Tuesday, 13 July 2021
Finance (Local Property Tax) (Amendment) Bill 2021: Second Stage
I move: "That the Bill be now read a Second Time."
In my remarks I will briefly outline the background to the introduction of the local property tax, its position in our overall taxation system and why it should be maintained but in a reformed structure. As the introduction of a property tax represented a major structural change in the tax system the local property tax was considered in depth in 2012 by an interdepartmental group chaired by Dr. Don Thornhill. Among other contributions to the debate on the optimal design of a property tax, the interdepartmental group noted the 2009 Commission on Taxation's proposal for an annual residential property tax to be self-assessed and banded by property valuation.
The design group considered that under a market value approach applied to housing, the market value of a residential property would be related to the characteristics of the building itself, the site on which it was located and the features and amenities of the neighbourhood. There would be a relationship between the market value of a house and the benefits to the owner in terms of enjoyment of the amenity value of the properties. The group proposed a tax that would contain limited exemptions and reliefs. It was introduced in 2012 and is collected by the Revenue Commissioners. The local property tax is the largest extension of self-assessment in the history of the State, with more than 1.3 million taxpayers obliged to file local property tax returns and pay the tax in respect of approximately 1.9 million properties. The local property tax has two objectives. These are to broaden the domestic tax base and replace some of the revenue from transaction-based taxes with an annual tax.
In 2015, Dr. Thornhill was engaged to conduct a review of the local property tax. In line with one of his recommendations, the Government agreed to postpone the revaluation date from 1 November 2016 to 1 November 2019. This postponement meant that property owners continued to have their properties valued for local property tax purposes on the basis of their 1 May 2013 declared valuation and were not faced with significant increases in their local property tax liabilities in 2017, 2018 and 2019.
I initiated a further review of the local property tax which reported to me in 2019. I considered that it was essential that the principle that formed a central part of the terms of reference for the 2015 review of local property tax, which was relative stability in local property tax payments over the short and longer terms, would inform the deliberations on the matter. The review group reported in April 2019 that it had not found it possible to deliver on the maintenance of the relative stability objective for all taxpayers against a background of significant but geographically uneven variations. I deferred that valuation to 1 November 2020. Absent any change in the local property tax legislation, the valuations of properties on 1 November 2019 would have been the basis for calculating local property tax liabilities in 2020 and beyond. This would mean that 27% of residential property owners would see an increase of between €101 and €200, 28% would experience increases between €201 and €300 and 30% would see higher increases.
The Bill arises from the programme for Government, which 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. It is necessary to have this legislation enacted before the summer recess. This is required to enable the Revenue Commissioners to make the essential technical preparations to implement the various changes to the local property tax regime that are contained in the Bill before the valuation date of 1 November 2021. In the absence of this legislation, revaluation would take place on 1 November 2021.
Ideally, legislation to give effect to reform of the local property tax would have been enacted in 2020. However, the process leading to the formation of the Government and finalisation of the programme for Government, not to mention the consequences of the pandemic, meant there was not sufficient time to implement the commitments during the remainder of 2020. This, therefore, led to a third deferral, with the revaluation date moved to 1 November this year.
Home owners, especially perhaps in urban areas, may have concerns over increasing property prices since 2013 and the effects of this on their local property tax liabilities. It is important to bring a level of certainty to this area, which is another reason it is essential to have the amending legislation enacted. The local property tax was introduced in 2013 and was designed to serve a dual function. As I noted, one function is to provide a stable funding base and to deliver structural reform through broadening the base for taxation.
It is important to note that the Bill does not deal with the third element of the programme for Government commitment concerning local authority funding and, in particular, the equalisation contributions from local authorities and the decision to move to a 100% retention model. I will work with my colleagues, the Ministers for Housing, Local Government and Heritage and Public Expenditure and Reform in the 2023 and 2024 budgetary cycles.
The most noteworthy proposal in the Bill is a revised method for calculating local property tax liabilities, which is set out in section 24. The 2019 local property tax review analysed five scenarios broadly based on a €500 million target yield excluding any local adjustment factor. The analysis is based on economic modelling and the predicted outcomes can offer only indicative conclusions. A key challenge encountered during both the work on the review and the more recent analysis is the significant variation of property price increases geographically and, in particular, the uneven pace and rate of increase in residential property values throughout the country since the original valuation on 1 May 2013. A guiding principle informing the design of the local property tax is simplicity for taxpayers and for Revenue, which collects the tax. In this regard, the new basis for calculating local property tax liabilities builds on the existing band structure and is a variation of scenario 5 of the 2019 local property tax review.
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 €200,000 to €262,500. The other bands are widened by 75% to create bands of €87,500. For properties in bands 3 to 11, inclusive, a mid-point rate of 0.1029% will be charged. At present, a higher rate applies to properties valued above €1 million, with the first €1 million charged at 0.18% and everything above that at the higher rate of 0.25%. Properties are charged on the self-assessed value at individual property level. Under the proposed variation of scenario 5, it is likely that owners of high value properties with values over €1 million would benefit from reductions in local property tax liability due to the widening of the bands and the reduced rate. To address this, a higher rate will be applied to properties above €1 million by charging a higher mid-point rate on bands above €1.05 million and introducing a third rate for properties valued above €1.75 million. Therefore, properties in bands 12 to 19, inclusive, are charged a mid-point rate of 0.1029% on the first €1.05 million and 0.25% on the balance over €1.05 million. Properties in band 20 are charged on individual property values as before, which is to say 0.1029% on first €1.05 million, 0.25% between €1 million and €1.75 million and 0.3% on the balance.
An important principle underpinning the tax is that the number of exemptions is low, which helps to keep the tax rate low for those who are liable to pay it. Sections 10 and 13 to 15, inclusive, of the Bill accordingly provide that the exemptions for first-time buyers and homes in unfinished estates will lapse. Section 16 provides that the current exemption in respect of pyrite-damaged properties will cease to apply for new applicants after the end of the two-year period following the enactment of this Bill. Any taxpayer qualifying before that date may avail of the exemption.
In regard to damaged properties, the Government has been very active in addressing the problem of pyrite damage and the more recent manifestations of mica-related damage in some western counties. Since 2014, approximately €166 million has been provided for the pyrite remediation scheme for certain eastern counties and Limerick. I understand that more than 2,800 applications have been received under that scheme and, so far, approximately 2,380 dwellings have been included. In 2020, 1,866 properties were exempt from local property tax, LPT, under that provision. Section 18 of the Bill provides for a similar temporary exemption from LPT for homes that have been damaged as a result of the use of defective concrete blocks in their construction and whose owners are eligible for the defective concrete blocks grant scheme. The period of exemption will be six years, on a similar basis to the current pyrite exemption.
Section 20 provides that property valuations will be reviewed every four years rather than every three years. This is to achieve a balance between the timely capture of changes in the property market and the need to limit compliance costs. It also assists the regular addition of new properties into the LPT charge.
Section 21 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 become liable for the LPT charge at the next liability date, which is the following 1 November, and will be valued at the previous valuation date, 1 November 2021. Revenue will provide assistance to property owners to determine this value.
Section 38 implements the review group recommendation that the income thresholds for LPT deferrals be increased to €18,000 for a single owner and €30,000 for a couple. Section 37 provides for a reduction in the rate of interest on deferred LPT payments from 4% to 3%.
Currently, properties vacated by their owners due to illness may be exempt from LPT. This exemption applies to a property that was occupied by a person as his or her sole or main residence and has been vacated by the person for 12 months or more due to long-term mental or physical infirmity. An exemption may be available in situations where the property has been empty for less than 12 months if a doctor is satisfied that the person is unlikely to return to the property. In both cases, the LPT legislation currently provides that the exemption applies only where the property is not occupied by another person. I consider this to be a misaligned incentive with potential unintended consequences. Section 9 amends section 5 of the Finance (Local Property Tax) Act to allow a property that has been vacated by a liable person due to long-term mental or physical infirmity to be occupied by another person, who is not a liable person in respect of the property, without losing the exemption. In addition to freeing up residential properties for rental, this measure will also enhance the security of premises and assist with the maintenance of homes for vulnerable individuals.
Local authorities have the discretion to increase or decrease their LPT allocations via the local adjustment factor, LAF, facility by up to 15% every year. This remains unchanged under the Bill. Local authorities must notify their LAF to Revenue by 30 September if they want the adjusted rate to be effective for the following year. The review group recommended that the LAF notification to the Revenue Commissioners should occur in mid-October, except in the year that property valuations fall due for revaluation. In that instance, the LAF notification date should be 31 August at the latest to facilitate Revenue's processing of the required notification procedure. This change is provided for in section 27 of the Bill and is in response to concerns expressed by local authorities in regard to the timing of the decision on the variation of LPT rates, which is required to be sent to Revenue on or before 30 September in the year in which the relevant liability date falls. This concern centred on the necessity to make the decision on LPT variation in isolation from other budgetary decisions.
Section 29 provides that where the qualifying conditions for exemption cease to be met during a valuation period, LPT can start to be charged based on the property's value at the preceding valuation date. Currently, a property that is exempt on the valuation date continues to be exempt until the following valuation date, regardless of whether the qualifying conditions for the particular exemption continue to be met. I consider this situation to be anomalous and inequitable. The changes proposed will be facilitated by the availability of the Revenue valuation guidance and the publicly available property price register. The effectiveness of this change will be enhanced by having reasonably short valuation periods and regular revaluations of properties, as I have outlined.
The Bill provides for a new section 39A to be inserted into the 2012 Act to provide for the inclusion on a return to be delivered to Revenue of limited information about vacant properties. The LPT return will now contain a limited number of questions in regard to whether a property is occupied as a dwelling on 1 November 2021 and, if not occupied, whether it has been unoccupied for more than 12 months and why. This information, together with that obtained from other sources, will be useful in considering the case for a vacant property tax.
The Bill contains a number of other measures intended to improve the administration of the tax. It also includes amendments in the nature of minor technical adjustments. These involve minor changes to definitions and requiring exempt properties to file returns. I thank Deputies for their attention and look forward to hearing their contributions on the Bill, which I commend to the House.
I am sharing time with Deputies Guirke and Stanley. I welcome the opportunity to speak on this Bill. Sinn Féin is opposed to local property tax and the reasons for this are clear. The tax, as designed, is not only a tax on assets but a tax on debts, such that many people who are liable for it may have debts worth as much as 90% of the value of the property against which they are charged. This concern should not be readily dismissed as it is a real and immediate concern for many citizens.
On 6 July, the Joint Committee on Housing, Local Government and Heritage was told by Revenue that, on average, 43,000 people defer payment of the LPT every year due to inability to pay. In 2019, 50,00 homeowners deferred payment, more than 48,000 of them because they were below the income threshold. Those who do so are charged 4% interest each year for deferral. While I acknowledge that section 37 of the Bill will reduce the annual interest rate from 4% to 3%, the fact remains that the 48,000 householders who were unable to pay in 2019 were not exempt but simply deferred payment, with interest accumulating on those deferred payments every year.
Sinn Féin unapologetically flags its concern for the workers and families who see an interest bill accumulating for tax on their home, many of whom are saddled with mortgage debt or may even find themselves in arrears or negative equity. Sinn Féin is of the view that the LPT is badly designed and unfit for purpose. Instead, we favour the introduction of a wealth tax levied against assets, not debts. The issue we have with the LPT is that it does not take account of someone's ability to pay. It hits low and middle-income earners. A large number of pensioners have raised this issue with me on the doorsteps over the years. Many of them are still living in the home in which they raised their family and have many happy memories but they struggle to pay this tax and are very concerned about its continuation.
It is clear that this legislation is ill-conceived and ill-prepared, despite the Minister and the Government having had years to prepare for changes that have been signalled for some time. This is reflected in the serious flaws in the legislation. It is also reflected in the Minister having pressed ahead with the Bill against protocol and against the wishes and over the heads of the members of the finance committee, and despite pre-legislative scrutiny not having been completed. The motion was passed last week and the Minister probably heard my protest in that regard. I felt that flew in the face of good parliamentary practice, as no request for a waiver of pre-legislative scrutiny was made at the Business Committee.
When this issue was discussed at the finance committee, there was no agreement in that regard and nor was there any indication that the debate was in the offing. We had not undertaken the proper and thorough pre-legislative scrutiny we had hoped to undertake in respect of this Bill. That is poor parliamentary practice and undermines the role of the committee. According to the Oireachtas website, "One of the most important functions of a Dáil select committee is to consider Bills that are referred to it by Dáil Éireann". We want to engage in debate and in scrutinising and talking through proposed legislation. That should have been allowed to happen, but, unfortunately, we were not afforded that opportunity. Perhaps the Minister would respond to this point in his reply.
It should be noted that the introduction of a local property tax followed and coincided with a gradual squeeze on services. In that regard, the local property tax is, and always has been, intimately connected with local authority funding. Local government sources of income rely on central government transfers and own-source revenues such as commercial rates. Given that regional inequality was deepened by the financial crash and was barely recovering before the onset of the Covid-19 pandemic, fiscal equalisation has been crucial for the delivery of local services. Fiscal equalisation is essential to protect financially weaker local authorities and their communities and to correct the effects of regional inequality and the unequal distribution of sources of finance. Before the introduction of a local property tax, equalisation was achieved through general purpose grants. Those grants were determined on the basis of an historical baseline of supports. As the Congress of Local and Regional Authorities of the Council of Europe noted in 2013, "the system of distribution of grants to local governments from the Local Government Fund is not transparent and the rules have been set without consultation with local authorities". Little changed with the introduction of the local property tax. In fact, the baseline that determines transfers from the equalisation fund is based largely on the shortfall between the tax retained locally and the old general purpose grants, with little regard given to the actual fiscal capacity or expenditure needs of local authorities.
I agree with Dr. Gerard Turley and Mr. Stephen McNena of the National University of Ireland Galway, NUIG, when they argue that the current regime is not fit for purpose. This legislation will coincide with local authorities retaining 100% of local property tax receipts, thereby ending redistribution of 20% of local property tax revenue through the equalisation fund. The Minister has stated that the equalisation fund will be maintained but funded through the Exchequer, with the arrangement in place over a two-year period beginning in 2023. The Minister previously stated that he will be guided by the Minister for Housing, Local Government and Heritage, Deputy Darragh O’Brien. I hope that goes well for the Minister and I wish him luck in that regard. However, this is an opportunity to redesign the equalisation model to ensure that it is fit for purpose. In 2021, 20 local authorities received equalisation payments totalling €133 million.
As stated, the current model lacks transparency and has little regard for the fiscal capacity or expenditure needs of these local authorities in the service of their communities. This has left local authorities, even those receiving transfers through the equalisation fund, underfunded in respect of the provision of local services. Local authorities constantly raise their concerns regarding funding. Galway County Council is often concerned about having sufficient funding to do all that is needed. It is essential that the current equalisation fund and how it is distributed does not simply remain the same, with funding coming from the central Exchequer rather than local property tax contributions. Indeed, we need a new model of equalisation that, in the words of Dr. Turley and Mr. McNena, “is consistent with international best practice but tailored to the specific circumstances of the home country”. We are all aware of areas badly in need of funding. Despite the impact these changes will have on local authority funding, the Government cannot tell us how equalisation will take place from 2023.
Turning to the mica redress scheme, and everything happening in respect of mica and pyrite issues, section 18 of the Bill purports to provide an exemption for those homeowners whose houses have been affected by mica and pyrite. Does it do so? It inserts a new section 10D into the Finance (Local Property Tax) Act 2012 which states that "a residential property that has been damaged as a result of the use of defective concrete blocks in its construction" will be exempt from the local property tax. However, this will only be the case if certain conditions are met. As set out in section 18, these conditions include situations where "the property has been or is being remediated" or, under section 10D(1)(a), if "a confirmation of eligibility in relation to the property has been issued". What does "confirmation of eligibility" actually mean? Under section 10D(6), "confirmation of eligibility" has the meaning given to it by the regulations that gave effect to the current and flawed redress scheme.
In that case, applicants can only have eligibility confirmed once they have made an application to the local authority. Such applications must include an engineer’s report confirming damage caused by mica and pyrite. To spell out what that means to everyone in the Chamber and to those whose homes have been damaged by mica and pyrite, under this legislation homeowners will be required to have an engineer’s report, which costs more than €6,000, to qualify for this exemption to the local property tax. To put it another way, if homeowners whose houses are crumbling around them as a result of the mica scandal are unable to fork out €6,000 from their own pockets for an engineer’s report, they will be charged local property tax. The tax will be charged for homes that are not safe, have lost their value and will not be liveable unless a 100% redress scheme is delivered.
Can the Minister not see that this is a ludicrous and unworkable exemption? Does he also not see that requiring an engineer’s report to qualify for a local property tax exemption is also ludicrous, when that report costs several times more than the annual local property charge. It is completely nonsensical. Can the Minister also not see that this Bill, as it is drafted, will lead to these homeowners being charged local property tax as a result of the Government’s flawed and broken redress scheme? It is for this reason that my colleagues, Deputies Doherty and Mac Lochlainn, have tabled amendments on behalf of Sinn Féin so that homeowners affected by issues with mica and pyrite can apply for an exemption through a self-assessment, with the Revenue Commissioners putting guidelines in place in that regard. Once the Government has introduced a 100% redress scheme for those homeowners - which is something that Sinn Féin will continue to argue for - the Revenue Commissioners can then undertake a look-back to verify that those who applied for exemptions through self-assessment were eligible. These amendments are sensible and necessary to ensure that homeowners affected by mica are not charged local property tax. I urge the Minister, therefore, to accept these amendments from Sinn Féin in the interests of these homeowners. Section 18 applies with reference to the current redress scheme, which is only applicable to houses in areas administered by Donegal and Mayo county councils. This means that the legislation excludes homes affected by this issue in Clare and possibly elsewhere as well. Will the Minister confirm this is the case? If it is, then this exclusion must of course be addressed immediately.
I also raise another issue with the Minister because it concerns something close to my heart. While the local property tax will be impacting ordinary people struggling to get by, I am interested in hearing what the Government is doing to tackle the issue of vacant sites, which is plaguing many cities across the State. What is the Government going to do to make the vacant site levy a more effective tool to stop the hoarding of derelict sites in the middle of a housing crisis?
One of these sites, about which I have regularly spoken in this Chamber, is close to where I live in Galway city. It is a prime example of this issue. The derelict site at the former Corrib Great Southern Hotel sits at the entrance to Galway city. It has long been an eyesore at the gateway to our city and has been the site of numerous fires and antisocial behaviour. It has been a great concern to residents for a number of years. Planning permission was given to demolish the current structure in 2010 and the site was added to the derelict sites register in 2015, which is over six years ago. Yet we are still stuck here with this eyesore in one of the most prominent locations on the east side of Galway city. We just cannot afford to leave lands lying idle in Galway when young people cannot find an affordable home and there is a crisis in student accommodation and massive housing waiting lists. While the Government is hell-bent on making ordinary people pay the local property tax, I am wondering what is being done to address the hoarding of this kind of land in areas like Galway city.
The Minister has brought forward a Bill that contains serious flaws, some of which I have spoken to this evening. These flaws must be addressed as a matter of urgency. I also note that the changes brought about by this legislation will result in an increase in bills for 36% of homeowners, while workers and families who are unable to pay will continue to see their interest bill rise on payments they must defer as a matter of necessity. I reiterate that Sinn Féin is opposed to the local property tax. It is badly designed and has failed to deliver quality local services for local communities. It is a tax that charges debt, not simply assets. Given the legislation before us and the consequences it will have, I ask the Minister to address the concerns I have raised and correct flaws in what is clearly ill-thought-out and rushed legislation.
The local property tax, or the tax on the roof over people's heads, was introduced eight years ago in 2013. Even people who own their home feel like they are still paying a mortgage, albeit at a lower level, and feel they are never truly finished paying for the privilege of living in their own home. The local property tax has no consideration for people's ability to pay. People are struggling at the minute with huge mortgages that they will have for the next 20 or 30 years, and many of them are in arrears. There is no consideration given to old age pensioners, who might be asset rich but income poor. Family homes are not wealth because they do not produce revenue streams.
Local services in my area of Meath West have not improved since the local property tax was introduced. It is as simple as that. I will tell the Minister why that is. In 2014, I was a councillor on Meath County Council. That year, and every year since, the people of Meath paid €18 million in property tax. When the Minister at the time, Phil Hogan, said that the local authorities would keep 80% of tax collected, he did not tell the people that other Government grants almost totalling the same amount would be withdrawn. Between the equalisation fund of €3.5 million going to other counties and grants being taken away, the people of Meath were better off by €900,000 for their €18 million. Since 2013, the people of Meath have paid €144 million in property tax. The only difference the property tax made to the Meath people was €7.2 million, out of €144 million paid by homeowners. That is why services in my county have not improved under the local property tax. Will the same happen again? The Minister says that local authorities can keep this money but will other grants be taken away? If I had to guess, I would say they will.
I welcome the opportunity to speak on this Bill, at which I had a good look today. Many homeowners across my constituency of Laois-Offaly are experiencing serious financial hardship, not just with huge debts on houses but because the last 18 months of Covid have meant a huge hit on their income. For many of those families, the recent announcement by the Government regarding the local property tax has caused further distress and concern. The truth is that the local property tax is a tax on the family home, not on wealth or accumulated property. The tax does not just affect cuckoo funds, millionaires and speculators; it targets everyone, including those who have very little besides the roof over their heads.
Thanks to these proposed changes by the Government, 36% of homeowners will see an increase in their property tax. Some of them may live in a house that has a high monetary value but they may have very little income, and do not have the income to do very much with that house. These are homeowners who already paid stamp duty when they bought the house. Many of these homeowners have some of the highest mortgage interest rates in the European Union and they have huge outstanding capital sums on those mortgages. The local property tax effectively becomes a tax on debt. Some of these people also pay management charges if they live in multi-unit housing or apartment complexes, so they pay again there. These families still fork out money for privatised local services such as refuse collection and pay their taxes for the upkeep of roads, schools and everything else. People pay a lot of local charges but many of the charges they pay are privatised local charges, on top of this local property tax. If homeowners are being asked to pay an increase in property tax, they should have a right to know exactly what they are getting in return.
The Minister has confirmed that these changes will mean councils can keep all the money raised from property taxes, instead of the 80% they can currently retain. However, as one of my colleagues alluded to, this takes from one county and gives to another. Counties with low levels of commercial rates, which do not have a strong broad commercial rate base, will be left in a vulnerable position. At present, Laois and Offaly county councils receive funding from the equalisation fund. What will happen to those councils after the two years' grace is up? Will the Government commit to making up the shortfalls that many councils are certain to face through Exchequer funding? For how many years will that funding be provided?
We in Sinn Féin have argued consistently that this tax is not a wealth tax. It is a tax on the family home and on the roof over your head. In its current form it must be scrapped. We need to have a serious conversation about the best way to tax wealth and to fund local authorities. I have taken part in many discussions over the years on this subject, in the Dáil Chamber, in council chambers and in other forums through the local authorities. It is important that we do that. This tax needs to be scrapped because it is unfair as it is currently constructed.
I am pleased to have the opportunity to speak on this important Bill. As social democrats and a social democratic, left-of-centre party, the Labour Party supports the principle of a tax on property. When it comes to taxes on assets, some who claim to be of the left cannot find it within themselves to support a modest charge on property for the running of local services. I find that position incomprehensible and indefensible. In my view, people should not get to credibly call themselves socialists or social democrats if they fail to pass this test. Taxes on wealth are a central tenet of left-wing thought on mainstream economics and whether we like it or not, all the evidence tells us that a very serious quantum of wealth in Ireland is held in assets. It is not in cash or income from employment and enterprise but in assets, and those assets include property. It is normal everywhere for taxes to be collected against the objective valuation of the asset that people call their home. What the Irish local property tax system provides for is a relatively small charge, with compliance rates of about 95%. Opposition to the principle and operation of the local property tax from the likes of Sinn Féin is just not credible when it levies, and is happy to collect, multiples of the local property tax to run what are regarded as generally good local authority services in the North. We have seen very peculiar alliances emerge on local authorities, sometimes between Fine Gael, Fianna Fáil, Sinn Féin and People Before Profit, which are parties right across the political spectrum, demanding cuts to the local property tax that would impinge on local services.
More often than not, parties like the Labour Party, the Social Democrats and the Green Party acted as the adults in the room. This is a fair tax and the definition of progressive taxation in that the more the asset is worth, the more you pay. That is as it should be. There cannot be progressive taxes on wealth if property is excluded. That does not work and it does not stand up to the thinnest of scrutiny.
If the pandemic has taught us anything, it is that it is the State, working with others, to which citizens look to deal with the big issues of our time. The pandemic has also exposed some of the weaknesses and gaps in the local community services that are operated by local authorities and others. People have a better understanding of those gaps now. They have a better understanding of how local parks and services need to be improved and that all of this has to be paid for through a sustainable local income source that is democratically controlled at local level. As matters stand, less than 10% of all public spending in this country occurs at local level. This compares with an EU average of 23%. In Ireland, we famously have a centralised form of government and decision-making. Few powers are available at local government level. Until it is decided to allow local authorities to raise more revenue and take responsibility for more services, as is the case in the UK, local government will continue to be a form of local management and administration, not local government in the widely understood sense of the term.
The Bill before us is a long overdue series of reforms to the local property tax system. We in the Labour Party support the thrust of the Bill and will propose amendments to sections that we believe require some attention from the House. It is good that the post-2013 exemptions from the local property tax are to be removed. There is no longer any justification for that measure to continue. It is also welcome that the Bill provides for an exemption to those who are affected by the serious mica problem, similar to the exemption provided for property owners affected by pyrite. That is to be acknowledged.
It is also positive that local authorities will, from a point in the near future, retain all of the local property tax raised in their administrative area. This is an important measure to make the local property tax and the link to local services much clearer. I am glad that solidarity will continue to be shown with local councils in areas that benefited from the equalisation fund. We are one country after all and economic transfers are an important and well-established feature and instrument of public policy. The Minister made it clear earlier that there are some issues to be worked through in that regard between his Department, the Department of Public Expenditure and Reform and the Department of Housing, Local Government and Heritage. The legislation also provides for cases where investment funds are leasing properties to councils or approved housing bodies, AHBs, for 20 years or more. In that case, it will be the lessor which picks up the local property tax tab, not the council or the AHB. This is an important protection for local councils and voluntary housing groups and means the tenant will be protected from having to pay.
The current system of local property tax was based on self-assessment. When this Bill is enacted there will be an obligation on the liable person to make a return to Revenue. Where someone is found to have taken steps to undervalue a property and, therefore, reduce his or her local property tax liability, this should be treated as a form of tax fraud and attract serious penalties and sanctions. The ability of a liable person to defer his or her local property tax liabilities under certain defined circumstances has assisted a great many people, especially some older citizens who may, on the face of it, be asset-rich in terms of the value of their home but may in reality be cash-poor.
I note that the deferral thresholds are being amended for single liable persons and for those who are married or cohabiting. The economic picture has changed considerably since the dark days when the tax was first introduced and wages and incomes have thankfully risen since the system was first devised. My assessment is that the thresholds could be raised to a higher level. They could be raised to just below €22,000 for a single person, which would be the gross income of one worker on the hourly rate of the national minimum wage who is employed full time. Will the Minister apprise the House of how the thresholds were devised? Why is the threshold for a single person pitched at €18,000 and not €20,000 or €22,000? I note from the 2019 local property tax review that consideration was given to moving the threshold for deferral up to €20,000 for those who are aged 80 or over and live alone and those who have a long-term illness or disability and live alone.
I also ask the Minister to take another look at the position with regard to the provision around the adjustment for mortgage interest, which stands at 80%. We will propose an amendment on Committee Stage that the system should not be wound down but retained and the 80% figure should be increased to 100%. The new bands are pitched about right but more can and should be raised by adjusting the planned 0.25% levied on properties worth over €1.05 million to 0.3% and the 0.3% levied on homes worth over €1.75 million to 0.4%. Again, we have proposed an amendment in this regard and I will make the case for it on Committee Stage tomorrow. I am also wondering why the interest rate for those in receipt of the State pension who defer will be a punitive 3%, albeit down from 4%, and not the European Central Bank, ECB, lending rate, which is much lower. The deferral is only available to those who meet strict thresholds and are, by any stretch of the imagination, less well-off and in many cases experiencing poverty or relative poverty.
This Bill should not be the end of the matter. We can and should deploy the tax system to raise revenue for services in a fair way and disincentivise residential property owners from sitting on properties that are vacant and not in use and watching their value go up all of the time. We need to get a clear picture of where those vacant properties are. This new legislation, and regulations around it, will allow the relevant Departments and the Revenue Commissioners to do just that. We know from previous analysis from the Business Postthat large build-to-rent developments such as Clancy Quay and Capital Dock, which are not far from here, are not fully occupied. This is a scandal at any time but especially so at a time of such acute need for so many. My colleague, Senator Moynihan, and I have repeatedly made the case, as have others in the House, for a vacant homes tax. There is an urgency around this kind of reform and I hope the Minister will bring such reform to the House for a full debate as a matter of urgency. That should be his next move.
I welcome this Bill. It is important that a tax like this be updated regularly. We are eight years on from the original evaluation in 2013. There is never a good time to update the valuations but we saw the consequence of not doing that. The revaluation of commercial property caused untold controversy because valuations that had been set years ago on the basis of rental values were suddenly changed to try to catch up with the reality of the marketplace. That caused serious consternation. The Minister is right to move to regular revaluation of properties on a four-year cycle. It will avoid these types of problems arising.
I do not know who it was but a wise person once said, "To tax and to please, no more than to love and be wise, is not given to men." I do not envy the Minister for Finance the task he has been given in trying to arrange a system of new valuations at lower rates. He has done the work of Solomon in trying to design a system that is as fair as possible but does not give a sudden shock to people who have been used to paying at a certain rate. A small number of people will see their property tax increase. I recognise that and that it will create a pushback but the Minister has done extraordinary work on this.
It is important that we recognise that this tax broadening measure, which was introduced some years ago, is something we should protect and keep as a viable source of revenue. So often in my career, I have seen taxes that were designed to broaden the tax base introduced and then whittled away by one allowance or another, some hard case or another special measure.
As a result, we ended up losing the capacity to broaden our tax base. The Minister has done a worthwhile job for us in ensuring this can be a solid part of our tax base into the future.
I agree with the points made by Deputy Nash. We need to rethink the ways in which we tax property. I hope that the Commission on Taxation and Welfare will look at some of the anomalies that have given rise to poor occupancy rates. People of my vintage are often rattling around in houses that are way beyond their needs at a time when others with families are cramped into small apartments. It is difficult to make those moves because the tax system does not facilitate it. Capital acquisitions tax, deposit interest retention tax and the rules about access to the fair deal scheme, the nursing home subvention, do not encourage people to make moves that are probably good for them and for the community. If those moves were made more attractive, people would make those moves. Every night in this country, we have 2 million bedrooms empty at a time when we have a housing crisis because of the poor occupancy patterns that are way out of line with the rest of Europe. We must think beyond the Bill. I hope the Commission on Taxation and Welfare will take a hard look at that.
We in Sinn Féin believe this is not a fair tax. We have been consistent on that position from start. It hits low- and middle-income families the hardest, as many are already struggling with negative equity and high mortgage interest payments. Also included in the tax are homes and estates that are not taken in charge and therefore get few, if any, local authority services. Council tenants who do not own their homes are included in this tax.
This tax has never delivered what it was supposed to. It has not delivered the extra local services that were promised when it was delivered. While the Bill contains proposals to increase the share that will be assigned to local areas from 2023 onwards, I remain sceptical as to how much will actually be delivered.
We all remember at its inception that the new tax was to fund local government while at the same time a similar amount of funding from central Government subvention was withdrawn and, therefore, virtually no additional local services were ever delivered. I was a council member for a number of years and remember it well. Homeowners should not be burdened with this unfair local property tax. We have seen from information recently released by the Revenue Commissioners that, on average, 43,000 people defer payments every year. This shows it is a burden too far for many home occupiers. Those who defer are charged an interest rate on the tax, as the Minister knows. That is wrong. Those who are unable pay are burdened with additional charges and if you cannot pay, your debt grows and grows. The tax does not take into account people's ability to pay. While there are different bands depending on property valuation, for those on the lowest incomes, the tax amount is still far too much.
As I have outlined, I am opposed to this tax but in the absence of it being abolished, we must look at how it operates and the adjustments that are proposed. The adjustment to the lower property tax band is a positive step and should reduce the local property tax burden for some of our lower earners. In March, Daft.ie issued a report showing that the average asking price for a house in Limerick city and its suburbs is €225,000, which represents an increase of 11.6%. It is an amount that excludes many local people from mortgage application. How can we expect somebody who is renting on a low to medium income to be able to afford such a place without putting them under excessive stress to keep up their repayments and then saddle them with a further tax on their home? While the bands have been adjusted, tax on a home worth €225,000 is still too much, particularly when the necessary local services are not being provided. We persist with this tax that does not take account of people's ability to pay. Many of our older citizens may own their properties but are income poor. We need a more progressive way to fund local authorities, many of which have not seen the benefits of the property tax, a tax that was introduced as part of a suite of measures to bail out the banks at the time.
I have a problem with the timing of the Bill. We are talking about much money being taken from somebody's pocket and that is a significant responsibility we take on as elected Deputies. It is particularly important that sufficient time is afforded for us to discuss such issues. I would like to record my distaste at how this Bill is being rammed through before the end of term. The Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach should have been allowed to do its work and fully scrutinise the Bill but it was denied that opportunity. We are now discussing a Bill that was only published on the Oireachtas website last Friday. That is not good enough for any legislation, let alone legislation that affects people's money.
It is fair to say that how local government is funded in Ireland is so opaque that most people find it difficult to get to grips with the origin of the system. When the local property tax was introduced in 2013, it was based, as we know, on the market value of a house or apartment. It does not, however, take into account people's ability to pay with the exception of allowing for deferral on the grounds of hardship. It does not take into account the equity. In situations where a house is in negative equity, the market value still applies. Those are significant issues for a local property tax.
The tax is not collected locally as it is in most other countries. It is instead collected by the Revenue Commissioners. A previous contributor talked about the high level of compliance and that high level exists because the tax is collected by the Revenue Commissioners. In most other countries, the tax is collected locally. In this situation, if the tax is not paid, it is a charge on the property. In circumstances where taxes are raised and collected locally, there is often a political choice about how much tax is raised and what it is intended to be spent on. This is a local tax. It is an issue that is politically defining. Left-wing governments often raise more taxes and collectively do more things. I have friends who live in France. They pay a lot of local property tax but they get childcare, elder care, summer activities, local policing and high levels of maintenance. There is a vast difference across Europe and in places such as France, taxpayers pay their tax collectively and feel they get some value in return.
We have a centralised system of decision-making and our local government is more like a system of local administration because many of the functions and decisions are taken by the Executive, the paid officials, rather than the directly-elected councillors. Long leasing of social housing from vulture funds is in the news at the moment and councillors were the last ones to know about that. It is very much a feature of our local government and administrative system.
When local property tax was introduced in 2013, we were told it would improve local amenities. According to the Department of Housing, Local Government and Heritage website:
Local Property Tax allocations paid from the Local Government Fund help fund essential local services such as, public parks; libraries; open spaces and leisure amenities; planning and development; fire and emergency services; maintenance and cleaning of streets and street lighting – all benefitting citizens directly.
There is no doubt but that those are all valuable services but the expectation was that there was going to be something additional when the local property tax was introduced. That was how it was sold. In fact, what happened was the local government fund, which was made up of the local tax receipts, was gradually withdrawn over a few years when the local property tax was introduced. The property was a replacement tax rather than an addition. It is not unusual for people to ask what they are getting for the taxes they pay because they have not seen the additionality they expected to see when they were paying an additional tax.
The main thrust of the legislation before us is to do a revaluation and to bring houses and apartments that were built since 2013 and were excluded from the tax until now into the local property tax. Will that mean there will be more money available to be spent at a local level? The issue is that it will not, necessarily. The method of distribution of the local property tax has not changed since the fund was made up from the motor tax fund. The system of distribution of the tax is broadly the same. It goes back to the needs and resources model from the year 2000.
Basically, it counts the needs of a council. If, for example, a council had 1,000 staff, ten libraries and four swimming pools, the matching resources were calculated to meet those needs, hence the needs and resources model. A baseline was set for each council based on this. The problem was that not every council was starting from the same baseline and the model took no account at all of the population and shifts in population. It still does not take any account of that. Essentially, areas that did not exist in the year 2000 will have needs as a consequence of a whole new community being built. And yet, there is no provision whatsoever within those baselines. The Minister spoke about this possibly being changed in the future but I have been listening to this for a decade or more.
Staffing levels are very uneven across the country. County Meath, for example, which is a growing area, has somewhere in the region of 650 staff whereas County Kerry has 50,000 less of a population and more than 1,000 staff. It is a complete mismatch and that is for historical reasons. The whole point, however, is that we evolve that over time to create some degree of fairness. It is the same case with facilities such as swimming pools, for example. County Kildare has only two public swimming pools for a population of 220,000 people. That is for one pool for every 110,000 people whereas our standard is set at one for every 50,000 people. Our funding system has nothing to do with population density and yet the baselines take no account of that whatsoever.
Counties such as Fingal, Kildare and Meath, which have rapidly growing populations and evolving needs, never get the resources to catch up. The baseline for those areas remains stuck in time. That one-dimensional development causes a huge amount of resentment. People will say that all they get are more and more houses but not the matching facilities and services. One then must have the fundraisers and all the rest. I am not saying that is not required anyway but the resources are not there to match that. The expectation was that the local property tax could be an aspect of that. The way it is designed, however, mitigates against that with regard to the baselines.
Consider the totality of what the various councils receive. I looked at the total income for each of the local authorities because people might say that a particular county might have more in commercial rates or might get more from another source of funding. If one looks at the total income for each local authority and make some comparisons, however, it gives some sort of an understanding of how daft our system is. I will leave places like Leitrim and Dublin out because they are unique; one is a capital city and one has a very tiny population in what is geographically a fairly big area.
Let us look at counties Wicklow and Mayo, for example. Wicklow has a gross expenditure of €91 million. Mayo has a gross expenditure of €125 million. Wicklow has a population of 142,000 and Mayo has a population that is 12,000 lower, at 130,000. Wicklow has €35 million less to spend than Mayo. We might then look at what happens with the property tax in those two counties. We have already established that Mayo has €35 million more to spend and has a smaller population. Both have many towns and a big rural area so they are quite similar. Included in their income is the local property tax. I am using 2017 figures because I previously made a submission on this. They have not changed much since, however. As the Minister knows, the local property tax has not changed and that is what this Bill is about. Wicklow took in €17 million in local property tax and Mayo collected €10 million. Wicklow had a benchmark of just €8.5 million, however. This is going back to the needs and resources model from the year 2000. It had a benchmark that was set at €8.5 million while Mayo had a benchmark of €19.8 million.
Wicklow was, therefore, stuck in time. It did not matter that it was growing or that it had additional population and new needs. Wicklow, with a bigger population and less money, was deemed to have €13 million in excess of what was needed from the local property tax. It had to put 20% into an equalisation fund and was then restricted in what it was permitted to spend from some of the remainder of the local property tax. This is called the self-fund element and it must be spent on capital projects instead of funding being provided through central funds. This is where we really need to be paying attention regarding how local property tax is supposed to fund councils. Roads and housing are deemed to be the two areas on which councils must spend their money.
We know that Wicklow took in €17 million in local property tax and Mayo took in €10 million. Mayo, however, got €19.8 million out of the fund, even though it had a bigger income from all the collective sources. I am not saying it does not need the money and would not have the ability to spend it. The unequal nature of these baselines are highly problematic and make it very difficult to argue that this is a fair tax, even if one takes the other issues into consideration.
I received a reply to a parliamentary question from the Minister stating that the 20% equalisation fund would be phased out and councils would retain all their tax. The problem with the baselines, however, is what they now require of local authorities. If the local authorities take in a lot more money, the baselines will mitigate them having the discretion to spend that money on the things they deem to be needed in their county, even in counties with a very large growing population. They must spend it on roads or housing. Only six or eight counties fall into that particular category. Essentially, what will happen is the central Exchequer will reduce the amount of central government grants that will go to those counties, even though they are less well-off than some other counties when one looks at their total income.
People are right to ask what they are getting for this local property tax. It is a fair question. They want to see the additional services. They do not want this one-dimensional development where they see rows and rows of housing without the ability to fund parks and playgrounds, normal maintenance or things one would expect to see. We are going into a very challenging time as well. Local property tax made up between 8% and 10% of council budgets but obviously now with Covid-19, commercial rates will be very significantly hit. Welcome and justified subsidies were given to the commercial rates sector in the context of Covid-19 but there will be a lot of recovery and a loss of income there in terms of the commercial rates. That will make these baselines even more problematic and those councils, which appear to be well-off, will be well-off in terms of growing populations but not with the services to match those growing populations.
On a number of other points, I believe the 3% interest should be 0% interest.
We are really talking about people who are very poor and who are having to go and seek deferrals on the basis of their just not having the ability to pay. I do not understand why we would be charging interest on a deferral. It is something which would at least be of some assistance. I have seen so many pensioners who are struggling to try to pay their local property tax. I have told them they really should consider deferring. When you start seeing people deciding not to heat their home or not spending money on things they should be able to afford and which they need, in many cases it is because they do not want to leave a burden for their family. That is the kind of thinking here, particularly with older people. There are many different ways a local property tax system could be designed, and it can be done in a fair way. The distribution of the resources is equally important and we have go that very badly wrong; it is very unfair. The more people appreciate it is unfair and do not see a return on it, the more significant resentment builds up.
The local government system is overly centralised. It is not fit for purpose when compared with local government systems across Europe, many of which have many more functions than ours has here. We have far too much localism at a national level and not enough discretion at local government level. That must be looked at in the context of how we fund our local government system.
I thank the Minister for bringing forward this legislation. It is always difficult to bring in legislation of this kind or, indeed, any tax legislation. As my colleague, Deputy Bruton, said, there is never a good time to do this.
Recognising the changes the Minister has made to the bands, rates and so on, the difficulty taxpayers in my area of Dún Laoghaire are going to face will be in the context of revaluations. It is completely understandable that there be a revaluation from 2013 values. At that time, the State was on the cusp of an International Monetary Fund, IMF, bailout and we were trying to recover our employment situation, which had been so desperately bad. The valuations which people placed on their properties at that time, and on the basis of which they have been paying tax, were comparatively low. Nearly a decade later, the value of property has jumped quite a lot. The issue in my area, as in so many others, is going to be around revaluations.
People understand the nature of this tax and the basis for it. When it was introduced, we were entirely dependent on transaction taxes and income taxes. Both of those fell of a cliff when the financial crisis occurred. There is a real need for us, as a mature state, to have a broad-based and stable revenue generation mechanism, and the property tax contributes to that. I acknowledge the different measures the Minister has taken to try to enhance the fairness of it. He has brought in the new property owners since 2013 and he is encouraging measures to reduce vacancy and to bring those properties, particularly ones understandably vacated due to illness, back into use for other people. A rebalancing and fairness measure of interest to my constituents will be the redistribution of the property tax that is collected and keeping it 100% in the locality. That will be important to people.
People in my constituency are always surprised when they hear the proportion of property tax they pay goes to other parts of the country, although it is understandable why that was so for the period. However, property values in Dún Laoghaire have gone up very considerably, which is due to the finite amount of space and the increasing number of people who want live there. People there are potentially facing higher property taxes than those in other parts of the country. They will continue to pay but it is important to acknowledge that the money they are paying to local government will stay in their area and that they will see the benefit of that. It is not sustainable for me, as a Deputy for Dún Laoghaire, to say that this should be reduced, that the people in my area should be protected or that this or that group should be protected. We are a collective in Dáil Éireann and we are trying to fund the interests of the State generally. It is true there are some constituencies where constituents are going to face higher taxes than others because of property values, but we must be honest about the need to fund the State in a sustainable way. There is a dishonesty otherwise. It is simply not credible to oppose a tax of such progressivity and, in particular, for Sinn Féin to oppose it outright. There is broad consensus on this, although there are matters of detail in respect of which we will disagree. There is a progressivity to what is proposed that is genuinely fair. People want to see a sustainability to our tax base. We do not ever again need to go through the shocks we experienced before. I acknowledge that this is difficult legislation to bring in and difficult for some Deputies to accept.
I welcome the Minister. As Fianna Fáil spokesperson on local government, I welcome the opportunity to contribute to the debate.
In 2013, I and many of my colleagues on Dublin City Council described this as the wrong tax at the wrong time. The timing was obviously very difficult for many people but the tax was a market value-based tax rather than a site value-based one. The Bill before us defines one of the real issues with the current system, namely, it will require us to constantly review the valuations. There is much work still to be done on the local property tax and we should look at more innovative, progressive and different ways to use our local property tax. I accept, however, even with Covid and everything else, that now is the time for us to take the difficult decision to amend the valuations and to get on with doing so.
I should acknowledge that the Government has made a significant attempt to ensure that the vast majority of people will not pay more tax as a result of this Bill or the revaluations that will take place. That is a significant achievement given the significant increase in property values over that time. The second thing is, we should acknowledge that while there are some people who have not paid the local tax since 2013, they will be covered by this new scheme. That will be a significant hit for many of those people. While some might say that those people have not paid it since 2013 and the rest of us have, I acknowledge that this will be significant for people, that they will be making a payment they have not made before and that this is a very difficult time for some of them to do so.
That said, I also want to discuss how this tax is spent. There are two positives in here. One is the ending of the equalisation fund, which will ensure that 100% of the taxes raised in the local area will stay in the local area. That is really important because one of the fundamental tenets of how this tax was sold to people was that it would help fund the services in their area. Restoring 100% retention in places like Dublin and in many counties will ensure that money is spent in the local areas and councillors will welcome that. However, councillors and communities will only welcome it if it genuinely does stay in their communities. Two things must happen for that to be the case. First, we must not replace existing grants and funding streams by looking at what increased funding councils will get from this scheme and, second, we must ensure that we match the shortfall in the local government fund to ensure those counties which will now not receive that overflow are correctly funded. At the committee, I think it was estimated to be in the region of €90 million. This is a significant amount and we must start looking now at how we will address that so there is a genuine benefit to this Bill, that more money is kept locally and that where money does not come from the equalisation funds, it will be replaced by a commitment from Government.
The mounting debts of people deferring payment of their local property tax due to inability to pay are extremely worrying. Information revealed by the Revenue Commissioners last year indicates that, on average, 43,000 people defer their payments every year. I suspect the number has increased this year because of the unprecedented times we are living in. Workers and families do not defer payment lightly but do so because they cannot afford to pay. If the local property tax was truly a wealth tax, this would not happen and we would not saddle ordinary people with huge bills when they just cannot afford to pay them. I commend the Sinn Féin team on South Dublin County Council, which yesterday reduced local property tax for the council's area by the maximum 15% allowed.
We should get one thing straight, which is that the local property tax is unfair because it is a tax on the family home. It is a yearly tax on top of increases in other costs of living. People have gone through financial hardship in the past 18 months that is unprecedented and Covid-19 has had a financial impact on families the life of which we have not seen before. The Government rammed through legislation without proper scrutiny or consultation last week. Rushed laws are bad laws.
The Government has a habit of bypassing democracy and bulldozing through legislation. This week again we will see the liberal use of such bulldozing through of legislation without adequate debate. An example is the legislation on indoor dining restrictions for unvaccinated people, which needs to be the subject of a full debate. The Government cannot rush through legislation that to all intents and purposes creates a two-tier society.
Our Whip, Deputy Mac Lochlainn, only this morning proposed that the Dáil should not go into recess this week but should rather remain sitting to deal with legislation. The latter would be preferable to the Government railroading through legislation relating to local property tax, public health restrictions and many other matters. We should take our time and give this process the responsible deliberation it needs. Public health requirements do not take a break during a pandemic and neither should the Dáil.
The local property tax is another bill that people cannot afford and it comes on top of other increases mentioned earlier. For example, only this morning I was contacted by residents in Lucan who have been hit with an 8% rent increase. If the average rent in the Lucan area is €2,000 per month, the rent will increase to €2,160. This is also a result of Government legislation that did not take on board Sinn Féin proposals for a rent freeze. The legislation had gaps that industrial landlords could exploit in order to raise rents for ordinary workers and families. It is legislation that makes things worse and not better for already struggling families.
Fine Gael is talking out of both sides of its mouth. While it is pushing through this Bill tonight, it was a Fine Gael proposal on South Dublin County Council to reduce the local property tax by 15%. It seems the party's councillors are not falling into line with Government policy.
The view of People Before Profit, as the Minister knows well, is that the property tax is an unjust, regressive and unfair tax on the family homes of large numbers of working people who have struggled to purchase a home and then have this tax imposed on them. This tax takes no account whatever of their income and their ability to pay.
When it was introduced, and contrary to some of the comments made by the Minister about the rationale for the tax, we were told that imposing this tax on the family home would lead to more funding for local government and it would also do something to dampen the property market. It was a response, if you like, to the madness of the Celtic tiger. That was the rationale put forward at the time to justify the tax. The broadening of the tax base might have been mentioned as well but the two central arguments put forward was that it would lead to more money for local government, leading to better local services, and it would do something to dampen the madness of the property market. The fact is that it has done neither of these. There has not been an extra cent for local services or government as a result of the tax because it replaced central government grants. In many cases, services have declined significantly in key areas. It is self-evident that this did absolutely nothing to dampen property prices and the craziness of the property market we saw during 2006, 2007 and 2008, which led to the crash. We are seeing it again now, with property prices rocketing once more.
There is a reason the Government deferred the revaluations and is trying to put some measures in this Bill to try to limit the unfairness that would result from a revaluation in line with the original flawed and unfair tax. It must adjust it because otherwise the Government would face massive political anger arising from any change in line with the original tax. It is an acknowledgement of all the points we have made from the outset that this is a fundamentally unfair tax. Although the Government has now taken measures to try to ameliorate its unfairness, fundamentally, that unfairness remains and will continue as long as there are revaluations every four years and resulting property tax increases.
I will briefly restate the reasons this is a fundamentally unfair tax. As was stated earlier, this is in many cases a tax on a debt, as a person may be paying a huge mortgage. It is a tax that is charged at different levels based on where a person happens to live, regardless of the fact that people's incomes may be the same as those in other areas being asked to pay less. It is a fundamental unfairness that is not addressed in this Bill and the point has never really been acknowledged or addressed by the Government. It is an unfairness we have always alleged about this tax.
I would be interested to hear the Minister respond to the following point. An additional injustice was uncovered in an email I received a while ago to our office. It relates to the interest charged for deferrals, and I note the deferral threshold has been increased to €18,000 from €15,000. I did not fully comprehend it until now. If the deferral is based on an income of less than €15,000, it means we will impose interest on people who cannot pay because they are too poor. A person will be punished by having interest imposed in respect of the deferral that will have to be paid at some time. I had not realised until this elderly woman contacted my office that this is not simple interest on the total sum over the years when a person is forced to defer because he or she is too poor to pay. It is compound interest, which is even worse, and I can go through the details of a case indicating how it makes it worse. If a person is paying €405 per year in property tax and defers because he or she is earning €15,000 or less, or now €18,000, that 4% is added annually. This means the person would owe €4,212 after ten years instead of €4,050 if the tax had been paid each year.
That would be if it was simple interest, but it is not. It is compound interest. In fact, at the end of ten years €5,103 in tax will have been paid, which is €891 more than the cost of ten year's property tax paid each year. A person will be punished for being poor by having an additional two years of property tax loaded on. For being too poor to pay the property tax for ten years a person is then forced to pay 12 year's of property tax. That is grossly unfair.
The elderly woman who contacted us to point this out was so embarrassed by the fact that she had to defer, that her income was so low and that she was unable to pay. She was also too embarrassed to even tell her family members about her predicament and her low income. This is what the Government is doing to the elderly, to the vulnerable and to income poor people who happen to live in a property that results in a certain valuation and the imposition of a certain level of tax. This is grossly unfair and regressive. It stuns me that Deputies can say it is a progressive tax. It is not a progressive tax in that regard.
This will also punish people in particular sectors who have lost considerable income during the Covid restrictions. These are groups I often talk about such as taxi drivers, musicians, artists, people in the performing arts and in tourism and so on. They are going to be punished. Their income will have gone down considerably over the past year and yet they are still to be landed with the same tax as somebody who might not have lost a cent, or indeed the multimillionaires and billionaires who have actually gained massively during Covid.
This brings me to my last question. What is the alternative? In our 2020 budget submission we costed in an alternative. For example, €400 million could be raised by not charging anything on a principal private residence and by charging €600 a year for a second house, €1,000 per year for a third and fourth house, and €1,500 per year for all houses in excess of four houses. That would be a genuine wealth tax and it would raise €400 million per year or, as we have proposed every year, a 2% tax could be put on the top 85,000 households that own 53% of all the household wealth and assets in the State, which this year is up to €880 billion, an increase of €37 billion on last year. The Central Bank's quarterly report stated that this is mostly driven by an increase in investments, currency and financial rises in assets. Why not tax them 2% and raise €2 billion to €3 billion a year? That is a hell of a lot more than the Minister is getting from the property tax and a hell of a lot fairer. They would not even feel it and the Minister would not have to punish people who have little income but who have a tax imposed on them because they happen to have their own home.
I am listening to this debate and some people here are in need of a history lesson, as well as perhaps a mathematical lesson in terms of what progressivity means and what it is meant to relate to, which is income and wealth. In any case, I will deal with the history lesson first.
The local property tax was first introduced in 2013 as part of the Fine Gael and the Labour Party Government's austerity agenda to make working people pay for the economic crash and the bank bailout. It was met with a massive campaign of opposition with tens of thousands of people mobilising. I remember protesting outside this building whenever a Fine Gael Ard Fheis was taking place. People took to the streets understanding precisely what the property tax was, which was an austerity measure, and to vent their anger at the injustice of what Fine Gael and the Labour Party were doing. We know that it was ultimately run through by Revenue, through payroll deduction, despite it having no electoral mandate and despite the clearly expressed opposition of a large majority of people. It was an unfair and regressive tax on people's family homes then and it is an unfair, regressive tax on people's family homes today.
The new rules being introduced by the Government mean that homes built since 2013, which were previously exempt, will now have to pay the local property tax. Other exemptions are also being removed and there is a new method for calculating the tax that will increase bills for very many people. We fought the introduction of the local property tax in 2012 and in 2013. We are not ashamed to continue to fight against this unfair austerity tax and to demand that it is abolished.
We have an alternative proposal for a progressive income tax on high incomes, taxes on second homes, taxes on wealth and corporation tax, on which I will now go into a little more detail. In looking back at articles from the time of the struggle against the property tax I came across a quote from a protestor. In late March 2012, 46 year-old Brian Murray said:
It seems to me that the working-class people of this country are being asked to pay for everything. All the money seems to be going down a black hole to the bankers and the bondholders. They just appear to be fleecing us and I’m very angry about it.
This summed up the sentiment of those who were protesting. It was not the people with large houses protesting for the right not to be taxed. It was people protesting against austerity. The Government's victory in imposing the property tax against the wishes of people who mobilised and against the majority of the population was a pyrrhic victory. Let us remember that Fine Gael and the Labour Party got their just desserts in the election in 2016. It was the local property tax and the water charges that drove the Labour Party down from 33 seats to seven seats and Fine Gael down from 66 seats to 50 seats. It is clear, unfortunately, that the lessons have not been learned by the Government. When we consider the details of the proposals, and the impact they will have on a significant minority of households, it is clear that the Government is determined to continue on the same track.
Close to 750,000 households will face an increase in property tax bills. The Government does not want this figure to be widely known and is saying that it is a technical thing, that things are just changing around, and that most people are neither winning nor losing, and that some are winning. Almost three quarters of a million households face an increase in their local property tax. Added to this are the 100,000 households that face paying the property tax when they previously were not doing so.
Section 19 makes the owners of properties leased for more than 20 years to local authorities or to approved housing bodies, AHBs, liable to the local property tax rather than the local authorities or the AHBs being liable. It is likely, however, that the costs will simply be passed on from the funds to the local authorities or the AHBs. The only real import of this is to copperfasten the very bad model of long-term leasing of social housing from cuckoo funds, which we remember although we do not have to remember that far back. Just last week the Government rammed through a tax break for them.
Section 22 makes the buyers of properties sold by local authorities or AHBs liable for local property tax due on the normal market value of the property rather than a reduced €90 rate available that would otherwise apply. The significance of that is it shows the Government intends to continue selling off social housing despite the housing crisis.
We welcome the exemption for homes affected by mica. This should continue for as long as necessary and not just for the six years provided in the Bill. As already mentioned by many other speakers, however, it is very inadequate when we consider that people have to pay for the inspections and so on themselves. Fundamentally, the builders and businesses responsible should be made to pay the full remediation costs of homes damaged by mica.
I will conclude on the alternatives. Obviously, one very big alternative is the question of a Covid wealth tax. In the context of a pandemic even the IMF has raised the question of having wealth taxes.
The Government is not interested in going there. It is a fact that the wealthy have gotten much wealthier over the course of the pandemic. On an international level, Jeff Bezos has doubled his wealth from approximately $100 billion to more than $200 billion in the course of the pandemic. The same has happened in this country where the likes of Denis O'Brien massively increased his wealth. It means the increased concentration of wealth in the top households. The richest 1% of households, according to the Central Bank, all of whom are multimillionaires, own 15% of net household wealth in this country. The top 10% control more than 50% of the net household wealth in this country. A 3% wealth tax on the top 1% would raise €3.6 billion, many multiples of what is raised by the regressive local property tax.
I was struck by the irony of a Fine Gael speaker, Deputy Carroll MacNeill, who asked how we could be opposed to the property tax, which is a tax of such progressivity. She was astounded at the idea that anyone could object to it because it is progressive. Let us look at what the Government she supports is doing on corporation tax right now. For years, we have railed in this place against the tax haven status of Ireland. We have said it is immoral in terms of the robbery that takes place, in particular of people in lesser developed countries, from their public services, and from people in this country. We have talked about the immorality of it. We have also pointed out the fact that it is an unsustainable model because one cannot win a race to the bottom in corporation tax rates; it is only the corporations that win. Someone is always going to be able to come in to undercut. We saw that with Trump, bargain-basement Brexit, and various eastern European countries. It is not a sustainable model, but it is one to which the Government is committed. For years, every time that we have raised the question of corporation tax and ending Ireland's tax haven status, the Government has said it agreed with us – of course not on Ireland being a tax haven - but that it would like to increase the amount of taxes that corporations pay. However, the important point was that it could not be an Irish or EU process; it had to be an OECD process. It must be a worldwide process. In that context, the response was that it would be great, and the Government would love to be part of it. Joe Biden came along with his extremely watered down, inadequate proposal for a minimum corporation tax rate of 15% and signed up the vast majority of countries in the world. Some 130 countries, representing 90% of global GDP, have said they are all for it, but all of a sudden the Government is not in favour of global co-operation to increase the rate of tax that corporations pay. Ireland finds itself in the corner with Bermuda, the Cayman Islands, Barbados, and St. Vincent and the Grenadines in saying that we could not possibly go along with that. Why? Because Ireland is a corporate tax haven. It is a model to which the Government is committed, despite the fact that it does not work for people in this country or for people around the world and is an utter dead end.
While the revision in the property tax bands is largely a good news story for the people of County Longford, on a personal level there is concern about the threat to future funding of Longford County Council as a result of the proposal. At present, just over 17,000 properties are registered in County Longford for the LPT and 79% of them or more than two thirds of the properties are in the lowest band, that is, bands 1 and 2. In the proposed bands, more than one third of Longford households will face a smaller LPT bill. The reality is that 99% of properties will pay the lowest LPT charge under the proposals. That in itself is welcome news but there are unnecessary consequences for Longford County Council with a sudden shortfall of €1.5 million in revenue arising from the changes.
For several years, the council has leveraged a maximum 15% increase in local property tax. This in turn has enabled it to borrow and finance an ambitious capital regeneration programme. All of that is now very much in doubt. This is an issue of major concern for the management of the council. For the council to offset the €1.5 million shortfall in LPT revenue, the county would need to see an additional 10,500 new houses in the county, which is unlikely in the extreme. I welcome an assurance from the Minister that no local authority will be worse off because of the proposed changes to the LPT. As it stands however, Longford County Council is facing a €1.5 million shortfall under these proposals.
We must also address concerns regarding equalisation funding. As much as 14% of the funding for Longford County Council arises from the LPT equalisation process. Some 11 counties, including the local authority in Longford, will be penalised if there are changes to the equalisation model. I ask the Minister to have a careful look at that. At the very least, we need a commitment that hard-pressed local authorities such as Longford County Council will not have to pay an unconscionable price in the LPT revision proposals.
I wish to also address another issue that is on my mind that concerns Longford County Council. It is one of the most challenged counties in the country when it comes to its finances. Notwithstanding such a low revenue-generating base, it had an ambitious capital programme over the past six years. That bears testimony to the expertise and resolve of the local authority's senior management team. Over that period, it has emerged as one of the fastest growing and most industrious local authorities in the country. It has more than doubled its annual expenditure from €37 million in 2006 to €77 million last year, a 115% increase. Key financial challenges however include the low value of the LPT base but also a low rates base and high vacancy rates. The loss of €1.2 million in rates as a result of the closure of the ESB power station in Lanesborough has been a major challenge. That is the equivalent of 15% of the total rates base for the county or is indicative of the financial contribution of the average 661 rate payers in the council. If the council were to set about compensating itself for this shortfall it would result in an unthinkable 15% hike in rates in the current financial climate.
I thank the Minister for Finance and his colleagues, the Ministers for Public Expenditure and Reform and Housing, Local Government and Heritage who collectively provided €1.2 million to the council this year to head off the loss in revenue. The report of the just transition commissioner, Kieran Mulvey, stated:
It would be extremely unfair in circumstances over which...[Longford County Council]...had no responsibility and for a decision which was not expected until 2027 that they should be burdened with this sudden loss.
I recommend that an urgent engagement takes place with the...[local authority and]...the funding Departments so that a suitable emergency arrangement can be agreed to alleviate the rate losses over the period 2021-2026.
I am afraid the just transition has had an unconvincing start. The Government must send a strong message of solidarity to the midlands, specifically counties Longford and Offaly. A budgetary undertaking later this year to underwrite the annual €1.2 million rates shortfall for the next five years would certainly go a long way to providing the solidarity and assurances that Longford County Council desperately needs at this time. I appreciate that I have strayed from the LPT, but I am sure the Minister will appreciate that this is a major issue for the council, and I hope he will pursue it in his budget 2022 deliberations.
I take this opportunity to offer my congratulations to Deputy Bacik on her fantastic result in the recent by-election. It is a huge honour for her and her family. I look forward to working with her and her colleagues in the best interests of the constituency of Dublin Bay South.
Many homeowners are deferring payment of their local property tax because it is not affordable for them. This is worrying for homeowners who are struggling to pay, for example, a resident on Lombard Street East who is in her 80s and is a double leg amputee. She would pay if she had the money. Unfortunately, she does not. Her only income is her welfare payment. If this were a wealth tax, she would not have to worry about it because she is not wealthy, but she must pay the property tax or else defer its payment. Property tax does not take into account a family or individual's ability to pay. Property tax is dependent on property prices, not the amount of money a homeowner has. If someone was ripped off when buying a home, the Government will tax him or her more. That is what is happening in areas like Ringsend and across the inner city, where large tech companies are pushing up prices and ordinary working families must pay more because of Government policy. We in Sinn Féin have a positive alternative. We are in favour of a wealth tax as part of our progressive tax reform proposals.
This debate comes at a time when huge tech firms continue to escape proper taxation in Ireland, leaving a large hole in the Exchequer's finances that ordinary working families have to fill. It was recently highlighted that Google had moved more than €63 billion in profits out of Ireland using the controversial double Irish tax arrangement in 2019, which was the last year it could use the loophole. Ordinary homeowners like the elderly resident on Lombard Street East do not have loopholes of which they can take advantage. They just have to pay the property tax out of their pensions and get on with it.
Another bone of contention is the lack of services provided by the council. If residents are paying a property tax, they expect to see some services. Trees are not being cut back and maintained, roots are becoming dangerous, particularly for older people, and weeds and dirt on the street are not being cleaned up. Residents groups must deal with these problems themselves. They are happy to do so, but they are not getting the assistance they need.
I am not opposed to the property tax for the sake of it. I am opposed to the property tax because it is unfair.
I welcome the opportunity to speak on this review of the local property tax and the legislation that will underpin it. It is important that we support local government with proper funding.
I will take some time to speak about Galway County Council in my constituency and its precarious situation in terms of financial support. An expert advisory group on local government arrangements in Galway examined the prospect of amalgamating Galway city and county councils. According to its report dated 26 April 2018, "the Expert Advisory Group recommends that the existing deficiencies in respect of both the human and financial resources be expeditiously resolved as an essential prerequisite to the amalgamation process." It made this recommendation because there was a serious lack of funding in Galway, but the reason for that remains a mystery. At every chance since entering the Dáil more than four years ago, I have tried to elicit from the Department the formula that is used for the distribution of the equalisation fund to local authorities. The announcement of the changes to the local property tax presents an opportunity to address this underfunding for Galway County Council.
I will offer some comparisons. Galway County Council is comparable to local authorities in Mayo, Donegal, Kerry and Tipperary, but it is getting the lowest budget despite having the largest population. To illustrate this point, for Galway County Council to have had the same budget in 2020 as the average between Mayo, Donegal, Kerry and Tipperary, it would have needed an additional €28 million. Using the Local Government Fund's local property tax allocation as an alternative basis for comparison, Galway County Council would have needed an additional €10.8 million to have had the same average budget per capitaas those four counties. The problem with this is that it means there is a year-on-year deficiency.
Galway County Council has staff who are working overtime and on Saturdays, Sundays and bank holidays in order to meet statutory requirements because we do not have enough staff to allow people to work proper hours. We do not have an enforcement officer in the planning department in the east of the county where I live because the council cannot afford to take on one. I believe our county, which is geographically the second largest in the country, has four housing liaison officers at a time when there is a housing crisis. If someone left Clifden for Ballinasloe, he or she would only be halfway to Dublin without having left the county.
The extreme urgency of this underfunding is not to be underestimated. Roads engineering staff are out there doing work. I am fearful that because of the pressure and stress they are under, mistakes will be made. I fear for their health and safety. It is important that we support the chief executive, Mr. Jim Cullen, the directors of services and the staff in a meaningful way.
I am raising this matter with the Minister because the local property tax brings with it an opportunity to address imbalances between local authorities and ensure there is fairness for everyone. Galway in the second largest county in Ireland. We have islands, scenic areas, tourism potential and a Gaeltacht, but we also have a large number of CLÁR areas where there is underfunding and low population growth. Despite these issues, we are trying to build an economic base using Galway County Council, but we are finding it difficult to get people in place to access the funding that is available from various State agencies. We are being squeezed in whatever we try because we do not have the resources and morale is low. I am not saying this with the begging bowl out. These are simply well-documented facts.
An advisory group has examined Galway county and city councils, but we need to deal with the financial problems before we return to the agenda of amalgamation, which I support. It is important that this matter be raised at Cabinet level to ensure that Galway, which is a fine and large county, is not left without proper funding. We must ensure that we protect our workers and that councils deliver services in a safe manner that achieves the best results for the money they are given.
I ask that the Minister take this matter into account. I support the idea of reviewing the local property tax, but it presents an opportunity for the Government to address what has been a well-documented bugbear for Galway for a long time.
It is incredible to see the Government railroading legislation of this importance through the Dáil just before the summer recess, especially during a week when most of the country's attention is on the vaccine discrimination Bill. The LPT has the potential to increase the property tax for rural dwellers and those around the country who have been hit by the mica problem. There are a number of serious problems with this legislation. The use of the guillotine is deleting the Dáil's democratic oversight.
It is wrong and it is happening over and over again. Since its introduction in 2013, the local property tax, LPT, has been an unjust taxation measure. Many property owners are struggling to pay bills, have had their incomes cut, been hammered with decades long mortgages or hit with this blanket measure. It fails to take into account any of those personal circumstances people are in. Those who have been hit with economic hardship are less likely to be able to deal with this tax. I have opposed this LPT for years and I am unconvinced this Bill will alleviate the inequity that arises from it.
I put several questions to the Minister at the finance committee and I was surprised he was not in a position to answer them. He said he would forward a note to me on those questions. I have not received a note before this debate. It is disappointing because the issues I raised were important.
The first one was on the redefinition of a residential property. On that, I raised the fact many people in rural Ireland are concerned that suddenly sheds, outhouses and other buildings on their property are to be taken into the cost of the valuation of the local property tax. We did not get clarity on it then. I was asked to trust the Government on it, but if you look at the legislation now, it says a shed, outhouse, garage or another building shall be considered, for the purposes of this Act, to form part of the residential property. That means this redefinition could drive up the cost of property taxes to residential property owners in rural Ireland. People in rural Ireland are far more likely to have these types of buildings and, therefore, are likely to be hit.
Has the Minister done any estimate? Can he tell us how many people are likely to be hit under this new definition. Does he have any estimate of what the cost to families in rural Ireland will be as a result of this extra definition?
The Bill also changes the word "acre" to "hectare". This is no small thing. It more than doubles the footprint of valuation. This will also hit farmers and rural dwellers. How many people will be hit by this, in the Minister's estimation? What costs will they have to pay? It looks to many people that a Dublin Minister for Finance is trying to increase a sneaky tax on people in rural Ireland. That is wrong. People should know what will happen as a result of this Bill.
I also asked the Minister about the loophole in the Bill around the mica homeowners. We were told, under questioning, this Bill includes a six-year LPT exemption for mica property owners. However, the Taoiseach stood up in this Chamber not too long ago and said it would take €1 billion and ten years to deal with this crisis. There is a four-year gap in this legislation given the Taoiseach's estimation of how long it will take to deal with homes with mica. For a Minister for Finance to be so blind to that need, just one month after mica homeowners made that trek all the way from counties Donegal and Mayo to Dublin, is wrong. There should be no time limit placed on mica property owners. The exemption should remain in place for each home until each home is fixed, which logical. Under this legislation, we have a situation in which mica homeowners whose homes are not fixed in six years' time will be liable for LPT on their crumbling houses, which is absolutely wrong.
I also raise the issue of empty houses. One in 33 houses in this State is empty. More than 200,000 houses are empty and that does not include 60,000-odd houses considered to be holiday homes. In the heart of a housing crisis, in which dozens of people are dying in homelessness in this country and well over 1 million people are in crisis, whether it be in homelessness, on waiting lists or paying spiralling rents and house prices, it is shocking the Minister does not include the cost of vacancy or some level of tax to encourage or mobilise empty houses into family homes.
When I asked the Minister at the finance committee what the story was, he said some research needs to be done to understand the context of these empty homes. That is like someone saying some research needs to be done on a building that is on fire before we quench the fire. The housing market is on fire. There is a crisis of massive humanitarian proportions in this State and the Minister's response to hundreds of thousands of empty buildings is that we should look into this. That is an incredible thing to do. There is no urgency there.
Before I finish, the Minister needs to look into the way local authorities are funded in this State, which is wrong. There is massive inequality with regard to population distribution and local authority funding. It needs to be fixed. It has a material effect on how people live, in all aspects of their homes. In my county, we have the lowest investment per capitain the State with regard to local authority investment. That radically reduces people's access to services they need.
The introduction of the property tax and its predecessor, the household charge, has been controversial; most obviously, around the time of their respective introductions. It perhaps ranks alongside the universal social charge as the most controversial of taxation measure in recent times. Those things were introduced in a time of financial crisis. Unfortunately, we may be at the beginning of yet another financial crisis and this time as a result of our Covid-19 measures.
I understand the proposals presented before us in this Bill will lead to a reduction in property tax for some residential properties in County Wexford, while most property owners will see their tax bill remain at the same level. A property valued at €200,000 in 2012 is in the third band and the current standard rate of property tax at €312. Under the new proposed bands, a property valued at €200,000 will be in band 1 and will pay the standard rate of property tax at €90. At first glance, this may look like a significant reduction but when we take into account that a house valued at €200,000 in 2012 is now likely to be valued at more than €300,000, we can see why most people will remain at the same level.
I am concerned Department figures show that approximately 33% of property owners will see an increase of up to €100 on their property tax bill. The bill is providing for the property tax to be charged on all houses after 2013. That means a far greater number of properties will be brought into this tax than are currently in it. With that in mind, I ask the Minister to examine ways of ensuring no one sees an increase in their property tax. By bringing more properties into the tax, the money raised from it will increase anyway and there is scope to avoid people having to pay extra property tax.
This Bill also states a shed, outhouse, garage or other buildings which are usually enjoyed with a residential property in rural Ireland shall be considered to form part of the residential property tax. Yards, garden sheds or other lands, such as gardens or grounds shall be considered to form part of the residential property, up to and including 1 ha, which is 2.2 acres. We are going from valuing a house to a situation in which we are now valuing everything on the site. I have some concerns and few questions.
What is the definition of an outhouse? I know many people who have old outhouses, almost in ruins, on their properties. Will they have to be valued? Does a wooden garden shed have to be taken into account when valuing the property? These are the questions people will likely be asking and we need clear guidelines.
Most of us here would accept that Government spending, in general, is too high and this has become even worse since Covid-19 measures were put in place. When governments are in a habit of spending too much money, the consequences will inevitably fall on the back of the taxpayer, who will be expected to give up an even larger amount of his or her income to help sustain such spending levels. Unfortunately, when the State gets into financial difficulty, the burden of solving the problem is too often placed, via extra taxes, on the ordinary working people. I hope that in recovering from our current difficulties, the first port of call will not be to increase taxes on people.
Instead, the first step should be to conduct a root and branch review of how savings can be made in Government expenditure.
Even in years gone by, when past Governments felt a need to cut back on spending, they targeted the vulnerable and easy targets. The cuts to carers' supports is one example that springs readily to mind. It appears that money is given hand over fist to NGOs and quangos, and there appears to be no end of money available to waste in gross overspending on projects such as the children's hospital. Members of the hospital's board appeared before the Committee of Public Accounts this morning and it seems we cannot be told what the final cost of the children's hospital is due to be as a result of the Department of Health taking the view that commercial sensitivity trumps public interest and accountability. The logic of this defies belief. The State is in the business of giving billions of euro to NGOs or lobby groups whose main function is to campaign to get the Government to spend even more money introducing policy changes to match whatever agenda they want to set or push. It makes no sense whatever, and this type of work should be carried on by Departments.
As we discuss this Bill to raise money via taxes, I would like to get clarity on one matter, which the Minister might address in his closing statement. Section 23 deletes section 15 of the main Act, which means the Revenue Commissioners will not accept self-assessment anymore in respect of properties valued at under €1 million. I am not sure about these self-assessments. Are they now subject to the Revenue Commissioners' compliance regime for other self-assessment taxes? Does that mean self-assessment can now be challenged by the Revenue Commissioners? Do property owners need to get valuations from auctioneers every four years, as one does when valuing properties for stamp duty, probate and so forth? I would appreciate clarification on that.
I appreciate the opportunity to discuss the reforms that are coming to the local property tax. First and foremost, it is important to point out that this tax is one of the few taxes whereby people can see a tangible difference in terms of what it can do. I come from east Cork and I served as a member of Cork County Council prior to being elected to Dáil Éireann, which was a major privilege. Unfortunately, our local authority is one of the most underfunded local authorities in the country. That was recently confirmed by reports carried out on Cork County Council. I commend the work the council has done to raise this with Members of the Oireachtas. Hopefully, it will be brought to the Minister's attention by his Fine Gael colleagues, but I am doing it here tonight with regard to the funding issues it has. The property tax is extremely important.
I want to give some feedback on some of the reforms that have been discussed. Unfortunately, there has been much fearmongering about what these changes will mean, but some valid issues have been raised with me regarding what is considered when calculating the property tax. I have heard some ludicrous suggestions that new formats will be found, particularly with regard to rural dwellings and relating to outhouses, garages or sheds that may be located there, when calculating the valuation of properties. I have even heard talk of redesignating what are considered to be sites of houses and farmhouses. As somebody who comes from a farming background, I can tell the Minister that it is quite hard to define these issues, so I would be very worried by any attempts made by the Department. I will resist any attempts to try to reform how property tax is calculated in order to punish people living in rural Ireland. They are going through enough challenges as it is.
We have to examine how fair and equitable property tax is. It is a good tax. I believe it makes an important and positive difference to communities. It helps to fund the local authorities which provide services to citizens throughout the country. Obviously, people who are renting properties or who do not own property are not affected by property tax. It is a progressive tax. As a Fianna Fáil Deputy, I find it extraordinary that one of the main political blocs in the Dáil wants it to be abolished. I am concerned that a major party, and I do not know if I should name it, which claims to be representing ordinary people and people who are trying to earn an honest living wants to abolish it. There has just been a by-election in Dublin Bay South. Deputy Gould is laughing, but from my perspective the joke in the Chamber is what I am looking at. What Sinn Féin is proposing is ludicrous. How is it going to fund our local authorities and build social houses by taking away such an important revenue stream for local authorities? That must be put on the record. Undoubtedly, I will be charmed by the response we will get shortly from the Deputy from Cork North-Central. He is laughing, but that Deputy does not want to charge property tax on somebody living in a house on Shrewsbury Road. That is extraordinary. He does not want to charge property tax on people living in dwellings worth from €1 million to €20 million. That is the joke here, so I thank Deputy Gould for his laughs.
I am very concerned, as somebody who has represented Cork County Council and gone on to be elected to the Dáil, that we ensure there is equity when people pay this tax. It has been laid out quite clearly that Cork County Council is one of the lowest funded local authorities in the country, and I have to question the value that people get for paying this tax. I want the Minister and his Department to examine this issue. It is very important that this is done. I return to the central message. For people who own property it is right and just, from the perspective of those of us who wish we were in that position, that there is some equity when it comes to taxation. Many positive benefits come from people who are in that financial position. I say that as the youngest Member of Dáil Éireann.
Sinn Féin is against a property tax, generally, and would dispose of it in favour of a wealth tax when in government. However, the fact that the Act is being amended at this time deserves some scrutiny. The local property tax was designed to pay off austerity-era banking debt and has no place in our society. It has never taken the ability to pay into account and it does not represent the type of taxation we should be considering and aiming for, which is to take money from those who will not suffer from its loss. We know from the Revenue Commissioners that 43,000 people defer payment every year. They still see interest of 3% applied to this debt. These are people who obviously cannot afford to pay. This is unacceptable. If the local property tax was a wealth tax, this would not be happening.
This ad hoc approach to governance is what has led this and many previous Governments to be extremely ineffective at delivering the social change which the people of this island are crying out for. Let us take the wool from our eyes, with which the Government has attempted to blind us, and reflect honestly on the fact that this Bill is being brought forward now only because there is a suitable distance between elections. It wants to avoid unfavourable voting. The Government has kicked this issue down the road three times because of impending elections and has chosen to introduce it now. It is seen by the people as strategic timing, if there ever was one, and self-interested.
Our citizens are struggling now more than ever. It has been announced that homeowners in Donegal and Mayo affected by the presence of defective blocks in their properties will be exempt from the tax for the next six years. Unfortunately, homeowners in Clare have not been afforded the same luxury. That is outrageous. The homeowners in Clare are not at all happy. Sinn Féin has tabled amendments to ensure that an engineer's report will not be necessary to qualify for the tax exemption. The cost incurred to get the approved certified I.S. 465 reports is so expensive that most people cannot afford it, especially families who are already suffering the injustice and ambiguity around what aid the State will give them to fix their shattered homes. This should be noted.
In my constituency, the Clare Pyrite Action Group is extremely frustrated and insulted that it will not benefit from this goodwill gesture. Honestly, in the great scheme of things, it is only a small, goodwill gesture. This olive branch is still not being extended to those homeowners despite the fact that the rigorous analysis which the Department of Housing, Local Government and Heritage demanded be conducted to show there were defective blocks was in only a core sample of five homes tested in February this year.
A further 34 homes in one estate alone are awaiting laboratory results. These figures may well be just the tip of the iceberg. We should not be saddling our people with more debt.
The Government has rushed this legislation for consideration before the Dáil. The Oireachtas Library and Research Service was unable to provide a full Bill digest for it due to the short timeframe between publication of the Bill and Second Stage. The Bill was not publicly available on the Oireachtas website until Friday, 9 July 2021 but it is down for a debate today.
It is a pity Deputy O'Connor has left. He said he was the youngest Deputy in the Chamber. He probably should have stayed to listen to the bit of knowledge I might be able to feed to him. If we look at property valuations today we notice that properties valued at €100,000 last year have jumped to €170,000 or €180,000 because of the lack of housing. The Minister is well aware of the cost of building because of the children's hospital, which has quadrupled in costs. The Government cannot control them. It should probably have used a Limerick builder who would have built it on time and on schedule.
The Minister is on about the local property tax. If we look at the price of building we see a 2,000 sq. ft. house costs €330,000 plus VAT. The Government gets €44,000 on top of the cost of building the house. Now let us look at the price of a site. People go for planning permission and pay €7,000 or €8,000 to get it through. When that has gone through they need to pay for water and electricity. This brings it to €11,000 or €12,000. Guess what? They have to pay the local authority another €6,000 or €7,000 to build on their own land. The Government gets €44,000 in VAT, the local authority gets €7,000 and now the Minister is coming back for more.
The Government has now taken the person who was building a house for €200,000 and put them in the €400,000 bracket. Before we leave the €400,000 bracket we have to furnish the house. This brings the cost of a 2,000 sq. ft. house up to €500,000 by the time it is finished. God forbid if people build a garage to house the lawnmower and the children's bicycles. They will be taxed again. Let us add on the 37% of the people who live in rural Ireland. They are now paying the most tax for emissions because they have no infrastructure. It is another tax on rural Ireland.
The Government then decided it wanted to pump water from the Shannon all the way to Dublin. I hope a meter will be put on it and the Government pays a premium price for every drop of water that goes out of the Shannon to Dublin. Then it might be able to give us money back to fix the infrastructure in Limerick and let us have adequate water. Fedamore in County Limerick has been on a boil notice for 16 months and there has been not one call from Irish Water, which is spending €5.5 billion over five years. Where is the money going? There is €4.5 billion here, €1 billion there and another €1 million there in Dublin. The Government is taking every cent from towns, villages and rural areas and spending it in Dublin. I have been saying this since I came here and people are now listening to what I am saying.
This is another tax the Government is trying to sneak through the Dáil using its majority. I want everyone in Ireland to look at the Fine Gael, Fianna Fáil and Green Party Deputies and when they come to their doors, which they will, I want the people of Ireland to remember how much money the Minister, Deputy Donohoe, has been asking them to pay on the back of Covid-19 and how much more pressure he will put their children, brothers, sisters, mothers and fathers under after Covid-19. Now the Government is coming with another sneaky tax. People are already suffering trying to pay their mortgages to the banks the Government bailed out and again left the people of Ireland to the vulture funds. Fine Gael, Fianna Fáil and the Green Party did it with pensions in the years from 2007 to 2011 with Fianna Fáil and the Labour Party and again with Fine Gael in 2011. They implemented more taxes on the people in Ireland.
We commemorated 100 years of people who fought for freedom in this country and the same people who fought would turn in their graves to see that the people who said they were standing up for Ireland are now punishing Ireland. They are punishing everyone in Ireland because of their failure to manage money and finances. How dare the Minister even sit in this room on television.
I was a member of our party until I saw the light and how corrupt parties are. There are party lines. Deputies coming from Limerick are supposed to be supporting Limerick and the places where they were elected. They come up here and vote on party lines with a Dublin-based Cabinet. They were not sent from Limerick to Dublin to vote with a Dublin-based Cabinet. They were sent from Limerick to get our fair share of the taxes and the punishments the Government is putting us under and send it back down for the infrastructure in our county. This goes for the Deputies who are representing Limerick city and county. They are elected by the people of Limerick to represent them.
I might not have gone to school for as long as the Minister did or get all of the college degrees he has but one thing I have is education of life. I have been self-employed all my life. I have had to fight to put food on the table for my family like many other self-employed people throughout the country. A total of 51% of the business people in Ireland are in small and medium enterprises. What does the Government do? It puts on tax after tax after tax and bails out everyone. It is all for the big boys. Let us bail them out. Let us give them what they want.
The 37% of the people in rural Ireland pay the highest taxes and we have no infrastructure. We have nothing. The Government stands up here day after day telling its people in Fine Gael, Fianna Fáil and the Green Party throughout the country to look at what it is doing for them. No wonder it is trying to shove everyone into the cities. It knows the game is up in the counties because the people realise how much the Government has left them down for the amount of time they have been in power.
The time is coming for change. The Government will feel that change. Everyone in the Government parties will feel the change. The people will remember how much the Government that was supposed to be here to protect the people of all of Ireland just looked after its buddies in the cities. Not a penny is being given to the counties. Our representatives are elected here and they cannot represent because when they come up they are told what to do. It is follow the leader. They might as well call themselves the sheep party because it is like a flock of sheep following the leader.
That is all they are. They have been told what to do. There might be as well be no Deputies from those parties coming up here from Limerick because there is one person in a Dublin-based Cabinet telling them what to do.
I am glad to get an opportunity to talk about the property tax and the new formulas that are being brought in. It is ironic this change is being introduced just as we are emerging from a gigantic public health pandemic. People are still worried, confused and out of sorts after being isolated. They are very worried about themselves and their families and now this is another concern. People do not mind paying if they get something in return. The property tax is very unfair in that regard. In rural areas, farmers and many others get very little in return for this tax.
An example of this is the local improvement scheme list in Kerry, which numbered 697 at the start of the year. We have only got enough funding for seven roads. Deputy Griffin said we got a 5% increase, but in fact we will not be doing as many roads this year as we did last year. We got enough for just ten roads last year and only seven this year. People in rural Ireland deserve a good road to their door just as much as do the people in Dublin 4. I have consistently said that but it is not happening. The scheme was suspended for six or seven years, then a new list was looked for and the people who were waiting since 2008 are still waiting. It is not fair. These are not private roads. The criterion for applying for the local improvement scheme is that you must have two or more landholdings. It is not applicable to one private house. On many of these roads, there are 20 or 30 houses, with farmers and others living up and down the way. The roads are in a terrible state and are not in the charge of the county council. That is just one issue I need to get across. The officials in the Department of Finance need to realise these are public roads, not private roads. They are public rights of way.
Water is an essential service. In Kerry, we have a serious problem with group water schemes not going ahead because, as well as residents having to pay €8,000 or €10,000 per house along the line, Irish Water is now looking for €2,000 on top of that. This is double charging and it is not acceptable. When I think of Dublin and other cities, I do not begrudge anyone anything but the people there have all the services, including all the new buses. You might see three or four of them passing one after the other and only two or three people in each of them. We cannot get that kind of service in rural Kerry.
Then we have a scenario where a small bridge or a large culvert, as we call it in many places, will not be replaced for 12 months or a year and a half because there are so many environmental and other assessments to be done. In the case of one particular bridge in Kilgarvan, Gort Bridge, the material that built it in 1880 or whatever was brought in a horse and cart. It has been closed for almost a year and a half and work on it will not be allowed to go ahead. It was the same in Gortdarrig and Headford. There was a slip on the road from the Top of Coom to Ballingeary and it was almost two years before it was repaired. People had to go around it. If those things happened in Dublin, Cork or any of the other cities, the repairs would be done right away.
The property tax will hit pensioners very hard, especially where there is only one pensioner in a large house. People want to stay in the house in which they gave all their lives. They are suffering hard and the increase in the property tax is going to affect them. Where there are two pensioners together, they can help each other to pay the bills, but it is very hard for people on their own. The funeral grant has been abolished and people worry about being able to pay for their funeral. Every extra cent they must pay will hurt them.
The Tánaiste said that something has to be done for people with Dublin properties that are of a very high value. I suppose the reason the value of houses has gone up is because of their scarcity. If the Government went back to the traditional house building, where local authorities were given funding to buy a site and build the houses, that would be cheaper than all the schemes that are in place at present, such as the rental accommodation scheme, the housing assistance payment scheme and all these things. They are costing money and the State is finishing up with nothing to show for them.
On top of the property tax, people in rural Ireland have to contend with the price of fuel, which has gone up massively. It has not gone unnoticed by people in rural areas. The addition of the carbon tax on top of it is making fuel very expensive. Every day, you would nearly be afraid to look at the sign beside the pump because the price has gone up a couple of cent more. Where is it going to stop?
I am very worried about the inclusion of sheds and garages and land up to an acre in these provisions. That is going to hurt people in rural Ireland with farms. What is the necessity of it? It is like the fair deal scheme, which I have been very opposed to, under which the farm is assessed as well as the house. That is very wrong and it is wrong as well to include up to an acre of land under these provisions. Again, it is not fair because people in urban areas do not have an acre and do not have to pay it, but farmers and others in rural areas will. In fact, it is up to a hectare, which is 2.5 acres. That is a lot of land. What value is going to be put on it? I am very worried about this and it needs to be clarified.
Then we have the proposal that if the valuation given by the householder is not accepted, the figure the Revenue Commissioners assume the house should be valued at will come into play. It seems to me there could a lot of room for increasing the value of a house and perhaps creating an unfair valuation because the person in Revenue, or whoever it is, may be from Dublin or another urban area. If a house is situated in the middle of a farm, it is just the place where the farmer lives. It does not have the same value as a house in Dublin 4 or wherever because the farm is around and it cannot be treated the very same.
People cannot pay another cent and that is it. They have so many things to contend with, whether it is the USC, which was brought in as a temporary measure, motor tax or any of the other charges people in rural Ireland face. If you are building a new house, you have to pay lots of levies, including a road levy. A levy to assist with roads must be paid but a cent might never be spent on the road up to the new house a young fellow is building. The cost of an ESB connection is unreal, depending on the number of poles or whatever.
Turning to broadband, we do not have that service in many places in Kerry. People are trying to improvise and pay others to try to bring broadband to them. It is a different story in rural Ireland. People in rural Ireland are not getting the services that people in urban areas are getting. That should be recognised when all this is being decided. This Bill is vague, but I am concerned for the people of rural Kerry that I represent.
The expansion of the LPT was parked for several years. I am glad that we are now dealing with this issue. In June 2020, the programme for Government committed to the introduction of legislation for a tax that put fairness at its heart. That is exactly what this legislation is doing. In the revaluation, most homeowners will face no increase in taxation. However, homes which were deemed new almost a decade ago, and which were deemed exempt on that basis, will be brought into the net. I appreciate and understand that there is no good time to make changes to the tax system, but our tax system must be fair and that must be at the heart of this legislation.
A lady in my constituency bought her home in Rathcoole in late 2012. Six other houses on her estate were bought just six months later. While that lady has paid her LPT bill every year for the past nine years, her neighbours on the same estate were paying nothing, because that was the tax code set up at the time. The change in this Bill will bring those homes into the system to ensure a more equitable and fairer system and to ensure discrepancies such as this do not continue. While the majority of homeowners will not see any increase on foot of this revaluation, it is important to remember that all money collected locally will now stay locally.
Currently, local property tax receipts are used to fund community services. The revenue collected funds amenities such as parks, footpaths, community centres, green spaces, housing repairs, playgrounds and team spaces. In my area in South Dublin County Council, it is primarily used to fund social housing, which everyone in this House agrees we need more of. Before I became a Deputy for Dublin Mid-West, I served as a councillor on South Dublin County Council for almost a decade. I witnessed first-hand how important all these services are and what they mean to people. Our community services have been hugely impacted by the pandemic over the past 18 months. With little income from commercial rates, our local authorities are in desperate need of funding. The LPT is an important funding stream for councils. The democratically-elected councillors have the job of setting the rate, based on the 30% differential variance.
Yesterday, Fine Gael councillors on South Dublin County Council voted to reduce local property tax for residents in Lucan, Clondalkin, Palmerstown, Newcastle, Rathcoole, Saggart and Brittas. Those councillors voted to reduce the local property tax by 15% when the new rate comes in. This past year and a half has given us all a brand-new appreciation for our outdoor spaces, our local facilities and our community centres. Whether through local Tidy Towns initiatives, housing repairs and-or footpaths and tree maintenance, we want to be able to continue improving our community spaces and to uphold those standards. Some people live on estates where substantial management fees are being paid for upkeep and maintenance, and it is only right that these fees should be taken into consideration when it comes to the local property tax bill. I welcome that individual local authorities will, under this new legislation, be able to provide a concession on management fees from their LPT revenue. The council will have the discretion in cases like this to provide rebates on the tax where management fees are paid. I welcome that measure because it is fair and fairness is at the heart of this legislation.
I have tabled two sets of amendments to the Bill that I strongly urge the Minister to consider. The current tax punishes people who cannot afford to pay. At the meeting of the housing committee last week, representatives of the Revenue Commissioners confirmed that 43,000 people deferred their local property tax payments last year because they could not afford to pay them. This means single people with an income of €15,000 or a couple with income of €25,000. This deferral means that every year those people cannot pay, they will pay 4% interest. The rate of interest will be reduced to 3% after this legislation is enacted, but it is still interest on an original fee that these people cannot afford. What happens then is that the debt mounts year-on-year.
Fianna Fáil and Fine Gael talk about this being a progressive wealth tax. That means that people are being penalised for being poor. The lowest income earners in this State will, ultimately, have to pay the most tax because of the interest incurred. It is punishing poverty, which is the answer to everything for Fine Gael and Fianna Fáil. According to ,last year there were 92,712 vacant homes in this State. In Cork alone, there are 8,880 vacant homes lying idle that could be used to house families and individuals in desperate need during this housing crisis. With only three full-time vacant homes officers, VHOs, in the State, this Government has completely failed to tackle the issue of vacant houses.
I am proposing a tax on vacant homes of 15% for any home that has been lying idle for more than 12 months in an area where there is a housing need. The Minister has said that this Bill will help to collect information and data on vacant homes. Information and data are not what people need. They need homes. The Minister should support my vacant house tax levy. It is an insult to ordinary people to see homes lying idle every day. I refer to houses that have been bought by investment funds and cuckoo funds that are driving up the prices of houses and rents. It is about time that we started to tackle the housing crisis. The Government has tried to make life easier for landlords, investment funds, cuckoo funds and vulture funds. It has tried to line the pockets of developers and even giving tax breaks to vulture funds. The only thing that Fianna Fáil and Fine Gael have not yet tried is putting ordinary people and families first. This is what Sinn Féin would do in Government.
I welcome the opportunity to contribute on this legislation. I remember going onto Galway County Council in 2014. The council used to then get something like €12 million from the equalisation fund. The property tax then came in that year, and €14.5 million was collected throughout the county. Galway County Council got its €12 million of that amount, while €2.5 million went back to the Exchequer. The equalisation fund in respect of the €12 million went off to Angela Merkel to pay for the bailing out of the banks. That is what the property tax meant to the people in that county; €12 million in that county was taken from ordinary individuals.
There are things I would never have a problem paying a tax on, but I have a real problem paying a tax on a house. First, people must start off and get a mortgage for their house. I call this, basically, a bedroom tax. Many people are struggling to get a mortgage now. As referred to earlier, fees are a major problem. I have heard some Members refer to differences between the cities and the counties. There are people, especially pensioners, whom we must think of tonight, who may have inherited a house located in a large city, such as Dublin, Galway or wherever. Elderly people in such situations are living on the old age pension. To those people, their house is their home and not a major asset. They are going to hand that house to somebody else, who will pay through the nose and probably not be able to afford it.
When a person is building a house today, fees must go to the council, whether in cities or in rural areas. Large fees are being charged for what are supposed to be community services and footpaths and all these types of things.
In rural areas, the community has to do these things itself. We have no footpaths to stand on and no streetlights to go out in, even though the fees are looked for. Thank God we have local group water schemes or co-ops in rural Ireland, for the simple reason that Irish Water charges a fee of €2,500 to join up to the water system.
Now the Government is talking about bringing in a bigger area in this new legislation. The Minister must remember that in farming areas there are sheds at the backs of houses that people keep their fuel in for the winter. There are sheds for cattle or someone might have built a shed for a car. There is a genuine worry about where we are going with all of this and what the reasoning is.
The Government is talking about climate. I looked today at the pumps. The Government raised the carbon tax and it is intending to raise it on a continual basis. Some people in rural areas do not have the offer of a bus service. At the moment, a litre of diesel costs €1.40 at minimum and is closer to €1.44 or €1.45. Does the Minister realise that? What world are some people living in that they do not realise that diesel has gone from €1.05 or €1.10 up to €1.40? Yes, world market oil prices have gone up but there is also the carbon tax increase. The Minister can say that we are changing things and are doing this, that and the other. That is fine but what bus service do these people have? Bus services have been cut in many rural areas, including the Local Link bus that collected elderly people who might only get out one day a week to go for their pension, do a bit of shopping and meet their friends to help them with rural isolation. Damn ye, but they have stopped that now. There is a route now but some people have to go three miles to get to it. Some of these people live on their own and do not have a car. Some of them do not have anyone to bring them from A to B. Now with the new Local Link service it is one town after another. That is it. It is not like it was with the drivers in the old system, in fairness to them. The madness about this is that there are bigger buses now. Before, we had little 16-seaters or 18-seaters that were able to go up the bóithrín, turn at the gate and help people in rural isolation to go out for a day and enjoy themselves. They might only see one person all week and that was the postman if they got a letter.
I cannot fathom the mentality of what we are doing. Think of those elderly people, be they in the city or the countryside. The value of their house might have gone up but that is not worth a damn to them because they are living in the house. It is not about the house. That is where they live and they are going to hand that on like it was given to them. Their incomes are still modest in many cases. We must bear in mind that the PSO levy has gone up many times, electricity has gone up around 15% and for those in cities gas prices have gone up as well. We talk about being a compassionate society and about looking after our elderly. There are young couples who have mortgages around their necks for €400,000 or €500,000. In the likes of Dublin you would not get too plush of a house for that, going by the prices I have seen. Still, we want to screw more out of those people and a lot of them can ill afford it.
I just cannot understand the mentality behind some of these things. The Minister will say it is for X, Y and Z reasons and that we are going to spend more on roads or something else but why do we keep trying to knock money out of people who do not have it? Why do we keep making their lives tougher? We are charging a property tax when most people who have mortgages and young families are struggling. Middle Ireland is struggling to keep going and we are going to make them struggle more by bringing in more legislation to raise the price of what they have to pay for their house. There seems to be a fierce disconnect between what is going on in this country in reality, especially in rural areas, and what is done in here. I ask the Minister to rethink this whole situation because we are going to leave a lot of people struggling, especially our elderly who have given so much to their country.
I would like clarification on garages, sheds for turf and timber and other sheds out the back, especially in farming areas. In older houses in rural Ireland they have what they used to call cow houses - though people might not know what they were - about 40 yd or 50 yd from the house, where farmers used to go out at night to see if the cow was calving. There are hay barns and the other things as well. That issue must be clarified.
We have to look at the whole system, including planning and the expenses that are incurred. That is for the people in the cities as well because this is not about putting one group against the other. This affects people within cities as well. While the value of a property might go up for speculators and people who are renting out their houses like landlords, for the people who want to live in the house, whether it has one, three or ten bedrooms, that is their house. That is their home and their family. That is where they came from and that is what they intend to hand on. I cannot for the life of me understand why we are going to put those people under more pressure.
I thank the Deputies for the different points made here this evening. I will respond to some of the questions that were asked and charges made about this tax. Speaker after speaker from Sinn Féin stood up and made the point on one hand that this tax should be abolished and then on the other hand argued that the county they represent does not get enough revenue from the tax they want to abolish. It is quite the position to hold to say they want to get rid of a tax and then also say they do not get enough from the tax as it is currently implemented. It is not at all surprising. Sinn Féin claims it wants more homes to be built and local authorities to have more power and get more money, but when there is a tax that is designed to support local authorities and make money available to them, Sinn Féin wants to abolish it.
Many Deputies also expressed their concerns regarding the affordability of this tax. Of course I understand that and appreciate that there are many people paying the local property tax at the moment for whom this is a very difficult bill to pay. It comes in at once.
It is a bill that can cause a lot of concern and there are many whose income does not bear relation to the value of the home they are in.
It is exactly because of all of these concerns that we have made such changes to the local property tax regime. We have widened the bands, we have cut the rate and we have changed the entry bands of the local property tax, particularly conscious of the impact that a change in local property tax valuations can have on homes that have a lower market value. We have put all those changes in place to try to change the local property tax in a way that is as affordable for many as is possible but at the same time, preserves the tax revenue that is coming in that everybody in this House wants to spend. We need to do this because if we want to ensure that local authorities or Government have the ability to deliver more and better public services in the future, we need to have the ability to pay for them.
I heard many Deputies make the charge that the Government is trying to punish people with this tax and they have questioned the mentality that we have behind this tax. I even heard one particularly pathetic comparison between the motivation behind this tax and those who were involved in the foundation of our State. I would have thought that Deputies would be able to understand the case that if a country wants to have a certain level of public services and look after our people in the way we want, particularly our most vulnerable, we need to collect taxes to be able to pay for it. With any tax such as local property tax, making changes to it or amending it is always difficult.
We are at a point where this is a revaluation that has been deferred on three separate occasions. Were the change to be deferred for another occasion, it would mean we would end up with more homes being built that are not paying the local property tax, which means more local authorities would have to provide public services for those homes that are newly built and that we want to see more of built in the future. However, those homes are not paying the local property tax whereas the houses and apartments beside them that were built a number of years ago are. That is an issue we need to change. With the changes that are happening in this local property tax Bill, we will change that to ensure that as a home is built and then purchased, shortly after that it moves into the local property tax valuation net. Again, this is with the objective of raising the money that needs to be collected so that it can be spent in local communities and used to deliver the services this House is in favour of.
One particular theme which came up throughout this debate was the definition of residential property. I want to clarify exactly what is contained in the Bill. The Bill provides for the amendment of the definition of residential property. In particular, it sets out that the part of the adjoining land to be valued with the house where the land exceeds 1 acre will be specified to be that part that is most suitable for occupation with the house. The chargeable value of a residential property for local property tax is based on the following: the house itself; any associated buildings or structures, such as sheds and garages; and any adjoining outdoor areas, such as yards and gardens. However, where the area occupied by the elements other than the house exceeds 1 acre, it is only the area up to 1 acre that must be valued. This applies to all residential properties, irrespective of whether they are located in a rural or urban area. This is the position and amendments to the definition of residential property do not change this treatment. The change in the definition of residential property does not change how such areas or properties are taxed. There is a change where we are changing "area" to "hectare". This is being done to make this definition consistent with other parts of our tax law.
Overall, this is a change that seeks to ensure that the local property tax is placed on a solid footing for years to come by ensuring that as a home is built and purchased it is moved into the local property tax base so that house or apartment can make a contribution to the funding of local services in the future. When these changes are made this tax will be raising €540 million to €560 million, which is much needed revenue, to make a contribution to the public services our citizens need.
Through changing the tax bands, the rate and the entry point into the local property tax structure, we have tried to get the balance right between broadening the tax base and generating a bill that is difficult for many but is as affordable as is possible. If this revaluation was to be deferred for a fourth time, these challenges would only get bigger and it would become even more difficult to get the balance right between affordability for individual apartment and house owners and the need to try to bring in enough revenue to make a contribution to the public services that those who own and rent these homes also deserve and want. For those reasons, I commend this important Bill to Dáil Éireann.