Paschal Donohoe (Dublin Central, Fine Gael)

I will deal with the amendment first and then respond to some of the points that Deputy Doherty made. The local property tax is an important part of our tax system, which has raised more than €6 billion in revenue since it was introduced in 2013. It has provided vital funding for our local government and local services. The Report of the Commission on Taxation and Welfare, published in 2022, acknowledged that local property tax is a broadly effective system that is well administered. The commission recommended that the current structure and broad features of the tax should remain. This includes keeping exemptions to a minimum and the continued use of regular revaluations. The report also noted that virtually all OECD countries levy some form of a property tax.

Property tax is considered economically efficient as it applies to an asset that is immovable. In contrast, taxes on income and business activities can have different effects on how people behave and what it can mean with regard to our economy. Importantly, local property tax also contributes to the broadening of our tax system, with approximately 2 million properties liable for local property tax, the majority of which are principal private residences. The tax therefore has a broad base, while exemptions are kept to a minimum. All property owners benefit from the essential local services local property tax helps to fund. These include a broad range of services in the public realm which benefit all members of society. Accordingly, it is equitable that the cost of providing the services should be shared by as broad a spectrum of owners as possible.

Revenue estimates that there are approximately 356,000 non-principal private residences nationally. To make up the estimated shortfall of €609 million would mean a non-principal private residence charge would need to be at the rate of €1,700 per property. Abolishing the local property tax and charging it only for non-principal private residences would mean revenue would have to be made up through other forms of taxation which could affect economic activity. Most notably, abolishing the tax for most owners while charging significantly a higher tax on a smaller group of property owners would considerably narrow the tax base and undermine the stability of this important source of local authority funding. For those reasons, I do not propose to accept the amendment.

To deal with the further points that have been made, I accept that a number of property owners will move in band but, from the modelling that my Department and Revenue have done, we estimate that 94% of people will remain within their existing band. We did a broad model. It is clear that the vast majority of people will remain in their current band. It is the case, to be clear, that even if you are in your current band, you will pay a higher rate of local property tax than there would have been before this revaluation took place. That will be an increase in somebody's local property tax of 5% or 6% compared with where it was before the revaluation occurred. To put that in context, if somebody is in band 4, he or she would see the property tax bill go up from €405 before this revaluation occurred to €428, a €23 increase. I know for many people a further €23 can be a difficult amount of money to find and it can be a large amount of money, with many of the different changes that are going on, but it is tax that we ask people to pay once across the year. All of the revenue that is being collected here is going to pay for public services.

There is a constant demand from our country to see them improve and a constant demand in debates in this House to see those public services, particularly local ones, being delivered in a better way. If any future Government were to make a decision to abolish the local property tax, the question is where we would find the further €600 million to take the place of the local property tax revenue that is currently being brought in. Some €600 million is a lot of money to find and would mean choices regarding other things that should not be done, otherwise we would end up either with a smaller surplus or having to make decisions regarding funding public services elsewhere from corporate tax receipts, about which I heard much concern regarding future sustainability at the Committee on Budgetary Oversight yesterday. I accept that some property owners will move band. It is a minority of all who pay the local property tax. The majority of those who pay the local property tax will stay within the band. While that will still mean an increase for them, and I acknowledge that, for some, it will be tough to find that additional money, it is a tax that we ask people to pay once a year and all the money that is collected from this goes into public services, many of them on a local level.

For those, including Sinn Féin, whose view on the topic I respect, who want to abolish it, €600 million would need to be found. Every time I participate in debates on these kinds of issues in committees, I keep on hearing that we need to expand our tax base, not narrow it. For those reasons, the local property tax is an important tax to keep. Deputy Doherty is right that it is a political decision to vary it every five years. It has been deferred in the past, but the further you push out a revaluation of the local property tax, the more difficult that revaluation becomes when you get to doing it. I believe revaluing a tax like this every five years is the right frequency for changing a tax like this, which is still sensitive for so many people.

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