Michael McGrath (Cork South Central, Fianna Fail)
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To ask the Minister for Finance if he will review the plans for the implementation of the local property tax to take ability to pay into account in view of the problems in the economy including mortgage arrears, unemployment and weak disposable income. [10832/13]

Michael Noonan (Limerick City, Fine Gael)
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In designing the local property tax, the interdepartmental expert group chaired by Dr. Don Thornhill, the Thornhill group, had due regard to issues such as ability to pay and considered the provision of waivers or deferrals for households unable to pay the tax or where a payment requirement would cause hardship. For individuals on low incomes or those whose only income source is from the Department of Social Protection, the Finance (Local Property Tax) Act 2012 provides for the possibility of deferring the local property tax, LPT, charge 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 will be €15,000 for a single person and €25,000 for a couple, whether married persons, civil partners or cohabitants. A person may claim a deferral if their income will not “as can reasonably be foreseen at the liability date” exceed these thresholds in that year.

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. A deferral of up to 50% of the LPT liability will be possible where the gross income of the liable person does not exceed €25,000 for a single person or €35,000 for married persons, civil partners or cohabitants. A deferral of 50% of the LPT will also be available where gross income does not exceed the above thresholds, that is €25,000 single, €35,000 couple, as increased by 80% of the gross mortgage interest payments that a liable person expects to make by the end of the year for which the gross income is being estimated. This type of deferral will also be available until 31 December 2017.

Additional information not given on the floor of the House

Where a liable person no longer satisfies the necessary conditions, amounts deferred prior to the date on which eligibility ceased may continue to be deferred. Interest of circa 4% per annum will apply to any amounts deferred. The deferred amount, including interest, will attach to the property and will have to be paid before the property is sold or transferred.

The thresholds were based on the recommendations of the Thornhill group. The Government accepted the income thresholds for a full deferral and adapted the income thresholds for a partial deferral so that they are €10,000 rather than €5,000 above the thresholds for a full deferral.

To determine whether deferral applies for 2013, a person is required to estimate on 1 May 2013 what his or her total gross income for 2013 will be. Gross income from all sources consists of total income before any deductions, allowances or reliefs that may be taken off for income tax purposes and includes income that is exempt from income tax and income from the Department of Social Protection but excludes child benefit.

I appreciate that some property owners may find themselves unable to pay local property tax but do not qualify for a deferral under the existing legislation. For this reason, the Finance (Local Property Tax) (Amendment) Bill 2013 provides that a person who has entered into an insolvency arrangement under the Personal Insolvency Act 2012 may apply for deferral of the LPT that is due during the period for which the insolvency arrangement is in effect. The 2013 Bill also provides that a person who suffers both an unexpected and unavoidable significant financial loss or expense, as a result of which he or she is unable to pay their LPT without causing financial hardship, may apply for full or partial deferral. Claims for this type of deferral will require full disclosure of the person’s financial circumstances, supporting documentation and any other information required by Revenue. Following an examination of the information provided, Revenue will determine whether deferral should be granted. The detail of how this type of deferral will operate and the criteria that will be used to determine eligibility will be set out in guidelines due to be published by the Revenue Commissioners shortly.

Details of the deferral arrangements are available on Revenue’s website www.revenue.ie, where the commissioners have recently published a useful guide to local property tax. This will be revised to take account of the provisions in the Finance (Local Property Tax) (Amendment) Bill 2013. It should be noted, however, that the provisions contained in the 2013 Bill are subject to its enactment.

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Minister for his reply. We will have a fuller debate on this issue tomorrow when the legislation comes before the House, but today I want to focus on the issue of ability to pay. The Government's efforts to take ability to pay into account are woefully inadequate. For example, a family earning anything more than €480 per week gross - before tax and other deductions - is not entitled to defer the property tax. A family with three or four children will probably spend between €200 and €250 per week on groceries alone, before it pays any other bills such as gas, electricity, school costs and so forth. That family does not have a bob to spare; it is broke. That family will not be able to afford this tax. If a family cannot pay the tax but the pay amount is in excess of €480 a week, a penal interest rate of 8% per annum will be applied to the debt. We will have the debate tomorrow, but the issue of ability to pay this tax must be readdressed.

Michael Noonan (Limerick City, Fine Gael)
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If I had time to read the remainder of my answer, I would have explained that I appreciate that some property owners may find themselves unable to pay local property tax, but do not qualify for a deferral under the existing legislation. For this reason, the Finance (Local Property Tax) (Amendment) Bill 2013, which we will debate tomorrow, provides that a person who has entered into an insolvency arrangement under the Personal Insolvency Act 2012 may apply for deferral of the LPT that is due during the period for which the insolvency arrangement is in effect. The 2013 Bill also provides that a person who suffers both an unexpected and unavoidable significant financial loss or expense, as a result of which he or she is unable to pay their LPT without causing financial hardship, may apply for full or partial deferral. Claims for this type of deferral will require full disclosure of the person’s financial circumstances, supporting documentation and any other information required by Revenue. Following an examination of the information provided, Revenue will determine whether deferral should be granted.

We can have a fuller discussion on this tomorrow. I will introduce a significant amendment which will not fully meet the Deputy's suggestion but will go some way towards it.

Michael McGrath (Cork South Central, Fianna Fail)
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With respect, it will not meet my suggestion. Essentially, it provides that somebody entering an insolvency arrangement may be entitled to a deferral, even if that person's income is in excess of the limit. A gross amount of €480 per week for a family with children is a very small amount of money. Half of it alone is spent on groceries and the rest is quickly accounted for by the payment of essential household bills. The Minister set the thresholds far too low. People on that level of income are absolutely broke. They do not have a bob and they will not be able to afford to pay this property tax. If the Minister is to revisit any aspect of the tax - he appears to be not for turning on the fundamental issue - I ask him to look at the issue of the thresholds that will allow people a deferral. This will not mean the tax will not be paid. It will be paid eventually. The current threshold figures are miserly.

Michael Noonan (Limerick City, Fine Gael)
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It was the Fianna Fáil Party when in office which brought about and negotiated a situation where we are obliged to introduce a property tax as part of the programme.

Michael McGrath (Cork South Central, Fianna Fail)
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Fine Gael said it would not introduce it.

Michael Noonan (Limerick City, Fine Gael)
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Deputy McGrath himself, before the last budget, published an alternative budget in which he maintained a flat rate property tax, with no allowance for income, would continue to be imposed on people.

Michael McGrath (Cork South Central, Fianna Fail)
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There was an allowance for income. That is not true.

Michael Noonan (Limerick City, Fine Gael)
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Fianna Fáil said it would continue the flat rate property tax and it allowed for no variation depending on income. Explain that to me.

Michael McGrath (Cork South Central, Fianna Fail)
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The Minister is wrong on that. That is not true. We allowed for €120 million a year to provide appropriate exemptions for people.

Michael Noonan (Limerick City, Fine Gael)
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Based on income.

Michael McGrath (Cork South Central, Fianna Fail)
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Yes. Go back and look at our proposal.

Michael Kitt (Galway East, Fianna Fail)
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Question No. 5 is in the name of Deputy Maureen O'Sullivan, but as she is not in the Chamber, we will move on to other questions.