Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I thank Senator Darragh O'Brien for this series of recommendations.

Recommendation No. 15 seeks to give broad discretion to the Minister on when properties should be revalued for LPT purposes. As the local property tax is a new tax, the Government wishes to provide certainty for homeowners. For this reason, valuation periods of three years were introduced, with the exception of the first valuation period which covers three and a half years. In addition to providing certainty, this also eases the administrative burden on the homeowner in that it is not necessary to have a house revalued each year.

Senators may be aware that with certain exceptions under the LPT legislation where a property is not a relevant residential property on a valuation date, in other words, not liable for LPT, it will not be a relevant resident property until the next valuation date. In the interests of equity for compliant LPT payers, it is important to have regular valuation dates in order that newly built properties are brought into the LPT net. It also provides certainty for those homeowners on when they will become liable for LPT.

In the absence of further valuation dates, new properties built after 1 May 2013 would not be liable for LPT and would not have a valuation for LPT purposes. Should these properties be brought into the scope of LPT using a different valuation date, it would be inequitable to those homeowners that their LPT liabilities would be assessed using a later valuation date when compared to those on the property register.

While the Minister is conscious of the concerns of homeowners in relation to increasing property prices and the affect this will have on their LPT liabilities, particularly in urban areas, the recommendation, in his view, would not be the most appropriate way to address these concerns. The next valuation date is 1 November 2016. In advance of this date, the Minister and his officials will be examining LPT and any impact on LPT liabilities owing to increasing property prices. However, any such consideration at this stage would be premature. For the reasons outlined, the Minister does not propose to accept recommendation No. 15.

Recommendations Nos. 16 and 17 deal with LPT deductions for landlords. Chapter 4 of Part 8 of the Taxes Consolidation Act 1997 provides for the charging to tax under Case V of Schedule D of income arising on rent from property in the State. The income chargeable under Case V in respect of such a property is computed by making the deductions for expenditure authorised by section 97(2) of the Taxes Consolidation Act from the gross rent. These deductions include, for example, expenditure on rates, maintenance, repairs and interest on a loan used to purchase, improve or repair the rental property. Recommendation No. 16 seeks to add to these allowable deductions by proposing a new deduction for local property tax paid on rental property. Senators are probably aware that the Thornhill group have suggested there seems to be an argument for allowing at least a portion of LPT paid on a rental property to be deductible for tax purposes, in the same way as commercial rates are so deductible. However, having regard to the pressures on the public finances and the need to bridge the gap between expenditure and revenue, the report also suggested consideration be given to the phasing in of deductibility over a period of years. This approach was accepted in principle by the Government.

As stated by the Minister in his 2015 Budget Statement 2015, both the taxation and expenditure sides of the budget are designed to support and broaden the economic recovery that the country is experiencing. As such, available resources have been carefully targeted at initiatives that will build consumer confidence, support jobs and strengthen demand in the domestic economy. In this context, the Minister considers that this is not an opportune time for him to introduce a deduction for local property tax paid on rental property.

Recommendation No. 17 would require the Minister to issue report within six months of the enactment of this legislation detailing how and when he would introduce a deduction for local property tax paid for the purpose of computing taxable rental income. The question of when such a deduction should to be introduced and the extent of any such deduction would be best considered as part of the budgetary and Finance Bill process rather than through the issuance of a report on the matter in the manner suggested in the recommendation. On this basis, the Minister cannot accept the recommendations. However, the principle of deductibility based on the Thornhill group report is accepted by the Government.

Recommendations Nos. 18 and 19 deal with LPT relief in respect of management fees. The introduction of a local property tax is part of a broader approach to the taxation of property. The aim is to replace some of the revenue from transaction based taxes which have proved to be an unstable source of Government revenue with an annual recurring property tax which international experience has shown to be a stable source of funding. The Government decided that LPT should be centred on the principles of equity, transparency and simplicity and that a universal liability should apply to all owners of residential property, with a limited number of exemptions. Limiting the exemptions available allows the rate to be kept at a minimum for those liable persons who do not qualify for an exemption. Properties in managed estates to which such fees apply would have been purchased by the owners in the knowledge that they would be taking on the commitment to partake in and fund the management of the estate and that it was the intention that many such estates would not be taken in charge by local authorities, nor, in many cases, would it be appropriate for the local authorities to do so. Management fees in these estates provide for refuse collection, the maintenance of common areas and a sinking fund for certain repairs to buildings, depending on circumstances. It is fair to say many of these costs are borne by homeowners and other households. It is important to make the distinction that many of the services covered by management fees are ones for which people not paying management fees also have to pay. I accept that is not the case in respect of all services, but it is in some of them.

Revenue from the local property tax accrues to local authorities and supports the provision of local services. Local authorities provide a broad range of services in the public realm which benefit the wider community. The proper functioning of these services is important for the well-being of every community and household. I accept that the Senator has acknowledged that local property taxes stretch further than estates and cover fire and emergency services, road maintenance, cleaning, street lighting, spatial and development planning and other similar services, regulatory and inspection functions, business support services, libraries, parks, recreational and cultural and public amenities. The benefits of these services obviously accrue to all members of society.

Recommendation No. 19 would require the Minister to issue a report within six months of the enactment of this legislation detailing how and when he would introduce a provision whereby liable persons who are obliged to pay an annual management fee to a management company in respect of private housing or apartment complexes would be eligible to deduct part of the cost of such management fees from their local annual property tax. For the reasons outlined, I cannot accept the recommendation.

Senator Aideen Hayden referred to the DKM study. She may have been referring to its work as part of the PRTB's recently published study of rent stability. This is an issue on which Government is actively working. I will ensure somebody reverts to the Senator on these matters.