Wednesday, 30 September 2015
Property Tax Administration
Very good. The Minister of State is very welcome. My Commencement matter was addressed to the Minister for the Environment, Community and Local Government, Deputy Alan Kelly. I wish to ask him to devise a property tax credit scheme for homeowners who pay management charges. Is it in order for the Minister of State to take this?
That is fine. Obviously, it is a budgetary issue, but property tax is within the remit of the Minister for the Environment, Community and Local Government. However, the request for a property tax credit scheme may rightly fall within the remit of the Minister for Finance. I will proceed.
I have written to the Minister for the Environment, Community and Local Government to ask him to devise a credit scheme against the local property tax for hard-pressed homeowners who are also paying management charges. Families and individuals are paying considerable management charges. In Galway, the charges range from €600 to €2,000. In a fairly rural area such as Lackagh, Turloughmore, where there are two estates, Carrickmore and Woodlands, the families pay €600 a year in management charges, and they feel duped because they also pay local property tax.
Does the Minister have a difficulty?
The local property tax was supposed to address some of the services, such as road maintenance, lighting and grass cutting. None of that is done, and they are paying on the double. That is how they feel. To their great dismay, none of the basic services promised under the property tax legislation has been delivered on. They feel that they are paying on the double for a service they are not getting. I have mentioned Carrickmore and Woodlands in Lackagh. When one adds their property tax and water charges to their bill, they are paying close to €1,000 per annum. I stress that this figure is at the lower end of charges compared with what others face. In Gleann na Rí, Murrough, Renmore, people pay management charges of €2,068 for a two-bedroom apartment. When one piles the property tax and water charges on top of this, it causes a lot of financial hardship to these families. At the lower end of range - for example, in Lackagh, County Galway - people have reported to me that they have to put aside €20 a week to be able to afford their bills. Others feel very strongly that they have been deceived in that the purpose of paying local property tax was to cover these very same local services. There are families in Lackagh, Turloughmore, who have heard that I was in the area and phoned me when I was on my way home to say they did not get to meet me but they wanted to stress this issue and the hardship that it is causing. On top of this, they are justifiably worried that with the increases in property value they will now face an increase in their property tax bill on the review date. They feel caught and fooled.
To add insult to injury, private estates that have applied to be taken in charge have also been let down, with Galway County Council replying to representatives of many of these local estates that it does not have the funding to take them in charge. At every level, including at Galway County Council, the local property tax has not delivered on its promise. That is why I ask the Minister for the Environment, Community and Local Government, in co-operation with the Minister for Finance, to devise a property tax credit scheme on a sliding-scale basis against the local property tax for those who already pay for management charges for services that were expected to be covered by the local property tax. I believe that it is a very fair and reasonable request. Why should one pay on the double? Why does the local property tax not pay for the services it promised at a local level? If it did, these homeowners would have an argument against their management companies to get credit from the management companies, but they cannot make that argument because they still need the management companies to provide the basic services that were supposed to be provided by the local property tax. I look forward to the Minister of State's reply.
When the Senator tabled it, it was addressed to the Department of the Environment, Community and Local Government. The Seanad Office has got confirmation that the Department of Finance said it had responsibility in this area.
The introduction of the local property tax is part of a broader approach to the taxation of property which aims to replace some of the revenues from transaction-based taxes, which have proved to be an unstable source of Government revenue, with an annual recurring property tax, which international experience has shown to be a stable source of funding.The Government decided that the local property tax should be centred on the principles of equity, transparency and simplicity and that a universal liability should apply to all owners of residential property with a limited number of exemptions. Limiting the exemptions available allows the rate to be kept to a minimum for those liable persons who do not qualify for an exemption. Senators will appreciate that reliefs and exemptions have costs which have to be paid for and their introduction must be considered only where there is a clear economic and social policy need to be addressed. Even with the limited number of exemptions available under the legislation, I understand exemptions were claimed in respect of 41,000 properties in 2014.
Properties in managed estates to which management fees apply will have been purchased by their owners in the knowledge that they would be taking on commitments to fund and partake in the management of the estate and that it was the intention that many such estates would not be taken in charge by local authorities, nor would it be appropriate for local authorities to do so. Management fees in these estates can include services such as refuse collection, maintenance of common areas and a sinking fund for certain repairs to the buildings, depending on circumstances. These are costs which home owners in other households, particularly in rural areas, must fund for their own properties. In certain circumstances, private estates will be taken in charge by local authorities in accordance with the relevant section of the Planning and Development Act 2000, as amended. This is a matter for the Minister for the Environment, Community and Local Government and the relevant local authorities.
Revenue from the local property tax accrues to local authorities and supports the provision of local services. Local authorities provide a broad range of services in the public realm, which benefit the wider community. The proper functioning of these services is important for the well-being of every community and household. They include fire and emergency services; road maintenance and cleaning; street lighting; spatial and development planning and other similar services; regulatory and inspection functions and business support services; and libraries, parks, and other recreation and cultural public amenities. The benefits of these services accrue to all members of society.
A requirement to pay management fees is not relevant in determining whether a property is subject to the local property tax. Accordingly, while those who are liable for management fees to property management companies may be exempt from local property tax for another reason or may be entitled to avail of a deferral arrangement under the provisions contained in the legislation, there is no specific exemption for the payment of management fees. There are no plans to change the basis of liability to the local property tax.
Given my letter to the Department, I am disappointed with the Minister of State's reply. My point remains that those paying management charges and local property tax face a double-whammy given the expectation that some duplication of services would be involved. People who pay management charges are paying on the double because it was intended that revenue from the local property tax would be used to cover certain services. This is the basis on which I am seeking the introduction of a credit.
While I take the Minister of State's point, I am speaking about hard-pressed people living in housing estates who believe they have no choice but to pay management charges. That is the basis on which I am making my argument.
The Minister of State indicated that it was never intended that local authorities would take in charge many estates.
What about estates in which residents have received letters from a local authority stating that it does not have sufficient funding to take an estate in charge, as occurred in the case of Galway County Council? In such circumstances, is it not the case that the local property tax has failed to serve its purpose?
One cannot have people in rural areas having to pay for services, while people in urban areas receive a Government subsidy because they pay a fee to a management company. That would be unfair and unjust, as the Senator will understand given that she comes from a rural area.
It is the point the Senator made when she stated that people living in housing estates who pay management fees to property companies should be exempt from paying the local property tax, while people in rural areas should pay the tax.
I will relay the points the Senator raises to the Minister for the Environment, Community and Local Government. However, my point regarding the treatment of people living in rural areas as opposed to people living in towns stands. Fairness is the issue.
The Senator referred to estates that have not been taken in charge by local authorities. This can only be done when funding becomes available. That is the position in my local authority in any case and I presume Galway County Council will take estates in hand when it has the money to do so. As the local authorities are collecting the local property tax, it is an issue for them.