Patrick O'Donovan (Limerick County, Fine Gael) | Oireachtas source

The Minister for Finance initiated a review of the local property tax, LPT, in 2018. The Minister believed it was important the Government was able to make its position clear on LPT in order that households would be aware of plans for the tax well in advance of the November 2019 revaluation date, as well as the associated 2020 and beyond LPT liabilities.

The Minister further considered it was essential that the principle that formed a central part of the terms of reference for the 2015 review of LPT, namely, achieving relative stability in LPT payments of liable persons both over the short and longer terms, would inform the deliberations on this matter. By relative stability in LPT liabilities, the Minister meant that any increases should be modest, affordable and fair.

The review of the LPT has now been completed by the Department of Finance in conjunction with the Departments of the Taoiseach, Public Expenditure and Reform and Housing, Planning and Local Government, as well as with the Revenue Commissioners. The review focused on the impact of house price movements under a series of scenarios involving different rate and tax band structures. However, against a background of significant but geographically uneven increases in residential property price levels, the Minister believes it is necessary to engage in further consultation to identify a scenario which would deliver on the condition he set that there should be relative stability for all taxpayers in their LPT liabilities and that any increases should be modest and affordable.

Having considered the findings of the review report, the Minister has decided to defer the valuation date from 1 November 2019 to 1 November 2020. This should give sufficient time for the Committee on Budgetary Oversight to consider the review report in the context of the committee's recommendations in its report on the LPT of 21 March 2018. Importantly, as a result of the Minister's decision, the LPT bills of those liable for the tax will not be increasing in 2020.

Under the LPT legislation, a deferral option is available in circumstances where the annual gross income of the liable person does not exceed €15,000 for a single person and €25,000 for a couple. Marginal relief applies for owner-occupiers whose income is not more than €10,000 above the income limits to permit deferrals of up to 50% of the LPT liability. The Minister understands from Revenue that, while over 300,000 people fall within the current income thresholds for the LPT deferral, only about 15% of these actually seek a deferral on these grounds.

State contributory and non-contributory pension rates have recently risen by €5 per week. For the majority of persons in receipt of such pensions, their eligibility for LPT deferral will not change as a result of this pension increase. In the small number of cases, where the pension increase brings a person over the LPT deferral threshold, such persons may still qualify for a reduction of up to 50% of their LPT liability.

The LPT review recommended the income thresholds for LPT deferrals be reviewed regularly by reference to movements in the consumer price index, wage growth in the economy and changes in fixed income payments by the State. From the next valuation date, the review recommended the deferral thresholds be increased to €18,000 for a single owner and €30,000 for a couple. This recommendation, along with the other recommendations in the review report, have been referred by the Minister for Finance to the Committee on Budgetary Oversight for its consideration.

The committee's 2018 report on the LPT indicated it was against proceeding with automatic revaluation of properties in 2019, as provided for in current legislation, as this would result in significant increases in LPT liabilities. The committee supported revaluation with an adjustment to rates nationally to maintain LPT yield or revaluation with an adjustment to rates locally to maintain LPT yield. The committee also recommended the cessation of exemptions on new and unused properties on equity grounds and because it would broaden the tax base.

The deferral of revaluation until November 2020 provides time and space for the Committee on Budgetary Oversight to consider the report of the interdepartmental review and to provide its views to the Minister. In his engagement with the committee, the Minister will seek to promote the policy objectives which should underpin any changes to the tax. These comprise protection of the overall yield; modest and affordable increases, if increases occur, in LPT liabilities; integration of new properties into the LPT base; maintenance of the tax base with a small number of exemptions; upholding the progressivity of the tax.

The Minister considers that the reformed LPT needs to be based on a model of band widening combined with rate changes. The Minister supports retention of the option for local authorities to reduce the LPT rate for their areas. The Minister will also engage with the Committee on Budgetary Oversight on the issue of LPT relief for persons in apartment complexes, etc., who are paying management fees.