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

I thank the Senators. I have an extensive speaking note which I will read but Senator Ó Domhnaill made a point about the grants from local authorities with which we would all be familiar where some elderly person can no longer take the stairs because of a particular ailment and a bedroom with a shower and toilet is built downstairs aided by grants. The likelihood is that will not drive them into the next band. It should be remembered that the value is not on a precise figure. It is in the ¤50,000 band and the kind of extension the Senator is talking about would probably leave people in the same band if they did that kind of work. However, if an extensive costly extension was built on to a house in other circumstances that might take them up into the next band and that would be picked up in the next valuation date.

I will read the speaking note because it contains a lot of information. The amendment covers a number of issues - mortgage arrears, stamp duty, negative equity on houses adapted for disabled persons. Section 2 of the Finance (Local Property Tax) Bill defines the chargeable value of residential property. On mortgage arrears the Senators are seeking to amend the section to ensure that the value of any outstanding liabilities in regard to a mortgage on a relevant residential property is deducted from the market value of the property before calculating the tax liability.

The Government agreed with the recommendations of the interdepartmental expert group on the design of the property tax, known as the Thornhill group, in its consideration that as a tax, the local property tax should be centred on the principles of equity, transparency and simplicity. In terms of these principles, it was also considered that a universal liability should apply to all owners of residential property, with a limited number of exemptions.

In making its recommendations for deferrals the group had regard to the following criteria: ability to pay - reliefs create costs which have to be paid for either by taxpayers who do not benefit from the relief or by a reduction in public expenditure; reliefs should be designed to address clear economic and social policy needs; care needs to be taken in designing reliefs to ensure they are targeted based on need and are not unintended and inequitable distribution gains.

The local property tax is intended to be a tax on the benefits from ownership of a residential property. Such residential properties have monetary and non-monetary values which are independent of incomes, and the local property tax is not assessed on incomes. The system of deferrals outlined in the Finance (Local Property Tax) Bill 2012 is more targeted in cases of need than a relief for outstanding mortgages and does have reference to income stressed homeowners, allowing enhanced deferrals where there is low income and liability to mortgage interest. An outstanding mortgage on a property does not mean that there is necessarily an inability to pay. Where there is inability to pay, relief is available in the form of a deferral. Mortgage interest relief is also available to many homeowners on interest up to ¤20,000 per annum. Individuals who bought properties since 2004 can continue to claim mortgage interest relief until 2017.

The Thornhill Group recommended against providing for reliefs specifically related to stamp duty paid. In making its suggestions for deferrals, the group had regard to ability to pay - reliefs create costs which have to be paid for by other taxpayers. This is more or less a repeat of what I have said already. The group recommended against allowances for stamp duty because it would not be targeted at need. The tax structure was known to house purchasers and so on. While some individuals have a significant stamp duty liability they may also be in a position to claim mortgage interest relief. We are dealing with the deferral situation there.

The Government also decided against using negative equity as a ground for deferral or waiver of the property tax. Instead, the deferral system was recommended by the Thornhill report and is modified in the Bill before the House and it focuses on the ability to pay the tax and is based on the income of the liable person. The fact that a house may be worth less than when it was bought does not necessarily mean that the owner cannot pay the tax.

The Government is conscious of the difficulty some homeowners are experiencing in meeting their mortgage obligations. The main focus of attention is on those mortgage holders who are experiencing genuine difficulty in meeting the commitments in respect of their home. It is to those that the large deferrals based on mortgage interest payments are directed.

The Senators are also seeking to amend the section to ensure that the valuation would be net of the value of any adaptation made to residential property to meet the needs of a person with a physical, sensory or intellectual disability or mental health difficulty. I have dealt with that.

In an effort to keep the rate of the tax low and to ensure horizontal equity, that is, as between taxpayers, the Government decided to minimise the number of exemptions to the tax and to limit deferral arrangements to cases where there is a real and material inability to pay. The initial valuation of the property to be assessed as on 1 May 2013 will be valid up to and including November 2016, and valuations will be valid for three-year periods thereafter.

Senator Walsh made some comments about equity. It comes down to one's concept of fairness. Sometimes an argument on fairness is made which seems to suggest that there is a small group of very wealthy people and if we tax them enough, nobody else would have to pay anything. That is one well-recited measure of fairness but the concept of fairness for those of us who know their constituencies on a door-to-door basis, like many of the Senators here, and for most people is that everybody should pay something in accordance with their ability to pay. That is the fairness.

If we consider situations in large housing estates where 80% or 85% of social houses have been bought out and are owner occupied under the rental purchase schemes but 15% are tenants, it is only fair that the tenants in similar houses should not make some contribution, no matter how small, when everybody else in the same street who bought out their house is making a contribution. The same applies, and accentuates the sense of unfairness, where local authorities, as a matter of housing policy, and it is a housing policy with which I agree, go into a private housing estate, buy a house and put somebody in it as a tenant. It is not fair that that family should not pay something as well when everyone along the road who bought their houses and are paying heavy mortgages are paying also. If the Senator thinks of fairness in terms of everybody making some contribution, no matter how small, to the situation in which we find ourselves he will get a better idea of where I am coming from in the Bill.