Seanad debates

Thursday, 11 April 2019

Nithe i dtosach suíonna - Commencement Matters

Property Tax

10:30 am

Photo of Robbie GallagherRobbie Gallagher (Fianna Fail)
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The Minister of State is very welcome and I thank him for taking time out of his busy schedule to be here. I want to discuss the Government's decision to defer the recommendations from the review of the local property tax, LPT, and the implications that may have for pensioners and those on low incomes. A review of the controversial tax on homeownership, the local property tax, LPT, recommended that the Minister for Finance, Deputy Donohoe, increase the threshold for deferring property tax to ensure that pensioners were not excluded because of the rise in their weekly pension incomes. However, the Government has failed to bring forward any reforms to the local property tax. One could be cynical and suggest that is for political reasons due to the forthcoming European and local elections but I will await the Minister of State's comments on that.

There are serious consequences for the Government's inaction on property tax. Many low and fixed-income households will no longer be able to defer the property tax when it is due. As the Minister of State knows, a couple who are both on the maximum State pension of €248.30 per week, which gives them a total annual income of €25,800, are now above the threshold to qualify for deferral which was €25,000 for a couple. It appears that the message to pensioners now appears to be that it is tough luck but they have to pay up.This is a particularly mean approach by the Government. It does not cost it anything to allow those on modest incomes to defer. Homeowners can currently defer their property tax charge if their income is below €15,000 for a single person or €25,000 for a couple. The property tax review recommended increasing this threshold to €18,000 for a single person and €30,000 for a couple. It appears the Minister's review of the controversial tax dismissed several proposals which would have made life easier, particularly for pensioners. Waivers for homeowners on low fixed incomes and people with disabilities were suggested. Both were rejected. The review group also dismissed a proposal to give property tax relief to people over 80 with long-term illnesses, despite this measure being previously recommended in a Government report. The report also ruled out cutting interest rates charged on property tax deferrals, which are mostly availed of by older people.

Approximately 328,000 people, mostly older people, are eligible for the deferral scheme but only a limited number take up the option. The possibility is that, as this is a relatively new tax, they might not be aware they are entitled to put off the payment. More needs to be done on this. Over 56,000 homeowners chose to defer their property tax last year. A deferred payment incurs a 4% interest rate annually which is permanently fixed as a charge on the property which must be paid on the sale or transfer of the home. As it is a relatively new tax, people need more information as to how the deferred payment system works. An information campaign is needed. Many people, including older people, have a fear of Revenue and are afraid to seek a deferral. I would hate to think that older people are stretching themselves just to pay a property tax when they may not be aware a deferral is available to them.

It is disappointing that many of the recommendations of the review into the property tax have not been implemented. Many of its good and worthwhile suggestions would have assisted those on low incomes and in financial hardship to be outside the property tax net. Unfortunately, that has not been the case.

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

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

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

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

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

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

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

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

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

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

Photo of Robbie GallagherRobbie Gallagher (Fianna Fail)
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I thank the Minister of State for his comprehensive reply. He stated only 15% of households are taking up the option to defer the payment. That speaks volumes in itself. As I said earlier, it is a relatively new tax and I feel not enough people are aware of this option to defer payment of the property tax every year. Will the Government look into an information campaign to make people aware that this option is available?

It may have been an oversight on the Department’s part that it did not take into consideration the increases in pension payments could result in some people falling outside the threshold. Will the Minister of State take that into consideration?

Photo of Patrick O'DonovanPatrick O'Donovan (Limerick County, Fine Gael)
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In discussing this we need to be honest. The LPT yields €500 million. Any changes to it will have a knock-on effect. While there could be a suggestion that people might not be aware of the possibility of a deferral, there are many who understand their tax liability and that when a tax is levied it must be paid.

Five scenarios were put forward by the review group and their impacts were considered. The Minister has said they need to go back to the Committee on Budgetary Oversight for its views on them. I have not heard from any Opposition party as to which of the five scenarios it would opt for. Each of them has its own pros and cons. There was much media coverage about one scenario which would have had an impact on rural homes. However, I have not heard any of the Opposition spokespersons from the three main parties say which scenario they would opt for.As in other debates we have had, such as on climate change, budgetary matters, education or health, a little bit of tax honesty would be a good thing. The Minister for Finance is providing an opportunity for the Oireachtas to state its view and he will, ultimately, take it. There is a role for local authorities. Some have decided to reduce their property tax rate, which could make a small but welcome difference to a householder, but they have shoved up commercial property rates. There is some in-built hypocrisy in that.

We need an honest debate on the issue and we need to debate the scenarios put forward by the review group. It behoves every party in the Dáil and Seanad to state the way it would do it, while maintaining the tax base and being fair. If changes are to be made, the parties should say what those changes should be but the base has to be maintained. When there are deferrals there is a cost implication and local authorities will have to increase their overall rate, meaning there will be an impact on both urban and rural areas. The Minister for Finance has put this off so that people can have a say. Everybody says the Oireachtas should have a say and the Committee on Budgetary Oversight was established so that Senators and Deputies could have an input into the budget. Now is the chance for that. I look forward to hearing the views of Senators and to learning which option they would go for.

Sitting suspended at 11.10 a.m. and resumed at 11.30 a.m.