.

The general scheme also provides that all new residential properties built between valuation dates will be retrospectively valued as if they had existed on the preceding valuation date. New properties becoming liable for the LPT charge at the next liability date, that is, the following 1 November, will be valued at the previous valuation date and the Revenue will provide assistance to property owners to determine this value. This will maximise the local property tax base and ensure equity.

The measures proposed for this Bill fulfil the programme for Government commitments in this area and secure the future of the local property tax.

The Government has decided to cut both the rate of the tax and widen the bands to make charges affordable. This means that the majority of homeowners are likely to see either a decrease or no change. Where increases occur, the majority will be a single band of €90 notwithstanding the significant increases we have seen in property values since 2013.

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