Seanad debates

Friday, 16 July 2021

Finance (Local Property Tax) (Amendment) Bill 2021: Second Stage

 

9:30 am

Photo of Seán KyneSeán Kyne (Fine Gael)

The Minister of State is welcome to the House. It was acknowledged during the financial crisis that the broadening of the tax base was important. At the time, it was one of the recommendations of the International Money Fund, IMF. The household charge and the LPT brought in a system of guaranteed income from households across the country. There were anomalies that became evident as time went on, including the fact that newer properties were not brought into the net post 2013. It was unfair on those that were paying that others were left out.

On the postponement of reviews, there was a concern as property values rose that people would end up paying more. The postponement of reviews and of leaving things the same meant that was not an issue up until this. The proposals will allow for changes to the methodology on the bands and the rates, which also is welcome. Any tax should be fair, equitable and kept under review. Anomalies should be closed. The impact of the tax should be assessed. Exemptions should be considered again where issues of fairness arise. I welcome that all moneys collected locally will be retained within the county. That is important, particularly for high-population and wealthier counties. However, the impact of equalisation also needs to be considered and the State must provide the funding needed for counties with lower populations. Such counties still have a large number of services that need to be provided and if they generate a lower level of LPT, that creates a shortfall within that local authority. That also has to be kept under review.

I welcome the fact that there will be more discretion for councillors to change the LPT rate. However, I always wondered why Ministers stand up here or in the Dáil Chamber in the month of October to present a budget. Local authorities get their allocations from the Department at the end of November and local authorities set their next-year budget in early December. However, it is at this time of year, months in advance of all that, when councillors must decide whether they will increase or reduce the LPT. I always found that strange and not best practice. I understand that this is to allow Revenue to set and generate the bills. However, there should be a process whereby councillors can make their decisions at the same time as the Budget Statement. They would then know what allocation they would get, not what they think they are going to get. Decisions would not be based on looking at what they got for the past few years, setting out what they expect they will get and then, based on that, deciding what is the budget. This will come up again in September and councillors will have to make those decisions. It is difficult and there should be a different system in place.

Local authority funding has been problematic in certain counties and, one could argue, in all counties. There is no county that is separate. I had meetings with officials in the Department of Housing, Local Government and Heritage as far back as 2016 about anomalies in Galway County Council funding. At that stage I was told that while they understood and accepted there were issues in Galway, nothing could be done until such time as the LPT review happened. First, that review will bring in the new houses that have not been billed before this. In addition, it will allow for whatever other changes will take place. On that basis, I am glad that the review is taking place. It will allow for additional funding to come to the local authority by collecting revenues from those who were not previously billed. However, it still raises the question of funding for local authorities. The LPT is not to be the full funding for local authorities except in those larger, richer and more well-off local authorities. The rates base is an area that needs to be modernised, as well as rates on businesses being charged on a per square foot basis and so on. There is a whole question in relation to funding for local authorities that needs to be looked at.

I welcome the changes proposed in this Bill. They are overdue and make it fairer and more equitable. We often hear certain people ask what do people get from their LPT and of course, the LPT balances the books of the local authority. The local authority provides an array of services. Not everybody will have a footpath or a street light outside his or her house but local authorities have an array of services. These include keeping the potholes filled, the hedges trimmed back and drainage works done, as well as community wardens and all else that is funded through the local authorities. It is important that they have a sustainable base from both LPT and rates and of course for central government to be able to come in to make up that shortfall. There needs to be a fair and equitable model for the funding of local authorities, which we do not have at the moment. Officials admitted to me that they do not know how the model was arrived at nearly 30 years go or whenever it was. There have been many changes since then, including the establishment of Irish Water and other initiatives. There are many different parameters that determine how and why Galway County Council, for example, gets a certain allocation from a Department. The officials I spoke to cannot fully explain how that allocation is arrived at, other than that they will give a proportionate allocation based on the previous year's allocation. It is difficult to say how the model was devised in the first place and whether it may have been wrong from the start. It is very hard to justify why Galway County Council, Meath County Council or any other local authority would get less than it might need to run its services. Galway, for instance, is way down the pecking order in comparison with counties of a similar size like Mayo, Kerry, Tipperary and Donegal. It is way down the scale in terms of the number of staff working in the local authority and the funding per head of population. We have an array of issues, including coastal protection and offshore islands, that add to the requirements for funding, but they are not entirely accounted for in the allocation we receive.

I welcome the Bill as a first step towards correcting the issues local authorities are facing. The larger issue of funding, including the model, type and level of funding, will not be sorted by these provisions, but they are a positive step in the right direction. There will be additional funding arising out of the legislation for local authorities and the Exchequer and, most importantly, it will allow for additional and improved services and, in some cases, the continuation of basic services.

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