Tuesday, 6 December 2011
Local Government (Household Charge) Bill 2011: Second Stage
I am pleased to open the debate in this House on the Local Government (Household Charge) Bill 2011.
The EU-IMF programme of financial support for Ireland commits the Government to the introduction of a property tax for 2012. The programme reflects the need, in the context of the State's overall financial position, to put the funding of locally delivered services on a sound financial footing, improve accountability and better align the cost of providing services with the demand for such services.
In light of the complex issues involved, a property tax, requiring a comprehensive property valuation system, would take time to introduce and, accordingly, to meet the requirements in the EU-IMF programme, the Government decided to introduce a household charge in 2012. The household charge is an interim measure and proposals for a full property tax will be a matter for consideration by the Government in due course.
The charge will be set at €100 and will apply to the majority of owners of residential property in the country on a point in time basis. It is expected to raise some €160 million, on full collection, and the revenues from the charge will support the provision of the vital services provided by local authorities. Internationally, local services are administered by local authorities and financed by local service charges. In Ireland, local authorities are responsible for, among other services, fire and emergency services, maintenance and cleaning of streets, street lighting, planning and development services, public parks, libraries, open spaces and leisure facilities.
The household charge will be administered on a self-assessment basis and is to a significant extent based on the arrangements applying to the €200 charge on non-principal private residences introduced under the Local Government (Charges) Act 2009. As such, it will be a matter for owners of houses concerned to register and pay the charge. It is intended that the liability date will be 1 January with payment due at the end of March. The Department of the Environment, Community and Local Government and local authorities will undertake a national information campaign to advise people of their responsibilities in relation to payment of the household charge and I am confident that all residential properties owners in the State will be fully aware of their liability or otherwise to the charge.
The liability date is the date upon which persons will have to assess whether, as an owner of a residential property, they are liable to pay the household charge.
The actual payment of the household charge can be made from this liability date up to and including 31 March 2012. Persons will have a full three months from the liability date to pay the household charge. Late payment fees and late payment interest will only apply if the household charge is not paid in respect of a liable property by or on the due date of 31 March, or if persons do not apply for payment by instalments. These are similar provisions to those that apply under Revenue legislation in respect of the late filing and payment of certain taxes and will act as an incentive to pay the self-assessment household charge on time. In addition, any household charges, late payment fees and late payment penalties will remain as a charge against the property concerned.
The Government recognises that the charge represents an additional cost for all homeowners and it is proposed to facilitate homeowners by allowing it to be paid in four equal instalments of €25, if the householder so wishes. My colleague, the Minister for the Environment, Community and Local Government, Deputy Phil Hogan, will set out in regulations the dates on which each instalment will fall due and the arrangements for the payment of the instalments.
While it is intended that the charge will apply to the majority of residential property in the State, the Government proposes that a small number of exemptions to the household charge will apply. The proposed exemptions are as follows: properties that are part of the trading stock of a business and have not been sold, occupied or been the source of any income since their construction; properties vested in local authorities or voluntary and co-operative housing bodies for social housing, as making such properties liable would lead to a circular flow of income and be unnecessarily bureaucratic; properties owned by a Government Department or the HSE and used or let in the performance of their functions, as, again, making such properties liable would lead to unnecessary circular administrative structures; properties to which commercial rates apply - as with the non-principal private residence, it is intended that this charge would operate as an alternative to commercial rates, that is, a property will be liable for either commercial rates or the household charge, if it is domestic property, but not both; where a person is forced to vacate a property because of long-term mental or physical infirmity - this exemption was included in the Local Government (Charges) Act 2009 as a compassionate measure intended to provide for elderly people who have no choice but to move out of their sole or main residence into a residential nursing home; and where a charity owns a property.
In addition to these exemptions, two important waivers will apply to the charge. The programme for Government commits to giving consideration in the context of introducing a property tax to the impact that such a tax would have on the number of households in mortgage distress. The Government therefore proposes to exclude from the household charge households in receipt of mortgage interest supplement from the Department of Social Protection. Mortgage interest supplement provides short-term support to help eligible households pay mortgage interest payments and has, as a condition of eligibility, that the household could afford the mortgage repayments when the mortgage commenced. In excess of 18,000 households will benefit from this waiver.
The Government also intends providing a waiver for households in certain categories of unfinished housing estates. The report of the advisory group on unfinished estates identified two categories of households in particular difficulty: category 3 estates - some 1,112 estates - where a developer is in place but there is no onsite activity and where there are significant planning, building control compliance and public safety issues to be addressed; and category 4 estates - some 188 estates - where the developer or site owner is effectively not contactable and-or where no receiver has been appointed and serious public safety problems similar to category 3 exist. Again, the Minister, Deputy Hogan, will set out the list of the estates to which the waiver will apply in regulations. The Minister will be informed by local authority returns to his Department from the 2011 national survey of unfinished housing estates. This waiver will benefit residents of such estates as they work with other stakeholders in developing resolutions for these problematic developments. The costs of introducing this waiver will abate over time as more estates are resolved through the site resolution process and property owners become liable for the charge. The exact number of households to benefit from this waiver will be known when the Minister signs the necessary regulations into law.
Similar to the €200 charge on non-principal private residences, an online system is being developed by the Local Government Management Agency, LGMA, to enable homeowners pay the household charge by credit card or debit card. In addition, homeowners will be able to make payments by cheque, postal order and so on through the post to the LGMA. A bureau will be put in place in the LGMA to administer the charge on a shared service-agency basis for all local authorities.
It is recognised that the existing revenue base of local authorities is narrow by international standards. This was a consideration in the introduction of the €200 charge on non-principal private residences, NPPR, in 2009. While the NPPR charge represents a dedicated source of funding for local authorities which is relatively stable, it does not go far enough in addressing the imbalance in the sector's financing. A proper broadening of the revenue base for local government will come about as a result of the introduction of the household charge in 2012 and the subsequent property tax in due course. This measure is significant because it recognises that local authorities should not be disproportionately dependent on central government funding.
The proceeds of the household charge will be paid directly into the local government fund. The Minister for the Environment, Community and Local Government will disburse moneys back to local authorities in general purpose grants. It is considered that this approach is preferable to allowing local authorities directly retain all moneys collected from the household charge in their areas, as it will make it possible for the Minister to introduce equalisation into distribution, thus ensuring that those local authorities with lower populations than others do not suffer unduly as a result.
We all now know too well that our economy, especially our tax revenue, was overly reliant on activity in the construction sector. The decline in the yield from transaction taxes, such as stamp duty, capital gains tax and VAT on property generally, has been a major factor in the imbalance in the public finances. The correction is sharp and difficult and, unfortunately, more needs to be done. The introduction of the €100 household charge on residential property is one of the measures that needs to be taken, reflecting the EU-IMF programme of financial support for Ireland, to close the gap between expenditure and revenue. However, it should be seen as more than simply a measure to raise revenue. It is a structural change to Ireland's revenue raising systems, providing an alternative revenue stream that will not be subject to the volatility associated with the transaction-based property taxes to which I have referred. As the household charge will accrue to the local government system, Exchequer support of the local government fund is also being ended.
The Bill is a relatively short and straightforward legislative measure. Essentially, owners of liable residential property will be required to pay to the LGMA an annual charge of €100. Given the relatively modest level at which the charge is set, I consider it important to minimise the costs associated with its collection. Accordingly, county and city councils will delegate their functions in administering the charge to the LGMA, which will collect the charge on a shared services-agency basis. The LGMA will be paid the costs of administering the charge from the proceeds of the household charge.
Liability arises each year on a point in time basis. Ownership of a relevant residential property on a specified day, known in the Bill as the liability date, gives rise to the requirement to pay the charge. It is intended to designate 1 January as the liability date for 2012 and subsequent years. This liability date was chosen due to its fit with the overall annual financial cycle of local authorities and will allow moneys collected to be expended by authorities in the year collected. It also provides clarity as to ownership on the liability date as there are likely to be very few, if any, property transactions on New Year's Day.
The charge is a self-assessment measure because it is for the owners of residential property, in the first instance, to assess whether they are liable to pay the charge. As the household charge is a self-assessment charge, the LGMA will not issue bills or invoices to those persons who own property liable for the charge.
Nonetheless, the charge is a relatively simple and straightforward measure and is easy to understand. The Department, the LGMA and local authorities will undertake a national information campaign to advise people of their responsibilities regarding payment of the household charge. In addition to the normal sanctions involving a fine on conviction of an offence, the Bill incorporates late payment fee and late payment interest provisions, which should act as a real incentive to pay the household charge when it falls due.
From a drafting perspective, the Bill starts from a position where all residential property is liable for the household charge. It goes on to exempt certain buildings and owners from this liability. In other words, it identifies what is not liable within the totality of residential buildings, rather than taking as a starting point buildings and owners that are liable. Section 2 provides that these include properties owned by a Minister, the HSE or which are vested in local authorities or voluntary and co-operative housing bodies for social housing. Other exemptions to the charge are provided for in section 4, including properties owned by charities and certain discretionary trusts and where a person has to leave their home due to long-term mental or physical infirmity. Waivers are provided for persons in receipt of mortgage interest supplement or residing in certain unfinished housing estates on the liability date. The household charge will apply to immovable property and, therefore, mobile homes and vessels are exempted.
The Bill provides that the charge shall be paid to the county and city councils under section 3, who will delegate their collection functions to the LGMA under section 13. The estimated annual yield, if collected in full, is €160 million. Like any new taxation measure, however, knowledge of the yield will only come with experience of its operation. In the event of non-payment of a household charge for which a person is liable by a certain date, section 7 sets out that late payment fees and late payment interest of 10% per month or part thereof will apply thereafter. The late payment fee to apply in the case of a household charge paid not later than six months after the due date is 10% of the amount outstanding; 20% of the amount outstanding if not paid later than six months and not later than 12 months after the due date; or 30% of the amount outstanding if not paid later than 12 months after the due date. These penalty provisions are proportionate to the level of the household charge and are similar to the provisions that apply under Revenue legislation in respect of the late filing and payment of certain taxes. They will act as an incentive to pay the self-assessment household charge on time. The rolled-up late payment fee should not be underestimated and non-payment of a charge for two years will result in a liability of €280 when account is taken both of the charges, the late payment fees and late payment interest.
I want the message to go out clearly to those liable to pay this necessary charge that it will be simpler and considerably less expensive to pay the charge when it falls due or in instalments, as provided for, than to attempt to evade it. Local authorities will also have power to take prosecutions against owners who fail to discharge their liability to pay the charge. Prosecution will be by way of summary proceedings and a court may impose a class C fine under section 5(4) of the Fines Act 2010 of between €1,000 and €2,500. Where a property liable for the charge is being sold, the Bill provides under section 10(3) that the vendor will be required to discharge all outstanding household charges, late payment fess and late payment interest on or before the date of transfer. This should prove a strong incentive for a purchaser's solicitor to ensure that all outstanding charges are paid before a contract to sell the property is executed.
Under section 14 provision is made for data exchange between local authorities and the Private Residential Tenancies Board, PRTB, the Electricity Supply Board, ESB, and the Revenue Commissioners. This data should assist local authorities to identify properties liable for the charge. The PRTB holds data on rental properties and the ESB's systems can generate data on residential properties where electricity is used. The Revenue Commissioners hold data on certain property transactions such as stamp duty, VAT and capital gains taxes.
Payment will be accepted on behalf of any local authority through a website, which has been designed and constructed by the Local Government Computer Services Board and which is broadly similar to the NPPR charge system. The revenue accruing will be relayed automatically and at intervals to the bank account of the local government fund. Payment will not be accepted in local authority offices. Although payment can be made through the postal system to a bureau to be established in the LGMA, I ask everyone who can do so to use the website for his or her own convenience. This will minimise costs associated with the administration and collection of the charge and ensure that the maximum amount of the revenue generated will go towards the provision of vital local services in our communities.
In addition, other amendments and insertions are being made to the Local Government (Charges) Act 2009 in respect of the definitions and other provisions contained in this Bill in order to mirror in the Act the provisions contained in the Bill. The 2009 Act exempts properties leased to a local authority under the rental accommodation scheme, RAS. The RAS exemption was included in order to encourage take-up of the then relatively new scheme. As the scheme has been in existence for a number of years, an incentive is no longer required. Similar long-term leasing arrangements with private property owners are now being entered into in respect of meeting social housing needs. As leases under RAS, now a mainstream social housing option, are subject to the same legal framework applying to private leases under the Residential Tenancies Act 2004, it is not justifiable that a landlord group should continue to receive added incentives from inclusion of their properties in social housing arrangements. The Government has agreed that the charge will apply to properties in this group and that, furthermore, the opportunity will be taken to amend the Local Government (Charges) Act to remove the NPPR exemption with effect from 2012. The exemption for properties leased to the HSE is linked to this and it will fall to be treated in the same way as RAS.
It is also intended to take this opportunity to amend the Local Government (Charges) Act 2009 to provide for a €10 charge on over-the-counter transactions in respect of the NPPR. Initial take-up of the online payment option was encouraging, with 85% of users choosing to pay online in October 2009. By December 2010, this figure had fallen to 59%. It appeared that the early payers were more likely to use the online option, while those that had left it late preferred to pay over the counter. Anecdotal reports suggest that most of these over-the-counter payments are made in cash. Such payments are resource heavy for local authorities and this should be reflected in an additional charge if somebody chooses to use an administratively expensive payment option when others are available. A €10 transaction charge was also recommended by the local government efficiency review group to apply to all payments other than those made electronically but, at this stage, it is only proposed to apply the additional administrative charge to over-the-counter payments for the NPPR. Given that some people may still not have access to electronic means of payment and the fact that broadband is not universally available, an electronic option may not be a realistic alternative to a postal payment for many people, particularly the elderly in rural areas. It is, thus, not proposed to apply the charge to postal applications.
Senators will be aware of the significant role which the local government fund has played in the financing of local government since it was established in 1999. The fund has been financed from a combination of an Exchequer contribution and the full proceeds of motor taxation up to and including 2011. Total funding for 2011 amounts to €1.16 billion. The 2011 fund comprises an Exchequer contribution of €164 million and the proceeds of motor tax, which is projected at €998 million this year. Local authorities were allocated general purpose grants of €790 million in 2011, which represents approximately 29% of local authority current funding. Some €398 million was provided to the Minister for Transport, Tourism and Sport from the fund for the provision of roads and public transport infrastructure. As announced yesterday by my colleague, the Minister for Public Expenditure and Reform, the Exchequer contribution to the fund will cease this year and will be replaced by the proceeds of the household charge in 2012.
The footprint of the local government sector has reduced significantly over the past five years. Local authority investment and service provision capacity has reduced from a record €11.7 billion in 2007 to an estimated €7 billion in 2011. The reduction has been most pronounced in the local government capital programme, the figure for which has declined from €6.8 billion in 2007 to an estimated €2.2 billion in 2011.
It is important that the funding of locally delivered services be on a sound financial footing, with better alignment between the cost of providing services and the demand for those services. It is clear that local authorities require sufficient funding to ensure that they can operate effectively across their range of functions and responsibilities but this must be balanced with the need to limit the direct financial contribution required of business through rates and charges and having regard to the need for a reduced footprint for the sector generally. Notwithstanding the importance of this source of funding, the Government is mindful of the need to minimise the burden on business, particularly business that may be especially vulnerable in the current difficult economic environment.
As local authorities approach their budget period, elected representatives will be called upon to make difficult choices to adopt balanced budgets for 2012. The emphasis to date has been on cost reductions and efficiencies that will reduce the costs to business, the maintenance of front-line services, broadening of the funding base and the refocusing of capital investment. However, with income from all sources under pressure, each local authority will have to strike a balance between the competing demands for resources. Against this background, local authorities continue to face significant challenges in collecting income arising from rates and local charges.
The Government is not solely focused on the funding of local government. We are also concerned to ensure that local government delivers the services that our communities expect as efficiently and effectively as possible. The Minister, Deputy Hogan, is determined that local authority cost bases will continue to be examined rigorously and reduced to maximise efficiencies which, in turn, impact positively on business. The realisation of the savings and other efficiencies identified in the local government efficiency review report will involve implementation over a focused and achievable timescale. In this context, the Minister established, earlier this year, an implementation group with an independent chairman and business expertise to drive and oversee implementation of relevant prioritised recommendations of the report of the local government efficiency review group.
The implementation group is focusing on key recommendations in areas such as shared services, procurement, ICT and human resources that will remove costs and yield early financial savings for the local government sector. The Minister is due to receive the implementation group's first report this month and this will include an assessment of progress made to date. This work must take account of the reduction of over 6,500 staff posts in local authorities over the past two years. This is well ahead of any other area of the public service. This is the biggest single contributor to efficiency and productivity.
The Government's commitment to align the community development sector with local government will also see an expanded role for local authorities in local enterprise and community development. This, in turn, will maximise the impact of investment to produce jobs at a local level. The Department of the Environment, Community and Local Government will continue to work with the County and City Managers Association to identify best practices in the local government sector in building stronger sectoral approaches and in eliminating variances between local authorities.
A properly resourced local government sector is vital to local democracy. I take this opportunity, however, to refer briefly to another issue that is equally important to the well-being of the local government sector. A range of work relevant to the reform and development of local government is also under way, in accordance with the programme for Government, and significant progress has been and is being made.
With regard to structural reform, the Government announced, on 28 June 2011, its decision to create a single local authority to replace Limerick city and county councils with effect from the local elections in mid-2014. In addition, the Government decided to establish a unified county council in Tipperary, also with effect from the next local elections. Implementation groups have been appointed to oversee planning, preparatory work and initial implementation of the reorganisation process in both Limerick and Tipperary, and their work is proceeding. The Minister for the Environment, Community and Local Government has established a local government committee under the Local Government Act 1991 to consider whether the creation of a unified authority in Waterford would be desirable. That committee is in operation and is due to report by the end of February 2012.
These measures are being progressed ahead of more comprehensive policy proposals which will be brought to the Government in regard to local government structures at regional, county and sub-county levels. The local government sector is a willing and able partner in this agenda and recognises that public sector transformation is an integral part of the solution to Ireland's current economic difficulties. In this context, greater coherence and synergy between different levels of Government and the public service are fundamental to more efficient and effective operation. The Department of the Environment, Community and Local Government and the local government sector are working closely together to advance broad public service initiatives for a more integrated public service which can achieve better value for money and enhanced customer services.
The Local Government (Household Charge) Bill 2011 is a short and straightforward legislative instrument. The revenue stream to which it will potentially give rise is significant, at €160 million annually. The Bill establishes a new funding source for local authorities. It builds on the experience of the charge on non-principal private residences and further broadens the revenue base of local authorities. Its provisions will ensure that charges raised nationally are put to good use locally in providing the wide range of local authority services that the public needs and expects. Arguably, it would serve the interests of local democracy still better if local authority members themselves determined, perhaps within certain limits, the level of the charge, as is the case with commercial rates. There may be scope to devolve other aspects of the charge to local authorities. These are issues that will be revisited in the context of a full property tax to replace the interim household charge in due course. In this context, the Government has decided that an expert interdepartmental group will be established in the new year to consider the approach to the full property tax and report back by mid-2012.
I thank the Senators for their co-operation in facilitating the early consideration of the Bill and I commend it to the House.
The manner in which the Bill has been brought before the House is regrettable, to say the least. It was not published and circulated until last evening, and those in the Opposition benches had to have Committee Stage amendments tabled by 10 a.m. this morning. We found this wholly unacceptable. The timeframe did not give the Opposition parties in the Seanad sufficient time to scrutinise in detail the content of the Bill. I am not sure who is responsible but it was wrong and should not have happened.
This legislation is to impose a household charge of €100 on almost every house in the country, with the few exceptions outlined by the Minister. The Government, and particularly the Labour Party, was very vocal about the problem of imposing a property charge on a private principal property when it was trying to get into power and gain the votes of the people. The Labour Party said it would fight the charge at every corner. However, when it got into power, it turned very quickly to burning any promises it made prior to the election, as we have seen.
We have no doubt that the decision to take the Bill today and delay its publication until yesterday was simply to try to spare the blushes of Government Senators and Deputies, who have been caught once again misleading voters. That the Government, and the Labour Party in particular, could stand over a Bill that offers none of the protections or exemptions that the most vulnerable citizens expect and deserve says a lot about the values that Fine Gael and the Labour Party are bringing to Government.
The Government parties will spend a lot of time saying their hands were tied and that they had no choice but to bring forward the charge because of the EU-IMF funding deal. Ordinary families will not fall for this falsehood. Both Fine Gael and the Labour Party spent the past nine months telling the people that they had influence in Europe and had been successful in renegotiating the terms of the deal. The Government thought it was impossible to renegotiate the funding deal to allow it to launch a raid on pensioners and the pension levy. Why was it not considered important enough to reach agreement on protecting those who cannot afford the household charge? The truth is that the EU-IMF deal only sets out the overall targets. It does not set the specific elements of household charges or other budgetary measures.
This legislation expects people to pay a household charge after they were raided in yesterday's budget announcement. The most vulnerable people were attacked. The Government can hide behind the fact that there were no front line cuts in the weekly payment rates but the budget was much worse than that. A young child or teenager who previously received a domiciliary care allowance of €188 per week will receive €71.30 from January. A disabled person aged between 18 and 22 person will face a cut from €188 to €100 per week. That will impact on families.
Last night, I met in my clinic a family with two disabled people who cannot fend for themselves. Their weekly payments will be reduced by a couple of hundred euro, not to mention the other social welfare cuts they will be forced to bear. They are still being asked to pay the €100 household charge and the septic tank charge. They simply cannot afford to pay these charges.
I appeal to the Minister of State, on the second day of the budget double whammy, to go back to the drawing board on these exemptions because they do not go far enough. The exemption threshold is very narrow. Exemptions will be made for properties that are part of the trading stock of a business, which is fine because rates are already being paid in respect of them, or which are owned by the Government, the HSE or local authorities. Waivers will be offered for those who live in unfinished housing estates or the 18,000 people in receipt of mortgage interest supplement. What about medical card holders or those whose disability allowances were cut in yesterday's announcement? Some of these young people are living with their parents but others are living on their own. What about those who are in mortgage arrears? According to the latest figures, 63,000 mortgages, or 8.1% of the total, were in arrears in September. What about the people who are in negative equity or those who are unemployed and receiving social welfare benefits? I meet on a weekly basis people who do not have the money to put bread on the tables or heat their houses. What about elderly people who are living alone and will have to deal with the cut in the fuel allowance from 32 weeks to 26 weeks? Why are they not exempted under the legislation? The Fianna Fáil Party will seek to amend the legislation to provide exemptions for these groups of people who cannot afford to pay the €100 household charge.
The liability date gives rise to further issues. The charge will apply from 1 January. I can only imagine that the Government parties are endeavouring to pass the Bill through the Seanad this week and the Dáil next week. It is unacceptable that householders will have until 31 March to pay the charge. Why can they not pay it over the full course of the year? If they pay it late, they will have to pay an additional 10% in subsequent months.
We will propose an amendment to allow the charge to be paid on a monthly or weekly basis. I cannot understand why a €10 charge can be imposed on over-the-counter transactions for the NPPR when the same option is not being afforded under this legislation. If somebody wants to pay a charge in a local council office, he or she should not be penalised for doing so. Not everybody has Internet access. We will be opposing the legislation in its current format because it has insufficient exemptions for the most vulnerable.
I welcome the Minister of State. Further to what Senator Ó Domhnaill said about the short notice we received on this Bill, I would welcome improvements in this regard because some of us had to burn the midnight oil last night to get up to speed on it. It is not a nice thing to be required to do. Given that the Senator intends to oppose the Bill because it does not offer sufficient exemptions, I presume he supports the principle of a property tax. For the past several years there has been speculation about the possibility that a property tax would be introduced. Property tax is not a recent innovation in this country. The rates levied until the late 1980s or 1990s were a form of property tax. I am surprised that the Senator is surprised.
He was a good man but he did not always make the right decisions. As the measure is set out in the EU-IMF agreement, we are left with no choice but to implement it. It is one of the fairer ways of raising tax because the tax that exists at present hits businesses and everything else. The previous Government set a precedent on property tax in the €200 levy on private rented properties.
It is not a home tax. It affects holiday houses. The Fianna Fáil Party's renewed programme for Government included a site valuation tax for non-agricultural land. I am delighted to learn it is addressing the exemptions. Perhaps they can go further than they currently stand. The issue of disabilities and disabled children, where people face hardships, could be reconsidered. They should be dealt with through an appeals system. Households that can afford to do so will be required to pay the €100 charge.
Section 6 relates to the provision of information in declarations by owners of residential property related to the household charge. In addition, provision is being made to allow the Minister to prescribe such information as he considers necessary to enable the preparation of a comprehensive database of residential properties in the State. Every other European state has such a database and it is time we moved in that direction. The collation of information in a national database would be of significant assistance in the context of the Government's consideration of the full property tax.
In addition, provision is made in section 12 for data sharing. The Minister for Social Protection discussed data sharing recently in the House. This is a first and I welcome it. We are talking about data sharing by people with local authorities and by local authorities with Ministers - and, as the Minister has outlined, all the relevant bodies such as the ESB and Bord Gáis. All of this data sharing is necessary and I welcome that provision in the Bill, because it is positive to keep channels open at local and national level, and indeed to prevent tax evasion and so on.
Section 10 will require the discharge of all household charges and late payment fees due to local authorities in respect of properties that are being sold or transferred. This is an important new provision which is being introduced to stop the practice whereby agents of property or property sellers are, in effect, passing on any liability for the charge on non-principal private residences to the subsequent owners through clauses contained in conveyancing agreements. The solicitors were taking it upon themselves to dictate who should pay the property tax. That was not right, and it is now being stopped. I welcome the provision.
The Minister of State has also informed us and the public of his decision to introduce this tax in the early part of the year and that there is a three-month period in which people can pay the charge. I welcome the public information campaign announced by the Minister of State, because it is important that people know what is coming down the line and that they have several months to pay the charge. A project board will be established by the Department of the Environment, Community and Local Government and the County and City Managers Association, CCMA, on the introduction of the charge, as well as a bureau.
Because we now have all of these online services and payment options, I ask the Minister to consider introducing a facility for charges to be deducted at source. This would deal with late payments, non-payments and people putting things on the long finger. In addition, something should be written into the Bill to encourage people who are not online - who do not have the facility - to use free online facilities in libraries and local authorities, and similarly, these organisations should be encouraged to facilitate and help people to do things online. The communication that goes out should tell people they can drop into their local library or whatever and they will be helped to pay the charges online. As well as educating people in the use of computers for other services, it would be a service to the community to provide this facility free.
The Minister of State has gone through the list of waivers and exemptions to the charge. It is important to restate that people who live in social housing will not have to pay the charge nor will those who have to leave their properties due to long-term illnesses. I will not go into the list of exemptions given by the Minister, but it is important to point out that the vulnerable and the poorest in society are not being asked to pay. Those who are in receipt of mortgage interest supplement from the Department of Social Protection are not being asked to pay either, and that is important, because people are experiencing hardship with their mortgage payments and everything else, and we do not want to frighten them further by scaremongering and saying that the poor will be affected. There are people, as I said, who are in receipt of mortgage interest supplement from the Department of Social Protection, and they are not being asked to pay. I ask the Minister to reconsider the case of disabled people - to look at their household income, examine whether they are in the same position as people who are in receipt of mortgage interest relief, and perhaps introduce a similar exemption.
Those who are already paying commercial rates on a property will not be asked to pay the charge. We all said while in local government that those paying commercial rates were always being hit and that this was not good for society, for productivity or for business. Now the charge is being spread. All the business people in the country will welcome this charge, which will yield positive results. The Commission on Taxation, when reviewing the structure, efficiencies and appropriateness of the Irish taxation system in 2009, recommended the introduction of a value-based property tax. While the initial charge of €100 is probably not value-based, the Minister of State has stated that the Government is committed to introducing a value-based property tax to replace the household charge, and he has indicated that work on this is to commence early in the new year.
I remind anybody who might be tempted to say that it is unfair and that there is no such tax in country A, B or C that in Northern Ireland the rates system was reformed to become a local tax based on the capital value of dwellings, which meant that all properties were required to be revalued for tax purposes, and there are limited reliefs for pensioners and those on low incomes.
The charge will be administered by local authorities. The effective system of local government is bringing power back to local authorities. We have had too many centralised decision makers. Local authorities will have discretion over how this money will be used.
I welcome the Minister of State to the House and commend him on his detailed outline of the Bill. I also welcome the fact that the Fianna Fáil Members have agreed with this legislation and have only expressed concerns about the exemptions. That is not unexpected in view of the fact that it was their party that signed us up to this.
With regard to the Bill, I welcome the waivers and exemptions that have been included, which, as things stand at the moment, will cover 250,000 households. However, I agree with Senator Ó Domhnaill, who outlined the situation with regard to other sectors of society which do need to be considered with a view to granting them exemptions. The Minister of State is from an urban area. Let us take, for example, a person living in a purchased local authority house who is now unemployed due to the economic downturn, or a pensioner living on his or her own. Those people, as the legislation stands, will be liable for this property tax. I ask the Minister of State to reconsider these groups because I believe they will be discriminated against. A person who lives in a local authority estate and has made an effort to purchase his or her own house during his or her working life will have to pay the charge, while his or her next door neighbour who did not choose to purchase the house will be exempted.
It is estimated that approximately €160 million will be collected from this charge if it is collected in its entirety. Can the Minister of State give us an outline of how this will be disbursed among local authorities? Will it be based on the collection rates within the various local authority areas or will it be distributed with no consideration to that? This is important because some areas will have high collection rates while others will not.
With regard to the payment methods that are outlined in the legislation, I welcome the introduction of instalment payments, which is very important. I also welcome the fact that people can pay online. However, in rural Ireland, people traditionally use the post office to pay practically everything. I ask the Minister of State to consider contracting An Post to provide payment cards, as it does for other payments such as local authority rents. This should be explored with An Post, particularly in view of the fact that rural post offices are under pressure in cases in which the commercial business does not justify the doors being kept open. This would assist An Post in providing a service that it is currently providing, in some cases, at a loss.
I would also like some information about the local government management agency, LGMA, which will be paid to administer this service on behalf of the Government and local authorities. Will it be paid based on the administration costs or based on the amount of money it collects? In other words, will there be a pro rata payment on a percentage basis?
Unfinished housing estates are given specific mention among the exemptions. Who will actually decide whether a housing estate is unfinished? Will it be based on the list that has already been drawn up by the former Minister of State with responsibility for housing, Deputy Penrose, or will people be able to claim inability to pay because their housing estates are not finished? Will the housing estate be required to be taken in charge by the local authority? The taking in charge of an estate by the local authority is a definitive indication that the estate is completed, because it is not actually completed until such time as all the services within the estate have been checked, have been seen to work correctly and have been confirmed as operational. Residents could claim that their estates are unfinished, so we need some clarity in this regard before we move any further.
I welcome the fact that the Department is having discussions with the CCMA about this legislation and how it will be implemented when we move from a flat rate to a full rate of payment that is based on the actual value of a house. The sooner that is introduced, the better. I agree with some media reports that both a millionaire and a householder on low income will be charged the €100. That is not the basis of any property tax in Europe or throughout the world, so the sooner we have the new system, the better.
The Minister referred to negotiations with the County and City Managers Association, CCMA. However, as I pointed out about four times in this House, the local authority members' representative bodies, such as the Local Authority Members Association, LAMA, the Association of County and City Councils, ACCC, and the Association of Municipal Authorities of Ireland, AMAI, have been left out of the loop in these negotiations. They are the people who make the difficult decisions. The Minister said that local authority budgets are due to be passed. My local authority, South Tipperary County Council, is drawing up its budget on Monday. It is the elected representatives who pass the budget and make the hard decisions, yet all the Departments negotiate with the CCMA. There are no negotiations on these matters with the elected representatives or their associations. I have suggested to the Minister, Deputy Phil Hogan, the Minister of State, Deputy McEntee, and other Ministers that they negotiate with the representatives of the county, city and town councillors who will be asked to implement these charges.
I welcome the Minister of State. We did not get much notice of this Bill and, as Senator Keane said, we had to burn the midnight oil to get some details on it. There is little doubt that all new taxes are unwelcome and hard to stomach, especially when it is a tax that affects so many people. However, we are probably in need of more tax revenue to pay our expenses and we are one of a few countries, if not the only one, that does not have some form of tax on property. Its introduction is understandable.
I welcome that the Minister is giving people a chance to pay the charge with instalments of €25 per month rather than in one amount at the beginning of the year. I do not agree with Senator Ó Domhnaill that it should be paid in monthly instalments, rather than four instalments of €25. However, there should be an incentive for those who pay at the beginning of the year. It would be in the Government's interest to do that, whether it is an incentive or a disincentive for those who pay by instalments.
The Bill is being put through this House while all eyes are on the Budget Statement. Perhaps that is the reason we were given such short notice. The charge will quickly rise once the Minister finalises the long-term charges based on the value of a property. Clearly, the charge must be based on the value of the property in the long term. Could the Minister give a rough estimate of what the charge is likely to be in future? Take the example of a three-bedroomed semi-detached house in north Dublin worth €200,000. What is the average household charge likely to be when it is introduced? It will probably be 2015 before the scheme will be fully in place. Will the charge be €200, €300, €400 or €500 per year? I am sure the Minister of State will be unable to give me an exact sum but it is likely that the Government has an estimate of what it could be.
Many people are sceptical about this charge. They argue that they already signed an agreement for services, such as sewerage or water, with a county council when they originally got planning permission for the house. However, the situation has changed beyond recognition and we will have to pay. I am worried about some of the older people in our society who might be asset rich, but cash poor. They might have had their house for generations and own their home but they rely on State pensions. They might not be able to afford to pay this charge. The €100 in the first year is probably manageable but if it increases, they might not be able to pay it. I am not sure the Government has thought that aspect through fully.
The Minister has indicated that the money raised will go into the local government fund and will be allocated to local authorities to pay for the provision of services such as fire and emergency services, street maintenance, public parks, waste management, libraries and leisure facilities. However, South Dublin County Council is proposing to introduce domestic fire service charges next year. I hope I have the figures correct but it proposes a first hour rate fee of €500 for call outs to domestic fires, €610 for vehicle fires and €610 to attend a chimney fire. There is also a proposed first hour fee of €610 for road traffic incidents. I can understand it proposing those charges if the service costs that amount, but how does the household charge fit in if people will be subject to these charges?
Nine or ten years ago I woke up in my house at 2 a.m. to hear a crackling sound. The house next door to mine had gone on fire. It was uninhabited at the time. I telephoned the fire brigade and the gardaí. The fire brigade arrived and saved the house. In fact, the tree in the neighbouring garden was touching the tree in our garden, so the fire could easily have spread. It was August, there was no wind and I was frightened for my house. The other house was burnt out. Who pays the fine in that situation? The owner of the house was not there and I made the telephone call. Would I or the owner of the house be obliged to pay the charge? What are the Minister of State's thoughts on that? I do not know how often something like that tends to happen, but is there a danger that charges for calling out a fire brigade will deter people from calling it, particularly if the fire is not in their house?
There is also the related issue of water charges. Recently the EU has been putting pressure on Ireland to recover the full cost of water provision, and just last month Ireland was the sixth member state threatened with legal action on water charging. If Ireland fails to reply within two months, the Commission may refer the matter to the European Court of Justice. Some people, including the economist Dr. Richard Tol, suggest that this could mean a charge of €500 per year per household. This charge pales into insignificance when one considers that cost. I am worried about those who say they will boycott the levy. They must be properly informed that this could cost them another €10 per month surcharge and put them under further debt strain, even to the point of being pursued by debt collection agencies. Some residents who tried to avoid waste charges in Dún Laoghaire-Rathdown ran up bills of more than €1,000 in avoiding those charges. Home owners must be realistic.
I do not disagree with the need for a property charge, but I disagree with a flat charge. I know why the Minister is introducing it at this stage and acknowledge the intention that it will be related to the value of the property in the future. If ours is one of the few countries that does not have a property tax, we will have to introduce it. Furthermore, it is a way of funding local government. I do not disagree with the introduction of the legislation, but there are some issues with it which have been raised by both sides of the House. The Minister would do well not to rush this legislation through the House although I realise he is anxious to have this introduced before 1 January next.
I will start by quoting from the programme for Government regarding legislation and rushing it through the Oireachtas. It states:
While recognising that there may be exceptional circumstances in which debate may need to be concluded by a given deadline, we will restrict the use of guillotine motions and other procedural devices ..... We will also deal with the related problem of legislation being shunted through at high speed and will ..... provide a minimum of two weeks between each stage of a Bill, except in exceptional circumstances.
That is another promise on the bonfire.
The exceptional circumstances are when a Bill is properly debated in both Houses. The Government has made promises and commitments in the programme for Government that it simply refuses to keep. It is absolutely outrageous in a democratic society that legislation is handed to us on a Monday for debate and passage on a Tuesday. It is extraordinary there were no objections from Members on the Government side of the House. If this continues the Seanad will become a rubber stamp. We will simply turn up every four weeks, pass everything through with a rubber stamp and go home.
This legislation comprises 34 pages and 20 sections. The Dáil and the Seanad are entitled to debate it at proper speed and give it due consideration. Instead, it is being rushed through because today is a good day to bury bad news, because there so much other bad news. This charge affects everybody, not just the sectors that were targeted in yesterday's expenditure measures. It is a matter of extreme regret for me personally that my party is supporting it, but I support my party's position.
I had many long arguments with the former Minister, the late Brian Lenihan. I believe there was a fundamental unfairness in imposing a standard flat rate charge on every sector of society. Most disappointing, the Government elected last February and March appears to have done nothing to alleviate this fundamental unfairness. It seems no work has been done to bring in a site valuation tax but merely a promise to start that work in the new year.
My colleague, Senator Ó Domhnaill, referred to the issue of waivers and I agree with him. Another fundamental unfairness in respect of this charge is that the local authorities are not being asked to make efficiencies under the legislation while members of the public is being asked to pay €100 or they will go to prison or be fined or convicted in a criminal court. The crimes the Government is coming up with always seem to affect ordinary people whether they relate to septic tanks or a household charge. The Government view is that people will be brought to court if they do not pay such and such and that they will be convicted of a criminal offence. This is a regressive manoeuvre and a measure the current parties in Government fought hard against previously in respect of fisheries legislation when they sought administrative penalties. Instead we have criminal penalties whereby the long hand of the law is forced on people. We should consider administrative penalties rather than criminal penalties.
There is a different system for the non-principal private residence, NPPR, charge. Why is this? Why did the Government not merge the two systems and put in place a different charge for one and for the other? One can pay for the landlord's tax in an office but one cannot pay or this tax in an office. Why should anyone pay such a charge in cash? Last week the Italians moved to stop all transactions in their economy greater than €300 in cash. There should be no cash payments of €100 in local authority offices by landlords of residential properties. I call on the Minister of State to consider this. Why can they not pay by cheque or bank transfer? At least if they are paying in a different way with a bank record it is better for the Government.
Members have welcomed the issue of mortgage interest relief and I welcome any waiver in this regard but fewer people will get mortgage interest relief as a result of the Government measures. I disagree with the points made by Senator Quinn on the instalment issues. Most people take care of their bills on a monthly basis. There should be a monthly direct debit facility. People do not take care of their bills on a quarterly basis. Most people here are living from pay cheque to pay cheque or welfare cheque to welfare cheque. The requirement to pay quarterly is problematic. I am disappointed that we cannot pay through the ESB billing system. The Greeks managed to do it. At the least we should have a monthly system whereby one pays whatever is due every month.
It is not about the amount. We are not the Greeks. The public will not pay the charge if they do not see efficiencies from the local authorities or if they telephone local authorities and get no answer.
Apart from putting a burden on the citizen, this charge will place considerable responsibility on local authority staff to ensure they do their jobs properly. Most of them do so but I hear of complaint after complaint about telephone calls not being returned or members of staff being ignorant to members of the public or dismissing complaints. This cannot continue because the public will be paying for it directly and the local authorities must respond to that. I hope they do so.
Is mór agam deis a fháil labhairt, fáilte a chur roimh an Aire Stáit agus an Bille seo a phlé. Ach an oiread leis na cainteoirí a chuaigh romham, táimid iontach míshásta leis an bhealach a tugadh an Bille seo isteach. Mar a dúirt an Seanadóir Healy Eames, this has been flagged for months. Therefore the Bill should have been made available to us with a reasonable amount of time to examine it. There is no point in our second guessing what is in a Bill. We were informed last week by the Minister, Deputy Hogan, that we should not do so and that when we tried to second guess what was in the septic tanks Bill we were all wrong. We cannot be expected to second guess what will be contained in a Bill on the one hand only to be given a Bill late and then be expected to rush it through the Houses, especially important legislation such as this. It is disrespectful and it is the height of political chicanery by the Government to push through this Bill during this week when we are all aware the media focus is completely on the budgetary issues rocking the State at present.
We are considering a Bill that has a start date of January 2012. It is clear it has been in planning for some time and it is completely out of order and unfair not only to us as parliamentarians but to the citizens of the State to introduced it in this way. Serious issues arise in this Bill which cannot simply be teased out overnight and I wish to raise some of them.
We are opposed to this charge and to this type of charge because it is completely inequitable. It does not take into account the income of the people involved. A flat charge such as that proposed is the wrong way to go and it should not be introduced. This is where we differ from our colleagues in Fianna Fáil. I note that it is termed a "charge". Normally, if I go into a shop or an institution and I get charged for something I get something in return. What do the people or citizens who own their houses get in return for this so-called charge? The Government should call a spade a spade and say that this is an extra tax on the citizens of the country which happens to be connected to the fact that they own a house. This is not a charge because no extra service ensues as a result of it. Let us call a spade a spade.
The Minister of State remarked in his comments that this is a relatively modest fee. Everything is relative. Perhaps if one is a Minister of State it might be modest but to the people I talk on a daily basis, no matter how high the charge, it is not modest. I am unsure whether the Government representatives get the point. People are strapped for cash. A lady called me during the weekend and said to me that the money the Government proposes to take from her family allowance represents the difference between being able to put two meals and three meals on the table every day. What is relatively modest to a Minister or a member of the Government parties differs completely from what is relatively modest to normal citizens. Many will fall through the tax net when it comes to the waiver system. This point has been echoed across the House and it should be re-examined.
It is ironic that the Government parties appear to be taxing us into the grave with this proposal. One measure in section 7 proposes that even when a person dies, the Government will go after the money. This should be reconsidered. Even if someone is deceased the full penalties and charges will issue. Is this not going too far in the case where someone has lost a relative or a parent? It represents taxing people to the grave to make them pay these charges. Let us consider the case where a waiver applies to the owner of a house. If that person is a parent who has lived in a family house and that person is then deceased and the house is passed on to someone else who is also in a waiver situation, then the surviving person should be considered for the waiver as well. Such a person might be on social welfare or in receipt of a limited income and they should be entitled to a waiver. We cannot tolerate a situation whereby a parent passes away and the house passes on to the child, the son or daughter, who is then liable for these charges. It is going too far to follow such people to the grave to look for the money. An inability to pay clause of some kind should be provided for. The measures included do not cover people on medical cards, those in negative equity or those who genuinely are unable to pay. There are a great many such people around.
I refer to the €10 over-the-counter charge. The Bill provides that this is waived if one goes on-line, etc. However, if one goes on-line to make a payment or if one makes a payment by cheque then one is paying money to the banks. People are budgeting so tightly these days that they are avoiding such charges, including credit card fees and banking fees. Many people who chose to pay by cash are doing so to save on those costs. It is not free if one pays by credit card or on-line.
The reference to a public information campaign is interesting. However, this charge is due to come in on 1 January. If there were a proper public information campaign it would have been underway for the past number of months. People are now budgeting for next year. The Government is budgeting for next year. It is only fair that the public information campaign should have taken place before now.
This will lower disposable income and contract the economy. Those of us in Sinn Féin have repeatedly stated that our policies would be decidedly different. Members have seen our pre-budget submissions. There are other ways to do this. This is an extra tax to raise €160 million. The Government should have considered other ways of doing this and for this reason we will oppose the legislation.
Cuirim fáilte roimh an Aire Stáit. There was a reference earlier to the manner in which the Bill is being brought through. Will the Minister of State accept amendments after Second Stage for Committee Stage? This should not be taken out of my time because it is a procedural question. The problem is that the Bill was introduced quickly and we had a deadline of 10 p.m. this morning.
I thank the Minister of State and I appreciate it.
I ask the Minister to indicate in his summation the other exemptions he will examine. I agree with Senator Landy on OAPs, the unemployed, people with medical cards, those in negative equity and people in receipt of family income supplement. The comments of the Minister of State on the amendments we will table on Committee Stage will frame our decision on how to proceed on Second Stage.
I agree our tax base needs to be broadened and with some of the other comments made on the Government side. We all want the tax to be fair and agree it is not because it is currently a flat charge which does not take valuations or income into account. The NPPR system has worked quite well. It is important that taxes go to local authorities, as the Minister of State knows, because it ensures they are answerable to their citizens and the service they provide. Many of us are aware of instances where it is way below the mark.
I have been asked by people in north Dublin to raise the issue. They want to know if the tax of €100 goes to Fingal County Council. The Bill does not confirm the tax goes directly to local authorities. I have an issue with that.
The Bill will address the general point.
I ask the Minister of State to deal with shared and affordable housing. Social housing is exempt, which is right. Unfortunately Deputy Penrose is no longer Minister of State. I raised the issue of arrears on shared ownership and affordable housing with him, which are over 18.5% on average and over 20% in some local authorities, with him. They do not come under the statutory code of conduct for mortgage arrears and local authorities are being extremely difficult with people in arrears through the Home Finance Agency. I will table an amendment today which deals with an exemption for people in shared ownership or affordable housing. There is a major arrears issue with which I am sure the Minister is familiar.
In regard to appeals on the waiver, section 9 of the Bill states if one wishes to appeal the decision of a local authority to not grant a waiver one has to go to the District Court. There has to be a better way to deal with that rather than going to the courts. If I believe I cannot pay €100 and have a case to appeal it is very unlikely that I will go to the District Court. How many people will be able to represent themselves in the District Court? Will they pay for solicitor's fees to represent them? They will not if they cannot afford to pay €100. That aspect of the Bill can be improved and is flawed.
The definition of a "residential property" includes a bedsit. We need to examine that issue. If someone is living in a one room dwelling with a kitchenette and toilet in the same room why should he or she pay €100 when someone living in a ten bedroom house in Foxrock is paying the same? They are realistic issues which need to be addressed.
Senator Keane is right to some degree. There are people who do not have access to the Internet who are not skilled at using it. I am trying to teach my family every day how to use it.
We are getting there. Perhaps I am a bad teacher.
If we are going to charge people an additional fee for paying the fee in a post office or local authority we should make it easy for them to pay. There should not be a surcharge. We should incentivise prompt payment upfront . If a senior citizen wants to pay the €100 fee at the start of the year he or she should not be penalised for doing that. These are small but important points.
We have to broaden the tax base, about that there is no question. We cannot say, "No, this should not happen." Exemptions need to be considered. I ask the Minister of State to indicate whether the Government is willing to expand the exemptions to include senior citizens, people in negative equity, the unemployed, those in mortgage arrears and medical card holders. Things will improve in years to come. Therefore, it is to be hoped fewer exemptions will be given in years to come. As Senator Ó Clochartaigh said, people are down to the bone in terms of what they can pay and €100 is a lot of money to many families.
I welcome the Minister of State to the House. I understand the necessity for gathering taxes. I assume that this tax goes to directly to local authorities to discharge their functions. I agree with the comments of some of my colleagues and they have made sensible points. I would have made them myself.
One tends to be happier if one is charged for a specific service. I have never had any problem with bin taxes. In my area I buy labels to put on the bins. We do not get a particularly good service and the fact it has been privatised means three or four different companies collect different rubbish. People become confused and the system is grossly inefficient. I do not like this kind of privatisation but at least there is a service. I have no difficulty with water charges.
This charge seems to be a method of raising revenue for local authorities, with which I do not have a huge problem. It is relatively easy to introduce these measures but virtually impossible to reverse them. That was found, with disastrous results, when the then Government decided to freeze rents during the First World War in the city of Dublin in order to reassure men who were at the front that their families would not be placed in financial difficulty while they were away fighting. Naturally enough it was a popular measure and proved completely impossible to reverse politically until legal action was taken some years ago and it was found to be unconstitutional. It had the effect of helping to create and consolidate slums and led to dereliction in large areas of this historic Dublin. I would hate to see this happen again.
It is important to take into account things like capacity to pay. There is no point in imposing additional burdens on people who simply cannot pay. There is no doubt whatsoever that some people cannot afford additional charges. There is also no doubt that this is the thin end of the wedge. Any time this kind of tax has been introduced it has inevitably increased. There are two inevitabilities, it will not be reversed and it will increase. Will it ever be related to the provision of services? I would like it to be.
On self-assessment, assessment usually deals with the amount to be paid not whether one is liable for payment. It is a misnomer to call it self-assessment. It is actually determining whether one is liable for the charge. I am very glad the Minister of State indicated he is prepared to consider the amendments of various colleagues. It would be extraordinary if people in negative equity and others who are having difficulty repaying mortgages were expected to pay. A small gesture was made by the Minister of State in his speech but it did not cover anything like the real number of people in difficulty. How could such people possibly be expected to pay and where is the morality behind it? If people are in negative equity and the value of buildings has collapsed compared to the price they paid during the bubble it is rubbing salt in the wound to expect them to pay further.
With regard to affordable housing, I know of a number of schemes in the city of Dublin where what was purported to be affordable housing was placed on the market. That value has been substantially degraded. If these properties were placed on the market, they would still make a loss. They have been gulled by the local authorities into taking up properties, which they were assured they were getting at below market value. The market has now collapsed and they would not get their money back if they had to be sold. Yet they are being taxed by the same local authorities and in many cases the local authorities refuse to accept responsibility for the condition of these developments or the social circumstances surrounding them, some of which are extremely difficult. I think this is a moral problem.
In principle, I have no difficulty with the Bill as the country is in desperate need of money. Personally, I doubt if we will ever raise enough to resolve the problem. The entire system is in difficulty and until the system is looked at, we will not rectify the problem. I have raised a number of issues that may be addressed during the passage of the Bill through the House. When is it proposed to take Committee and Report and Final Stages?
Part of the problem is that we have had four austerity budgets in recent years. The Fine Gael Party and the Labour Party voted against those four austerity budgets because in their view they were unfair, penalised working people and targeted people who were out of work. People on social welfare, on disability payments and older people had their entitlements cut. Generally, the then Opposition parties, the Independents, Sinn Féin, Fine Gael and Labour members said that approach was not working, that we were dipping into the pockets of people who could not afford to give. Those same parties who are now in Government joined with Sinn Féin in saying at that time that an alternative was needed, that we should focus on those who could pay more and who should pay more. One of the Government parties supported our proposals of a 48% tax rate on those with an individual income in excess of €100,000. That measure alone would bring in €400 million, yet what is being proposed with this household charge brings in almost half of that figure.
This is about fairness and whether we are targeting those people who have suffered enough. That should be the context, aside from the fiscal proposals in the budget. Last month a senior unguaranteed, unsecured bond of €700 million was repaid and signed off by the Government. A sum of €1.2 billion more will be paid in January 2012, at a time when we are cutting the disability allowance, child benefit, rent supplement, the lone parent's allowance, again targeting people who will be affected by this charge. The fundamental problem in Ireland is that we are moving away from the principle of fair, just and progressive taxation. We are moving more towards stealth, flat taxes. Again the then Opposition, now Government representatives, joined with us in Sinn Féin in opposing the universal social charge when it was introduced. It was opposed because it was an unfair flat charge and yet the Government is bringing in a flat charge of €100 for households. If somebody earns €3,000 a week, he or she is being asked to pay the same as a person who earns €300 a week. Where in God's name is the fairness in that? It is not fair and there are many alternatives that have been presented to Government where wealth could be targeted, capital gains tax, capital acquisition tax and modest increases in those taxes would raise significant money. For example the 1% wealth tax that we in Sinn Féin have proposed on all assets in excess of €1 million, excluding working farmland, business assets and 20% of a person's primary residence would bring in significant sums of money. We would say it could be €800 million.
A simple measure that the Government could adopt is to standardise all tax reliefs, including tax relief on pension payments. If we would do that, it would mean everybody would avail of tax reliefs at the standard rate of 20% rather than the marginal rate of 41% for top earners. That would raise an incredible €700 million. There are opportunities for the Government to save money and to raise extra revenue. While those on the Government side are shaking their heads and now saying no, when they were in opposition, they were saying something completely different. That is very interesting.
When reading through the Labour pre-election manifesto, I saw no reference to a flat household charge, but there was opposition to the universal social charge and the notion of flat charges. Today the Minister for Finance will take to his feet and introduce a 2% increase in VAT which, coupled with the proposed charge of €100, will devastate the retail sector. It should be noted that 55,000 jobs in the retail sector have been lost since 2007, 40,000 more are at risk and those jobs are at risk because we are targeting the same people. When will the Government learn that for those who have given so much, the well is dry? Now €100 is a significant amount of money for many families, and it is not just this €100 charge. Last week we discussed the €50 charge for registration of septic tanks. People will be also affected by all the other cuts in the budget and the increases that we will hear about today. It is the cumulative effect of what the Minister is proposing to introduce in terms of this charge and changes in the budget, which is having a negative effect and scaring the life out of many working families and those who are out of work and are struggling to pay their bills, mortgage and to provide for their families. Yet, the Minister is not looking at the genuine alternatives which are being presented to the Government, which the Labour Party supported when in Opposition but seems to have abandoned now that it is in Government.
Ba mhaith liom fáilte a chur roimh an Aire. This legislation comes to the Seanad on the day when the Minister for Finance will take to his feet in the Dáil to announce details of €1.6 billion in tax increases and extra charges in what is the second act of a tragedy, the 2012 Budget Statement. I say "tragedy" because that is precisely what it is for many hard pressed families the length and breadth of this county. The seemingly unending misery of the recession has physically and emotionally scarred individuals and communities. I know we will have the opportunity to discuss the budgetary measures later today, however the point needs to be made that the introduction of further charges and taxes will have an adverse impact on individuals who are struggling with debt and are just managing to put food on the table. To address the proposed household charge, the Minister has provided the following information. We know this new charge of €100 per annum will apply from 1 January 2012 to each house and we are told that it will raise €160 million to fund services provided by the local authorities. I am sure the Minister will agree that the charge, even at a seemingly low level of €100, will put further pressure on the people I mentioned.
Let us look at the issue of the fairness of the tax. Many mortgage holders are in negative equity and many more are at risk of unemployment in what is a contracting economy. Home owners paid stamp duty and VAT when they bought their houses. These large figures were based on a percentage of the value of the transactions and were charged at the point of the transaction, thus they are called transactional charges. People pay these large sums of money in the expectation that the tax, through the funding being dispensed by the Department centrally to local government, would be used to fund local services. Now they are being told that having paid their transactional charges at very high rates they are also liable for this new tax. It amounts to a form of double taxation and it is deeply unfair. For example, a couple in negative equity who bought a house in the past five years and paid a significant amount in VAT and stamp duty are now confronted with this tax. It is patently unfair. In terms of its operation and application, the very rich will pay the same amount as those living in modest dwellings, despite the vast disparity of income and the values of their homes. The rich are paying the same amount as the average or even the poor citizen. This is a form of regressive taxation. The Minister stressed that this in only an interim measure and that a full property tax will be established to replace it in the coming months.
Why allow such a charge to go ahead in the absence of a proper valuation system? This is a blunt instrument, devoid of any nuanced application to take account of circumstances. We are told that a full property tax requiring a property valuation system will take time to implement. Why introduce this measure in the absence of a graduated approach? The EU-IMF programme commits the Government to the introduction of a property tax for 2012, but makes no mention of any stop-gap measures such as this. People are tired of the ad nauseam references to the bailout as a blanket cover for political decisions by Ministers.
The charge will apply to most homes, with the exception of mobile homes, houseboats and housing not yet used as dwellings. This means that NAMA's new apartments and houses will be exempt for now, unless they are being rented. There are also exemptions for certain trusts, for property located in uncompleted estates and for the homes of the old or infirm where the usual occupant has been removed elsewhere, for example, to a nursing home. An exemption will also apply where the home owner is in receipt of mortgage interest supplement. In addition, there is a one-year exemption on properties where the owner has died.
These exemptions are all welcome but they do not go far enough. Tenants in private rental accommodation will find that landlords pass the charge on to them in higher rents. Pensioners, many of whom own their own homes, will be hit hard by this charge. People in receipt of social welfare and at risk of poverty will be similarly affected. This is where the flat-rate nature of the charge and its near universal application will cause the most difficulty. The fact that a multimillionaire and a pensioner at risk of poverty will have to pay the same rate flies in the face of even the most basic concept of fairness.
We all know that new taxes tend to go in only one direction as time goes by. Income tax was introduced by William Pitt the Younger almost 200 years ago in order to finance the struggle against Napoleonic France. It is still with us today. Not that I am objecting; there is a certain case for it. The annual household charge is being set at €100 on its introduction, but when the site valuation system is up and running we can almost certainly expect it to increase. We can only speculate where it will ultimately end up. Will it go as high as 0.5%, for instance, of the value of a property, which would equate to an annual charge of €1,500 on a property worth €300,000? I would be very surprised were the charge to fall in the coming years.
The Bill provides that local authorities will be able to demand information relating to a property in order to enable the Department to compile a database which will eventually be used to impose the successor to the flat charge. Will the Minister of State venture a guess as to the rate at which that successor tax will be levied? We are assured that the new tax will fund vital local services such as fire and emergency services, and provide for the maintenance of streets, public parks, waste services, libraries, open spaces and leisure facilities. However, at a time when many rural communities are seeing vital services being cut back, this promise will ring hollow. I urge that the Government reconsider the charge in view of its impact on struggling families at this difficult time.
I take Members' point regarding amendments. If an amendment is in order, I have no problem debating it. Perhaps the Cathaoirleach, in discussion with Senators, will agree a time by which amendments can be submitted. This will ensure Members have time to submit proposals and that departmental staff have time to respond.
That is fine. I agree that there should be a reasonable timeframe for the drawing up of amendments.
I thank Senators for their contributions to the debate. I assure them that I am mindful of the matters raised and look forward to examining them in greater detail as the Bill progresses through Committee and subsequent Stages. I am fully committed to working constructively with Senators to deal with these and further matters. I regret the timing of the publication of the Bill. However, it is necessary that the legislation is in place in advance of 1 January, as required by the EU-IMF programme of financial support for Ireland. That is why we are caught in this bind and why it must be done without delay.
No Government wants to be in a position where it is required to introduce new taxes or charges. Nor does this Government want to place an additional financial burden on households already living with the consequences of the austerity measures brought forward in recent budgets. However, we must be cognisant of the perilous financial position we inherited and which we must tackle. We can lay the blame for our financial situation at many doors, but that will not solve the problem. Nor am I suggesting that this Bill will do so, but it will contribute to a solution to our current difficulties. We are heavily reliant on the troika for the day-to-day running of this country and the bottom line is that it is a requirement of the EU-IMF programme that the Government introduce a property-based charge for 2012.
Rather than responding to each point on Second Stage, I propose to deal in detail with Senators' amendments on Committee Stage. However, I will respond to some of the main points raised. It has been said that the ideal in respect of any taxation measure is that it be equitable, simple and flexible. The measure before us today meets those requirements. The charge will be simple and cost effective to administer and simple to understand and comply with. While it will apply equally to the majority of households in the State, we have set the charge at the lowest possible level for 2012, which is €100. It will generate revenue on a continuing basis and will not be subject to the volatility we have come to associate with taxes on property transactions. In this sense, it has the flexibility to cope with changing economic conditions while maintaining a stable yield.
In response to Senators Brian Ó Domhnaill and David Norris, people in mortgage distress are being accommodated. Households in receipt of mortgage interest supplement from the Department of Social Protection on the liability date will be entitled to a waiver. All owners of a residential property will be liable to the household charge unless otherwise exempted or entitled to a waiver, as I outlined in detail. The Bill is estimated to generate some €160 million annually for the local government sector on full collection. Its importance cannot be underestimated for two main reasons - first, in terms of the potential revenue yield for the provision of local services; and, second, that it represents a new local source of funding for local authorities and reduces their dependence on central government. The latter is an important principle which we should all welcome.
The Bill does not include a valuation-based component. In light of the complex issues involved, a property tax requiring a comprehensive property valuation system would take time to introduce. Accordingly, in order to meet the requirements in the EU-IMF programme, the Government has decided to introduce a household charge in 2012. The amount of the charge is relatively modest at €100. It is an interim measure which will be replaced by a full property tax in due course. An interdepartmental group will be established in early 2012 to consider proposals for the property tax, which will include its scope, assessment criteria, applicability of exemptions and waivers and how the tax should be paid and collected. There will be an opportunity for input into the deliberations of this group. Having considered the group's proposals, the Minister for the Environment, Community and Local Government will bring his proposals to Government for consideration. The outcome of the Government's deliberations will be announced as early as possible in advance of the introduction of the tax, so that people will understand its implications having regard to their own personal circumstances.
I look forward to a high compliance rate with the obligation to pay the household charge. It is in everybody's interest. Moreover, it is simple common sense to pay it when it falls due given that evasion will incur significant late payment fees and penalty interest which will have to be paid at some point. The longer the delay in paying the charge the more expensive the late payment fees and interest will become. In addition, the resale of a property will be difficult if charges and late payment fees are left outstanding. A public information campaign will be undertaken nationally to advise people of their responsibilities in regard to the charge. This campaign will be undertaken by the Department and local authorities.
Senators Ó Domhnaill and Norris raised the issue of Committee Stage amendments. As I said, we are happy to co-operate in that regard. We have made great strides in the constructive and healthy exchange of views on the Bill. I look forward to teasing out the detail on Committee Stage.
I wish to make one point. I appreciate what the Minister has said and his clarification. However, we find it difficult to support Second Stage of the Bill without some assurances from the Minister that amendments such as exemptions for those with medical cards or those with mortgage arrears-----
The Seanad Divided:
For the motion: 28 (Ivana Bacik, Terry Brennan, Colm Burke, Deirdre Clune, Eamonn Coghlan, Paul Coghlan, Michael Comiskey, Martin Conway, Maurice Cummins, Jim D'Arcy, Jimmy Harte, Aideen Hayden, James Heffernan, Imelda Henry, Lorraine Higgins, Caít Keane, John Kelly, Denis Landy, Maire Maloney, Mary Moran, Michael Mullins, Catherine Noone, Susan O'Keeffe, Pat O'Neill, Feargal Quinn, Tom Shehan, John Whelan, Katherine Zappone)
Against the motion: 15 (Thomas Byrne, David Cullinane, Terry Leyden, Paschal Mooney, Rónán Mullen, David Norris, Darragh O'Brien, Ned O'Sullivan, Trevor Ó Clochartaigh, Brian Ó Domhnaill, Labhrás Ó Murchú, Averil Power, Kathryn Reilly, Jim Walsh, Mary White)
Tellers: Tá, Senators Paul Coghlan and Susan O'Keeffe; Níl, Senators Terry Leyden and Ned O'Sullivan..
Question declared carried.