Friday, 16 July 2021
Finance (Local Property Tax) (Amendment) Bill 2021: Committee and Remaining Stages
Paschal Donohoe (Dublin Central, Fine Gael)
I thank the Senators for their contributions. I will take a step back to look at what we are doing with local property tax. The evidence from other countries that have had property tax regimes in place for much longer than we have is that the difficult moment for those regimes happen at two points in time. The first one is when the local property tax is implemented for the first time and the second one is when the first revaluation happens. In many countries it is done on the basis of self-assessment. If a local property tax regime can cross the hurdle of being implemented comprehensively and get the support of all taxpayers, it then needs to cross the next hurdle of the first revaluation taking place. They are the most significant moments in the cycle of the local property tax regime.
I hope that when this revaluation occurs, we will get beyond that and we can look at the role of the tax in three years' time when we are having this debate again. At that point the issue Senator Ward raised regarding the application of the LAF could be considered. The reason I did not do it now is that while we have done extensive modelling on what this new structure will mean from a revenue point of view, in truth we need to see what will happen once we implement it. After the revaluation has occurred, we will have a far better idea of the stability of revenue.
Because of my concern about maintaining the yield and increasing it a bit by introducing new taxes, I felt now was not the right time to broaden the discretion and breadth of the LAF variation in the way the Senator suggested. However, once the first revaluation has occurred, the discretion that local authorities have and the choices they make should be definitely considered. The Senator has raised an important principle. However, because the first revaluation is so important, we need to get that done first.
Senator Higgins spoke about the progressivity of the tax. If the value of someone's home has increased in line with the national average of approximately 75% since 2013, there is every possibility that their local property tax bill will be unchanged or it will change a little bit in either direction. If the value of someone's home has increased by less than 75% in recent years, he or she may get an LPT bill decrease. People whose homes have increased in value by more than 75% are likely to face an increased LPT bill. We have looked to manage the affordability of the increase for some by widening the bands and cutting the rates. For the minority of the homes, the value of which has increased by more than 75%, we are doing what we can to ensure their increased bill will be affordable.
Those principles apply to homes of all values. For homes that are at different values - the more expensive homes or homes that would have a lower valuation - those principles still apply. That is a consequence of having so many homes, the valuation of which have all changed in different ways.
Senator Higgins spoke about the reality of progressivity and the need for progressivity to be perceived. That is why we have introduced an extra rate of 0.3% for homes above a certain value of €1.75 million. It is in an effort to maintain progressivity and the reality of progressivity. However, that progressivity does not peter out at that point.The way the liability is calculated, then, is for that part of the value which exceeds €1.75 million. The tax is applied for that portion of the value of a home which goes above €1.75 million. My contention is that we are seeking to maintain the principle of progressivity, but I also note that it will apply to all homes, regardless of value.
Turning to the point made by Senator Ward regarding additional discretion for local authorities, I believe we will return to that point. It will be valuable though for us to get this first revaluation done. It will no doubt bring up all kinds of challenges when we undertake it, and it will begin in November. We will then be at a point where the base of homes taxed as part of the local property tax increases every year. We do not have that mechanism now and it creates real issues of equity. It is important that we make progress in that respect and this is the thinking behind this section of the Bill. I thank Senators for their contributions.