Seanad debates

Tuesday, 10 November 2020

Nithe i dtosach suíonna - Commencement Matters

Property Tax

10:30 am

Photo of Mark DalyMark Daly (Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I thank the Minister of State for coming to the House and for bearing with us on that procedural issue.

Photo of Victor BoyhanVictor Boyhan (Independent)
Link to this: Individually | In context | Oireachtas source

I thank you, a Chathaoirligh, for selecting this matter. I welcome the Minister of State, Deputy Fleming, to the House.

This relates to reform of the local property tax. I am calling for an end to the local property tax section 8 exemptions. Some elderly people in their 70s, 80s and 90s living in locations like the one in which I live, Dún Laoghaire, have no income other than the State pension and are paying the tax. They can apply for a deferral which is not always granted. As the Minister of State will know, many people do not like to leave unfinished business behind them. They do not want to leave debts or bills behind them for anyone. It is part of our psyche, which I understand.

The existing exemptions are as follows. Properties purchased in 2013 are exempt until the end of 2021 if used as a sole or main residence. Properties that were self-built from 1 January and 1 May 2013 are exempt until the end of 2021 if used as a sole main residence. Properties that were self-built after 1 May 2013 and before 1 November 2021 are not liable for LPT until 2021 even if sold again in that period. New and previously unused properties purchased from a builder or developer between 1 January 2013 and before 1 November 2021 are exempt until the end of 2021 even if sold again in that period. Residential properties constructed and owned by a builder or developer that remain unsold and have not yet been used as dwellings, known in the business as trading stock, are exempt.

I think it needs to end. There was a logic for it, but no longer. We are in a different time. Last week I cited an example of two professionals living in a house valued at nearly €2 million and they are not paying this tax. This tax has no relationship to people's income. It is associated with the value of the house. It is an unjust and unfair tax. I have always strongly advocated for a local council contribution. It can be called a local council tax or whatever the Government likes, but it needs to be upfront and straight with people.I recognise that local government needs funding and that people should pay for that. I am not here to advocate that councils not be given an income. Local authorities are strapped. In essence what I am saying is that the local property tax needs to be reformed and that the current exemptions are grossly unfair to both other payers of the local property tax, LPT, and to those involved in the local authority.

While I am on my feet, I will stress that I support local authorities and recognise their needs and the difficulties they have in funding their core services. We have to do everything we can to increase their income but the reality is that we need, on another day, a long debate to tease out how we are going to sustain and fund our local authorities so that they can be viable. If we want to empower local communities and address the issues of subsidiarity and of making decisions at a local level, we have to give local authorities adequate funding to do their work and, more importantly, we have to hold them to account. The job of city and county councillors is to hold council executives to account to ensure that they get value for any citizens' money used and that it is used appropriately. Will the Minister of State touch on the issue of section 8? What is the Government's plan to address this anomaly under the programme for Government?

Photo of Seán FlemingSeán Fleming (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I thank Senator Boyhan for raising this matter. He has given a very detailed list of properties that are exempt from the tax introduced in 2013 to provide a stable sustainable funding base for local authorities, broadening general taxation measures. It has raised approximately €3.5 billion to date. Approximately €473 million is raised by the tax per annum. This goes to fund the local authorities. The Senator has clearly outlined the need for such a tax to fund local authorities. The taxation of property through a recurring annual tax is less economically distortionary than tax on either income or capital. Income and capital can increase or decrease whereas property tends to remain fairly steady. It is the norm in international and European jurisdictions to have some level of property tax.

Moving on to what the Senator has said, the 2020 Programme for Government: Our Shared Future includes commitments in respect of local property tax. It provides that legislation will be brought forward for the tax on the basis of fairness and that most homeowners will face no increase. That is a very clear statement. It is also intended to bring new homes, which are currently exempt from the local property tax, into the taxation system and to retain all money collected within the county, which the Senator will be very pleased to hear given that he comes from Dún Laoghaire. This is to be done on the basis of those counties with a lower LPT base having their income adjusted via an annual national equalisation fund, paid from the Exchequer rather than from local property tax paid in other local authority areas.

The Minister for Finance recently announced his intention to advance legislative proposals early in 2021 to implement these commitments. Ideally, legislation to give effect to the LPT measures I have outlined would have been enacted in 2020. However, the protracted nature of the government formation process following the general election in February and the necessary prioritisation and focus on dealing with the impact of the Covid-19 pandemic delayed decision making on the future of the LPT. The Minister was also very conscious of the practicalities and the need to allow Revenue sufficient time. Essentially, because of Covid and a government not being in place, there was not time to do it this year, even though that was what was intended.

The Minister deferred the revaluation due for 1 November 2020 through SI 458 under section 13(3) of the Finance (Local Property Tax) Act 2012. This decision means that taxpayers will not be faced with increases in their LPT bills for 2021 other than what a local authority may choose to apply in its particular area using the local adjustment factor.

As I have said, we are dealing with this issue under the programme for Government. To put a figure on it, the exempt cohort amounts to around 23,000 properties which were in the process of being built or sold during 2013. These were known to exist and are specifically exempt. The Senator has asked that they now be brought into the system. In addition, there is a much bigger category, that of houses that have been built since 2013. They are not exempt because they were never in the net in the first place. We now have exempt properties that were new in 2013 and those that have been built since and were not even included on the register. They are therefore not exempt and also need to be brought in. This change would bring an extra 80,000 houses nationwide into the system.That would result in approximately 100,000 houses being brought into the system overall, and at an average figure of approximately €320 per house, this would bring approximately €32 million into the local property tax fund nationwide, or an additional 7%. That will happen during the coming year.

Photo of Victor BoyhanVictor Boyhan (Independent)
Link to this: Individually | In context | Oireachtas source

There are 6,000 properties in the Dún Laoghaire-Rathdown County Council area that are outside the net. At an average local property tax of €675 in the area - it is lower than the real average but we can use it as the figure - this equates to €4 million gone that the local authority could do with.

I will read an extract from a letter in The Irish Timesthe other day from a pensioner. It states:

I believe in paying my fair share but this is unjust. I urge the Government to modify this local property tax in a fair and just manner, and to have regard to the very limited and low income of many older people in our State.

I will leave the Minister of State with that.

There is a need for some exemptions but not these exemptions. We must look again, particularly at older people who are in houses. They are described many times as "empty nesters", which I find very offensive language. These people live in their homes and it is where they have communities. They want to stay there and they should not be penalised for that. I ask the Minister of State to bear that in mind when the local property tax is reconsidered or reviewed.

Photo of Seán FlemingSeán Fleming (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I understand the gist of the argument and accept what the Senator said. He highlighted regarding Dún Laoghaire the large amounts of money that may be due to a local authority when the changes are made next year. They will flow into 2022. As I said, the figure nationwide will be approximately €32 million.

The programme for Government includes the provision for fairness and most homeowners will face no increase. Although there will be a change in the tax, it is proposed there should not be an increase. The Senator has pointed out the difficulty that the tax is based on property rather than income. There is a strong case that there should be some appreciation of a person's income if he or she is in a high value property but it is not part of the legislation enacted in 2013. There is no doubt that when we see the legislation early next year, there will be quite a debate on that element.

We will have specific legislation rather than including it in the Finance Bill that will come before this House shortly. It has previously been ruled that local property tax measures do not come within the definition of a money Bill provision as contained in Article 22 of the Constitution. Stand-alone legislation will come before the Houses of the Oireachtas on this early next year. I thank the Senator for raising the topic.