Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Senator Barrett seeks to amend the definition of chargeable value of residential property to the price the unencumbered fee simple of the property might reasonably fetch on a sale in a distortion-free open market were the property to be sold on a particular date. The Thornhill group recommended that market value of residential properties should be the basis for the assessment for the tax. Full market value is a tried and tested basis of assessment that is internationally accepted. This is underlined by the fact that it is so widely used internationally and, by implication, is readily understood by taxpayers all over the world. At any point in time, most homeowners will have a reasonable sense of the market value of the home in which they live by reference to recent sales and to officially and privately published data on house price movements. One would expect distortions, to which Senator Barrett referred, tended towards increasing the market value of a house or the price paid for it would be reflected in the self-assessment by the property owner and, consequently, a higher property tax payment.

Where there is a doubt in individual cases, estimates can be obtained from professional auctioneers or valuers. The initial valuation of property to be self-assessed by liable persons as of 1 May 2013 will be valid up to and including 2016. This will provide certainty for taxpayers. Revenue will provide guidance on how to value a property early next year. It will engage in a comprehensive information campaign, including writing to residential property owners in March 2013 enclosing a detailed explanatory booklet on the operation of local property tax, valuation procedures and the payment methods, as well as a return form for completion. Where taxpayers follow Revenue's guidance honestly, Revenue will accept their property value assessment. The register of residential property sales published by the Property Services Regulatory Authority will be of assistance in valuing property.

I am aware of the current difficulties in the residential property market.

I have attempted to bring some stimulus to the market by way of limited exemptions from the property tax for purchasers of new and previously unused properties purchased between 1 January 2013 and the end of 2016. Such properties will be exempt until the end of 2016. There is a further exemption in respect of second-hand properties purchased by first-time buyers between 1 January 2013 and 31 December 2013, which will also be exempt until the end of 2016.

It is quite legitimate for the Government to intervene in the property market in order to achieve policy ends. Mortgage interest relief and interest relief for landlords both distort the property market to some extent. Other policy measures such as varying stamp duty rates in order to cool or stimulate the market or the current capital gains tax relief for properties bought from December 2011 to December 2013 also distort the market. The property market in Ireland was considerably distorted in the past by oversupply of financing to certain sectors. This probably created a far greater distortion than any measures undertaken by the Government or the National Asset Management Agency. This form of distortion is not catered for in Senator Barrett's amendment. For example, it is not clear how precisely the distortion-free market value to which it refers will be arrived at. This will make it impossible to determine with certainty what will be the assessable value of the property for tax purposes. The latter would undermine a core principle of taxation, namely, that what someone is being taxed on and what is his or her liability should be certain and clear. I am not, therefore, disposed to accept the amendments.

On the questions that were posed by Senators, according to the Revenue some 90% of houses in the country are valued at ¤300,000 or less. The bulk of property tax will, therefore, be paid in respect of amounts from ¤300,000 down. If we introduce bands of ¤50,000, then most people will have a fair shot at placing an X beside the band which applies to them. We are not asking someone to indicate that his or her house is worth ¤176,000, we are asking him or her to estimate whether it is valued at between ¤150,000 and ¤200,000. The latter is a much easier question to answer and most people will have a reasonable shot at it. If anyone is in doubt, he or she can have an auctioneer value the property and obtain from him or her a letter which can be included with the return. The Revenue will provide extensive information with regard to the value of houses in particular localities. It has been accumulating an amount of information in this regard since late spring, when it was first asked to take on the task of collecting the property tax.

It is much more reasonable to introduce a property tax at the bottom of the market rather than at the top. If the property tax had been introduced in 2007, what has happened to property values in the interim would have ensured that a major imposition was placed on householders. At least we are building from the bottom up at this point. The market has stabilised, certainly in Dublin where values have risen marginally for three of the past four months. Money is available again and Bank of Ireland in particular is providing quite a number of mortgages and AIB is following it into the market. Some new overseas banks are also operating in the Dublin market. This sector of the economy was damaged but it is being repaired on a progressive basis. I do not believe there is a major difficulty in the context of people having a view on what their homes are worth. If one lives in a housing estate, it will probably be easier to value one's home. If someone low balls in respect of the value of his or her home and states that it is worth ¤50,000, while his or her neighbours value theirs at ¤250,000, this will stick out a mile in the returns when Revenue is carrying out its review. That person might be required to explain why his or her house was of such a uniquely low value. I accept that here might be a reason for this but an explanation will have to be provided.

The difficulty with regard to valuations will arise in respect of one-off houses. Many such houses are unique in nature and there can be a variation in value between two houses located next to each other, despite the fact that the square footage, etc., of both might be similar. I trust the Revenue to come to terms with this matter. The first step from its point of view is to get people to self-assess the value of their homes in order that it can get the register up and running. The Revenue can iron out the distortions as time goes by. Anyone who, in the opinion of the Revenue Commissioners, completes his or her form honestly will not be chased for penalties or anything of that nature. He or she may be written to if it appears that the value submitted is excessively low. However, such an individual will not have penalty clauses or anything of that nature invoked against him or her.

I would like the property market to rise again. I hope it will do so. Regardless of whether it does, there will be no revaluation until November 2016. That is the reason for the apparent competition between the sections to which Senator Walsh drew attention. What we are saying is that if someone values his or her house and if he or she sells it six months later - even at a higher price - the valuation for property tax which has been accepted by the Revenue will apply until the general revaluation date. That is an acceptable way to approach this matter. We want to keep it simple, ensure certainty and have the tax collected. In addition, we want it to contribute to the taxation base. Income taxes are at a high level and we do not want to drive them up further. The latter are taxes on work. If one were to identify all of the problems we face, the one that is most in need of remediation is the high level of unemployment which obtains. When the price of something goes up, one tends to get less of it. That also applies to work. If one taxes work, one will get less of it. As soon as we have the resources available to us, it would be our policy to reduce rather than increase personal taxes. When this happens, we want to broaden the base and introduced other taxes similar to that under discussion.

The property tax places a low enough imposition on people. When one considers the various tables, etc., one will come to the conclusion that, particularly in view of the deferrals which will be in place, it will not be penal in respect of anyone. There are always cases where an inability to pay applies. However, the deferral system should cater for these.