Sinéad Gibney (Dublin Rathdown, Social Democrats)

While certain aspects of this Bill are welcome, such as the exemption adjustments and consideration for homes with defective blocks, it fundamentally fails to address some of the issues at the core of our local property tax system. These are issues that have long been raised by the Social Democrats. Our cofounder, Catherine Murphy, highlighted these issues from the outset. We would like to welcome it as a progressive tax. We support the local property tax and the protection of the tax base. This is something we campaigned on in the last election. We do not hide the fact that we support the protection and expansion of our core tax base. This should be a progressive tax as a tax on assets but, unfortunately, it is diminished because the system itself is so fundamentally flawed.

It is unfortunate that pre-legislative scrutiny has not been facilitated for this Bill. I appreciate the timeline that is being dealt with, but I believe a shorter pre-legislative scrutiny process could have been facilitated rather than the full eight weeks.

In his opening comments, the Minister said these changes were "fair and progressive". Unfortunately, the system itself is not fair. I would go as far as to say that some of the changes proposed here are not fair or progressive at all. The two issues I want to focus on are decentralisation and disincentivisation. Ireland is one of the most centralised countries in Europe. The local property tax was meant to address this, but the way it has been set up means it has made little progress in giving local government more autonomy.

A 2023 report from the Congress of Local and Regional Authorities of the Council of Europe found that Ireland was compliant in only eight out of 20 principles of the European Charter of Local Self-Government. The report states "there is still a lot to be done before local self-government in Ireland is on par with other European countries." Ireland was found to have one of the lowest scores under the local autonomy index, with Irish local government scoring a rank just above Hungary, the Russian Federation and Moldova. Some of the key concerns highlighted in the report include limited democratic decision-making powers, where Irish local authorities have limited powers, leading to a democratic deficit due to the "imbalance" between elected councillors and chief executives. Another concern was the insufficient financial resources and autonomy, where local authorities face financial constraints that hinder their ability to provide essential services, with limited discretionary financial resources identified as a key obstacle. The report also noted the centralised local government system. The report states that despite some functions having been "transferred to local authorities", they do not manage "a substantial share of public affairs", indicating non-compliance with the "principle of subsidiarity", which requires decisions to be made at the local level.

A paragraph I will read from the conclusion of that report is quite bleak. It reads:

When the monitoring delegation visited the Custom House in Dublin, where the Department of Housing, Local Government and Heritage resides, it was informed that "local government had been administered and supported from this house for 200 years". The house was used by the British as the location where local government in Ireland was controlled, but after independence also by the Irish central authorities. This was a telling way of expressing how central government views local government - something that is administered and not primarily regarded as self-governing units.

This same picture is reflected in the figures regarding taxes and expenditure. Eurostat collects data on the proportion of taxes raised and the amount of public spending by each level of Government each year. Ireland sits in second last position on both counts, just above Malta. More than 95% of tax revenues are raised by central Government and 93% of public spending is disbursed by central government in Ireland. This is the opposite of countries like Finland, Austria and Denmark. It is important to highlight all those countries happen to have some of the best housing systems in Europe while Ireland has one of the worst. This is a good indicator of the impact centralisation has.

With regard to the wider democratic considerations of that centralised model we have here in Ireland, it is not just limited to local property tax; it is a wider issue in our local government. It is not news that we have a severe democratic deficit in our local authorities. We must not only support councils with funding but also ensure the system empowers our democratically elected councillors. When we afford them so few ways to meaningfully impact the funding of the councils and the decisions on what the councils do, we open the door for people to resent democracy and lose faith in public representatives and the State itself.

The other element of this I wish to speak to is the disincentivisation created within the system itself. Local authorities with a surplus are still only permitted to keep 22.5% of their local property tax yield to spend at their own discretion. A council that collects a significant amount of local property tax to fund its activities does not reap the benefits. Those living in those areas do not see the benefits of the money being taken out of their pockets, or being put towards their communities in a significant way. All of us hear our constituents ask, "What am I getting for my local property tax?" Unfortunately, it is a question most of us really grapple with answering.

This tax can work and empower councils to make our communities better but the system is set up to breed resentment and a sense of futility. The more local property tax collected, the more central government funding is reduced. This means people cannot see the benefit of their local property tax.

Regarding local impact, one of the few things our democratically elected councillors can do is increase the budget of their councils but this system incentivises them to lower it, narrow our tax base and have less guaranteed funding for our communities. When an increase to council revenue does not increase the money available to maintain their communities and support their lives, people resent the collection of local property tax. Of course, councillors will be incentivised to lower it and undermine what little additional budget it will afford us. When the council has too much of a surplus, it must go back to central government.

The marginal increase in base levels is welcome but if we do not tackle the structure of how local Government is funded, none of this will work. We continue to tie local government's hand and purse strings and we will therefore continue to see people dealing with these most basic issues at a local level. We already see litter, lack of maintenance of paths, lack of community spaces and lack of services all due to a lack of funding.

I will mention briefly - and this is something we may pursue as an amendment on Committee Stage - the disproportionate element of this. This is something that was raised by one of our former councillors who tried to deal with it on a voucher basis. Essentially, what he called out was that the current 15% discount is applied in such a way as to benefit property owners with higher value properties. The net discount they are afforded is much higher. We would like to explore the idea that any discount voted by council should be directed towards lower property bands, or tied in some way to the average or make those people on the lower bands benefit more from the potential 15% discount than those in the higher bands. This is a disproportionate piece which removes the progressive nature of such a tax that is asset-based and instead puts it into the regressive category of taxes in the State.

As I said at the outset, there are parts of this Bill which we welcome but, unfortunately, at present, it is problematic in respect of those issues regarding the fundamental flaws in the system, maintaining that decentralisation, disincentivising and tying people into tax bands. I spoke to a colleague just before I came here who told me his band has not changed for nine years. The property market prices have changed significantly over time and probably nearly doubled in his particular case. This is a problematic spiralling of house prices and Government mitigating that in this fixed band issue within the band system.

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