Dáil debates
Wednesday, 16 January 2013
Topical Issue Debate
Local Property Tax
3:00 pm
Alan Farrell (Dublin North, Fine Gael)
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Given the statement by the Revenue Commissioners last week that they will be compiling information on valuing properties for the local property tax beginning in March, it is necessary to provide more information for the public. Assumptions have been made in the media. I have spoken to individuals who are uncertain as to the valuation methods to be used by the Revenue Commissioners. If the Irish Independent is to be believed, surmising from the statement by the Revenue Commissioners, stamp duty records, electricity bills, rental details and household charge records will be used. With the exception of stamp duty, I am not sure how any of those payments are connected in any way to the value of a property. One would assume the vast majority of stamp duty records relate to the period before 2008, in which case, it would be very difficult to value these properties even if one were to take the industry average of 30% to 60% of loss in value since that period. It is very difficult to arrive at an accurate figure, even if only indicative.
I refer to reports in the media that property owners will have the option of valuing their property. I raised this matter in early January. It also came up for discussion in my constituency over Christmas. I refer to properties that are extremely difficult to value, such as those in estates affected by pyrite. There have been no sales of properties in the vast majority of those estates.
It will be almost impossible to put a value on the property where there is no comparable property on the market within a couple of miles. It would be difficult, even in urban environments such as my constituency, to value these properties, notwithstanding that the Minister has rightly announced that pyrite affected properties are to be exempt. I refer to properties that might have been repaired and on which the local property tax will be due.
The Office of the Revenue Commissioners has set out in its timeline that it will be issuing letters on self-assessment at the end of March, stipulating a valuation date in the middle of May. I am slightly concerned about where the figures are coming from and the right of reply of the homeowner. To what lengths must one go in valuing one's property? Must one engage the services of a valuer? If so, how much will it cost? Will the industry push up its prices? Perhaps it will, given that an opportunity presents itself to those concerned. I do not really have a problem with this in that people pay for services provided and valuation is a service, but many homeowners are under severe stress financially. Adding to the local property tax is not a step we should be taking.
The Revenue Commissioners' ability to stand over stamp duty figures, in particular, will present a difficulty. There is a large number of unique properties, including those in rural environments. I am clearly not talking about three-bedroom semi-detached bungalows but about properties above and beyond these, perhaps those built in the 1990s or 2000s. These properties are very difficult to value right across the country. They may not have sold for a number of years and it would be very difficult for us to value them. What leeway will the Revenue Commissioners provide in the valuation process for these homes?
3:10 pm
Michael Noonan (Limerick City, Fine Gael)
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I thank the Deputy for raising this important issue. The legislation governing the local property tax is contained in the Finance (Local Property Tax) Act 2012 which was signed into law by the President on 26 December 2012. The legislation sets out in detail how the tax is to be administered and provides how a residential property is to be valued for local property tax purposes, including where there is a change in ownership of the property. The Act provides for a number of specific exemptions from the charge, in addition to the possibility of deferring the charge in certain cases of hardship.
The Revenue Commissioners are compiling a local property tax register which is being drawn from a range of sources, including the LGMA database, its own databases and data from utility companies. Data from the various sources are being cross-checked to ensure the register is as accurate as possible. The register will be used to correspond with property owners.
In common with many other taxes, the local property tax is a self-assessment tax. Thus, in the first instance, it is a matter for the property owner to calculate the tax due based on his or her assessment of the chargeable value of the property. Beginning in March 2013, the Revenue Commissioners will be issuing a local property tax return to all property owners, together with an information booklet. The general issue of returns will also include a Revenue estimate of the local property tax. This Revenue estimate which is provided for in the Finance (Local Property Tax) Act 2012 is not a property valuation but an amount of tax which will be collected in the event that the liable person does not submit a return. Property owners will have the option of completing and submitting their local property tax return on paper or by electronic means. I am advised that the development of the paper local property tax return form and an online system for completing and submitting local property tax returns is well advanced.
The Revenue Commissioners will not be valuing properties for local property tax purposes, except where there is a dispute about a valuation provided by a taxpayer which, because of the banding system, is expected to be in a minority of cases. Revenue is, however, actively preparing valuation guidance and developing tools to assist liable persons in assessing the value of their property. These will be made available as soon as possible. Where these guidelines are used honestly, the property valuation will not be challenged by Revenue in accordance with its normal customer service charter. The guidelines will include drawing property owners' attention to the publicly available PSRA property price register which includes some 62,000 reasonably recent property prices and a method to help property owners establish average-indicative values for properties in different locations.
A range of data sources is being analysed to assist in providing this valuation guidance. They include Revenue's stamp duty records which record all property sales in the Republic and the values of the properties sold. These records provide an important benchmark that indicates average property values across the country. Analysis shows these values are in line with price indices produced by the Central Statistics Office and similar measures published by the real estate sector. Revenue is also examining accessing other sources of recent property valuations data which will complement and enhance the stamp duty data.
Data sources in addition to stamp duty records and other valuation data include the GeoDirectory produced by Ordinance Survey Ireland and An Post which provides information on property location and type; spatially derived data that indicate relative distances of all residential properties — using GeoDirectory — from a series of key amenities and services, including transport, health, education, retail and emergency services.
Revenue is also geographically linking its data with publicly available sources such as the CSO's 2011 census results at small area level and the 2011 Pobal HP Deprivation Index. The output of this work will be to give indicative or average values for properties in different locations across the country. The average values will be provided by property type, to distinguish separate values for detached, semi-detached, terraced and other types of houses. Other features include, for example, the ability to distinguish between values for new and old properties.
The Revenue valuation guidance tools will be available on the Revenue website as soon as possible but certainly in good time before the general issue of local property tax returns in order to allow property owners to examine and compare these indicative average values in their area. The Property Services Registration Authority property register, to which I referred, is already available for consultation in regard to property sale prices in recent years.
The approach of the Revenue Commissioners to producing valuation guidance is based on international best practice methods in this field. The methods being applied are widely used and accepted in real estate valuation and property tax administration in many countries. Similar methods to estimate average valuations have been used in Ireland, for example, by the Central Statistics Office when estimating the residential property price index and in research by authors from the Economic and Social Research Institute.
The Revenue guidance will provide average values for an area. These averages will be indicative of the correct property value band in the majority of cases but will not be correct for every property in every area. The approach used by Revenue meets international standards for property valuation, but no method can comprehensively and accurately value every property in the country. Comparisons with properties recently listed for sale show that valuations provided are in line with current market transactions.
The Revenue valuation guidance is intended to assist property owners, but each owner will need to consider the specifics of his or her property, the area and any other local factors that influence the value when making his or her valuation assessment. As I noted, the local property tax is a self-assessment tax and the Revenue valuation guidance will be provided to assist property owners in determining a value for their property. Each property owner will need to consider his or her area, his or her knowledge of properties therein and any other relevant factors in determining for himself or herself whether the Revenue guidance offers a reasonable indication of the value of his or her property. If the property owner approaches the matter honestly, Revenue will accept self-assessed valuations in accordance with the customer service charter.
Alan Farrell (Dublin North, Fine Gael)
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I thank the Minister for his comprehensive response. Let me return to his point on homeowners being honest in their approach to the process. Once guidance is made publicly available, perhaps it will be a little easier for people to judge how best to approach the process.
I am slightly concerned about the process that will apply to a property in a new housing estate where the owner or owners have invested in the property - there have been articles on this subject in a number of publications - be it to build an extension or to fit a new kitchen, for their own benefit and such investment has increased the value of the property. How easy or difficult will it be for Revenue to factor in the value of those improvements? If a homeowner receives a letter from the Revenue Commissioners with a valuation of €300,000 for their property and has spent €50,000 on an extension or a considerable amount to fit a new kitchen, as against their next door neighbour who has the same type of property but has not invested in it, how is the homeowner to balance such improvements in terms of the valuation given that they have increased the value by having invested in the property? Will the Revenue accept the homeowner returning the self-assessment form with the original value of the property?
3:20 pm
Michael Noonan (Limerick City, Fine Gael)
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The Revenue will send out a return to every householder. Much of what I described related to Revenue putting together a register of homeowners as that is not readily available. It will involve putting together a complete inventory of homeowners in Ireland, not valuing the properties just identifying the owners because the obligation to pay is on the owners. If one goes to anybody in the estate and valuation business, the auctioneering business, and asks them to sell a house, they will give one an indication of value very quickly and put an indicative price on the house. They may be right or wrong but the same system can apply if a homeowner wants to bring in a valuer. If the process is honestly approached, Revenue will accept that at face value. If somebody does not want to get a valuation and simply takes the norm for the area, as indicated by the Revenue, one does not have to precisely value one's house, all one has to do is to indicate the value is somewhere within a €50,000 band. If one thinks the value is between €150,000 and €200,000, one would put an X in that box and the house will be taxed at 0.175%, the midpoint. If one has built an extension at a cost of say €7,500 and one's neighbours say that their houses are valued between €150,000 and €200,000, the normal thing would be for one to value one's house in the next band and indicate it is worth between €200,000 and €250,000 and one would put an X in the box opposite that band and the tax will apply at 0.225%. One can create a problem for every solution but this can be done if there is a willingness to do this. One is not being asked to precisely value the house. Everybody knows that price values have gone down. The Revenue will give a good deal of information to assist people to simply fill out the form and will give an indicative value but it will not value houses for tax purposes. It is a self-assessment system and it is up to the homeowner returning the form to indicate what he or she thinks is the value of the house. If the homeowner proceeds in an honest fashion, according to the Revenue customer charter, that will be accepted. The value will hold for three years until there is a revaluation in November 2016.