Friday, 16 July 2021
Finance (Local Property Tax) (Amendment) Bill 2021: Second Stage
The Programme for Government, Our Shared Future, includes a commitment to bring forward legislation on the local property tax, LPT, on the basis of fairness and that most homeowners will face no increase in their LPT liability. In addition, there is a commitment to bring new homes, which are currently exempt from this tax, into the taxation system. It is necessary to enact this legislation before the summer recess. This is required to enable the Revenue Commissioners to make the essential technical and administrative preparations to implement the various changes to the LPT regime that are contained within the Bill before the valuation date of 1 November 2021.
Ideally, legislation to give effect to reform of the local property tax would have been enacted in 2020. However, the process leading to the formation of the Government, and finalisation of the programme for Government, took longer than anticipated. Last year, our immediate focus was, appropriately, on the response to the Covid pandemic which meant there was not sufficient time to implement the LPT commitments during the remainder of 2020. The Minister, therefore, deferred the revaluation date for local property tax of 1 November 2020 to 1 November of this year.
The local property tax was introduced in 2013 and was designed to serve a dual function. First, to provide a stable funding base for the local authority sector and incorporating appropriate elements of local authority responsibility. It reinforces local democratic decision-making and encourages greater efficiency by local authorities on behalf of their electorates. Second, the local property tax has broadened the tax base in a manner that does not directly impact on employment and has replaced some of the revenue from transaction-based taxes with an annual recurring property tax.
Perhaps the most significant proposal in the Bill is a revised method for calculating LPT liabilities contained in section 24. A key challenge encountered during both the work of the review of the tax in 2019 and the more recent analysis is the significant variation of property price increases geographically and, in particular, the uneven pace and rate of increases in residential property values throughout the country since the original valuation on 1 May 2013. A guiding principle informing the design of the LPT is simplicity for taxpayers and Revenue, which collects the tax. In that regard, the new basis for calculating LPT liabilities builds on the existing band structure and is a variation of one of the approaches examined in the 2019 LPT review, which was listed as scenario 5 in the report.
The new approach will maintain the number of bands at 20. Band 1 will be expanded from €0 to €200,000 and band 2 will contain valuations from €200,000 to €262,500. The LPT charge will be fixed at the current charge for bands 1 and 2, which are €90 and €225, respectively. The other bands will be widened by 75% to create bands of €87,500, which will be increased from the current range of €50,000, with a lower mid-point rate charged to maintain the existing broad structure. Currently, a higher rate applies to properties valued at more than €1 million, with the first €1 million charged at 0.18% and everything in excess of that at the higher rate of 0.25%. Properties are charged on a self-assessed valuation of the individual property. Under the proposed approach, it is likely that owners of high value properties, that is, values of more than €1 million, would benefit from reductions in LPT liability due to the widening of the bands and the reduced rate. To address this, a higher rate will be applied to properties valued at more than €1 million by charging it at a higher mid-point rate on bands above €1.05 million - these are known as bands 12 to 19 - and introducing a third rate for properties valued at more than €1.75 million.
An important principle underlining the LPT is that by keeping the number of exemptions low, it helps to keep the tax rate low for those who are liable to pay it. Sections 10, 13, 14 and 15 of the Bill accordingly provide that the exemptions for first-time buyers and homes in unfinished estates will lapse. Section 16 provides that the current exemption in respect of pyrite-damaged properties will cease to apply for new applicants after the end of a two-year period following the enactment of this Bill. Any taxpayer qualifying before that date may avail of the exemption.
In relation to damaged properties, the Government has been very active in addressing the problem of pyrite damage and the more recent manifestations of mica-related damage in some western counties. Since 2014, approximately €166 million has been provided for the pyrite remediation scheme for certain eastern counties and County Limerick.In recognition of the stressful situation facing homeowners affected by pyrite and mica in certain counties, section 18 of the Bill provides for a similar temporary exemption from LPT for homes in those counties that have been damaged due to the use of defective concrete blocks in their construction and are eligible for the defective concrete blocks grant scheme.
Section 20 of the Bill provides that property valuations will be reviewed every four years, rather than the current three years. This provides a balance between the timely capture of changes in the property market and the need to limit compliance and administrative costs.
Section 21 provides that all new residential properties built between valuation dates will be retrospectively valued, as if they had existed on the previous valuation date. Revenue will provide assistance to property owners to determine the value. This will maximise the LPT base and ensure equity.
Section 38 implements the 2019 review group recommendation that the income thresholds for LPT deferrals be increased to €18,000 from €15,000 for a single owner and to €30,000 from €25,000 for a couple.
Section 37 provides for a reduction in the rate of interest on deferred LPT from 4% to 3%. The Bill contains a number of other measures intended to improve the administration of the tax. These amendments are in the nature of minor and technical adjustments.
In conclusion, I thank Senators for their attention. I look forward to hearing their contributions on the Bill, which I commend to the House.
As we had a good discussion about this at the finance committee last week, I will be brief. First, it must be acknowledged that this review has probably been long overdue, since 2013. I say that in relation to the revaluations. The longer we leave revaluations to be carried out, the harder it becomes to bring in the change. The other significant thing is that this Bill brings into the tax net more than 80,000 properties on which property tax has not been paid since 2013. Anybody who has served on a local authority and who has tried to balance the books on an annual basis will know that had that money been available, it might have allowed councils to defer the property tax increases of up to 15% that they have experienced.
We also had a good debate with the Minister. While the Minister is only collecting it, one of the huge issues around property tax is how it is distributed afterwards. We know the 20% equalisation fund will be phased out over the period. However, the whole argument is on the baseline figure of the Department of Housing, Local Government and Heritage, and on the self-funding element the Department uses an ongoing basis. The local property tax was introduced to restore local democracy, to make councillors responsible for their decisions and to have them in charge of their spending. When they lose the top 20% - and probably another 30% or 40% - based on baselines and the self-funding element, realistically we are not restoring that democracy. There is an opportunity there because there is a commitment from the Government that the top 20% will not be in existence any more after this year.
The Minister of State can come back on this but is this a change to the definition of a residential property? A number of people have been on to me about the definition of an acre, as well as about which structures on that acre are valued and which are not. Much of it comes down to whether it is of benefit to the residential dweller. Is it of benefit to their enjoyment in respect of that residential development? The specific question I was asked was in relation to Covid-19. We have seen many instances of people building offices or converting sheds outside into offices. Is that considered to be adding to the residential enjoyment or is it not? Could the Minister of State tease out some of the details of the exact definition during the process?
I will probably come in again later on during the amendments.
The Minister of State is welcome to the House. It was acknowledged during the financial crisis that the broadening of the tax base was important. At the time, it was one of the recommendations of the International Money Fund, IMF. The household charge and the LPT brought in a system of guaranteed income from households across the country. There were anomalies that became evident as time went on, including the fact that newer properties were not brought into the net post 2013. It was unfair on those that were paying that others were left out.
On the postponement of reviews, there was a concern as property values rose that people would end up paying more. The postponement of reviews and of leaving things the same meant that was not an issue up until this. The proposals will allow for changes to the methodology on the bands and the rates, which also is welcome. Any tax should be fair, equitable and kept under review. Anomalies should be closed. The impact of the tax should be assessed. Exemptions should be considered again where issues of fairness arise. I welcome that all moneys collected locally will be retained within the county. That is important, particularly for high-population and wealthier counties. However, the impact of equalisation also needs to be considered and the State must provide the funding needed for counties with lower populations. Such counties still have a large number of services that need to be provided and if they generate a lower level of LPT, that creates a shortfall within that local authority. That also has to be kept under review.
I welcome the fact that there will be more discretion for councillors to change the LPT rate. However, I always wondered why Ministers stand up here or in the Dáil Chamber in the month of October to present a budget. Local authorities get their allocations from the Department at the end of November and local authorities set their next-year budget in early December. However, it is at this time of year, months in advance of all that, when councillors must decide whether they will increase or reduce the LPT. I always found that strange and not best practice. I understand that this is to allow Revenue to set and generate the bills. However, there should be a process whereby councillors can make their decisions at the same time as the Budget Statement. They would then know what allocation they would get, not what they think they are going to get. Decisions would not be based on looking at what they got for the past few years, setting out what they expect they will get and then, based on that, deciding what is the budget. This will come up again in September and councillors will have to make those decisions. It is difficult and there should be a different system in place.
Local authority funding has been problematic in certain counties and, one could argue, in all counties. There is no county that is separate. I had meetings with officials in the Department of Housing, Local Government and Heritage as far back as 2016 about anomalies in Galway County Council funding. At that stage I was told that while they understood and accepted there were issues in Galway, nothing could be done until such time as the LPT review happened. First, that review will bring in the new houses that have not been billed before this. In addition, it will allow for whatever other changes will take place. On that basis, I am glad that the review is taking place. It will allow for additional funding to come to the local authority by collecting revenues from those who were not previously billed. However, it still raises the question of funding for local authorities. The LPT is not to be the full funding for local authorities except in those larger, richer and more well-off local authorities. The rates base is an area that needs to be modernised, as well as rates on businesses being charged on a per square foot basis and so on. There is a whole question in relation to funding for local authorities that needs to be looked at.
I welcome the changes proposed in this Bill. They are overdue and make it fairer and more equitable. We often hear certain people ask what do people get from their LPT and of course, the LPT balances the books of the local authority. The local authority provides an array of services. Not everybody will have a footpath or a street light outside his or her house but local authorities have an array of services. These include keeping the potholes filled, the hedges trimmed back and drainage works done, as well as community wardens and all else that is funded through the local authorities. It is important that they have a sustainable base from both LPT and rates and of course for central government to be able to come in to make up that shortfall. There needs to be a fair and equitable model for the funding of local authorities, which we do not have at the moment. Officials admitted to me that they do not know how the model was arrived at nearly 30 years go or whenever it was. There have been many changes since then, including the establishment of Irish Water and other initiatives. There are many different parameters that determine how and why Galway County Council, for example, gets a certain allocation from a Department. The officials I spoke to cannot fully explain how that allocation is arrived at, other than that they will give a proportionate allocation based on the previous year's allocation. It is difficult to say how the model was devised in the first place and whether it may have been wrong from the start. It is very hard to justify why Galway County Council, Meath County Council or any other local authority would get less than it might need to run its services. Galway, for instance, is way down the pecking order in comparison with counties of a similar size like Mayo, Kerry, Tipperary and Donegal. It is way down the scale in terms of the number of staff working in the local authority and the funding per head of population. We have an array of issues, including coastal protection and offshore islands, that add to the requirements for funding, but they are not entirely accounted for in the allocation we receive.
I welcome the Bill as a first step towards correcting the issues local authorities are facing. The larger issue of funding, including the model, type and level of funding, will not be sorted by these provisions, but they are a positive step in the right direction. There will be additional funding arising out of the legislation for local authorities and the Exchequer and, most importantly, it will allow for additional and improved services and, in some cases, the continuation of basic services.
As I may not see the Leas-Chathaoirleach later, I would like to wish him well and thank him for all his work this year. It is nice to see the Minister of State, Deputy Fleming, in the Chamber. He is very welcome, as always.
Sinn Féin is opposed to the local property tax and our reasons are clear. The tax, as designed, is not only a tax on assets but a tax on debts, such that many people who are liable for it may have debts worth as much as 90% of the value of the property against which they are being charged. This concern should not be readily dismissed as it is a real and immediate concern for many citizens. We need to consider the burden the tax places on households. On 6 July, the Joint Committee on Housing, Local Government and Heritage was told by witnesses from Revenue that, on average, 43,000 people defer payment of the LPT every year due to inability to pay. In 2019, 50,000 homeowners deferred payment, more than 48,000 of them because they were below the income threshold. Sinn Féin unapologetically flags its concern for the workers and families who see an interest bill accumulating for tax on their home, many of whom are saddled with mortgage debt or may even find themselves in arrears or negative equity. We believe the LPT is badly designed and unfit for purpose. Instead of a property tax on people's homes and, thereby, their debts, we favour the introduction of a wealth tax levied against assets. The issue we have with the LPT is that it does not take account of someone's ability to pay.
It is clear that this legislation is ill-conceived and ill-prepared. It contains serious flaws. The LPT is and has always been intimately connected with local authority funding. Local government relies on central government transfers and own-source revenues, such as commercial rates. Given the regional inequality that exists, which was deepened by the financial crash and barely recovering before the onset of the coronavirus pandemic, fiscal equalisation has been crucial for the delivery of local services. Fiscal equalisation is essential to protect financially weaker local authorities and their communities, and to correct the effects of regional inequality and the unequal distribution of sources of finance. Before the introduction of the LPT, equalisation was achieved through general purpose grants, which were determined on the basis of historic baseline supports. The Congress of Local and Regional Authorities of the Council of Europe, in a 2013 report on local democracy in Ireland, stated: "[The] system of distribution of grants to local governments from the Local Government Fund is not transparent and the rules have been set without consultation with local authorities". Little has changed with the introduction of the LPT. In this regard, I agree with Dr. Gerard Turley and Dr. Stephen McNena of NUI, Galway, that the current regime is not fit for purpose.
This legislation will coincide with local authorities retaining 100% of LPT receipts, thereby ending the redistribution of 20% of the tax revenue through the equalisation fund. This is an opportunity to redesign the equalisation model to ensure it is fit for purpose. In 2021, 20 local authorities received equalisation payments totalling €133 million. It is essential that the current equalisation fund and how it is distributed does not simply remain the same, with funding coming from the central Exchequer rather than LPT contributions.
The Minister of State has brought forward a Bill that contains serious flaws. The changes brought about by this legislation will result in 36% of homeowners seeing their bills increase, while workers and families who are unable to pay will continue to see their interest bill rise on payments they must defer as a matter of necessity. As I said, Sinn Féin is opposed to the LPT. It is a tax that is badly designed and has failed to deliver quality local services for local communities.
I join colleagues in thanking the Leas-Chathaoirleach for his work in recent months.
We need a wider array of wealth taxes in Ireland. That need has been driven home in the past year as we saw the very wealthiest become much wealthier during the pandemic. We have seen an increase in the wealth of many of the people on the rich lists at the same time as a large part of the population has been experiencing incredible financial stress. I am in favour of wealth taxes. We need to look to the wide array of assets, including stocks and shares, when seeking to mark people's contributions. I also support the local property tax. Its introduction was very poorly done and it is still a work in progress, but it is important to acknowledge that those who own a property, albeit with debt attached, are in a different situation compared with the vulnerability of those who have only income and nothing to sell or even walk away from. They include some of the most vulnerable families in Ireland. Lone-parent families, in particular, have the highest rates of poverty and deprivation and half the level of home ownership of other kinds of households in this State.
It is appropriate, therefore, that we have a property tax. I have a number of concerns, however, in regard to how it is being applied. Although I will address some of those concerns through amendments, the nature of a Finance Bill is that most of the proposals I might have put forward would potentially involve a cost to somebody. It might not be a cost to the State - in fact, some of the proposals might even have had a benefit to the State - but there certainly would be a cost to somebody and the amendments would, therefore, be ruled out of order. As a result, I am availing of the Second Stage debate to highlight some of my concerns.
It sends a poor signal when we have the Tánaiste talking in the past couple of months about how the people in Donnybrook whose houses have gone up by €100,000 and those in Ranelagh whose homes have increased in value from €535,000 to €647,000 are going to see a reduction in their property tax. It is a concern that this kind of message is coming from the Government. It seems to be the case that someone whose property value has gone up to €1.6 million will be paying a little less under the new bands. That may be reassuring for a very particular audience at a very particular time but it sends a really poor message in terms of progressive taxation, which is still supposed to be the policy of the State. Those messages were unfortunate and short-sighted if we want people to understand the importance of the LPT.
Any revisions of the tax should be progressive and should reflect the principles of progressivity. Will the Minister of State give us more information on the 11% of homeowners whose tax liabilities will go down? He referred to the mid-point rate. I do not know the extent of the revision but I know the bands are changing. In fact, three things are being changed, that is, the mid-point rate, the bands and the rates.What we want, therefore, are examples of how are we really protecting the progressive nature of this. Who are the 11% who are gaining out of this and how many of them are stacked towards the top of the scale? I am also concerned that the scale kind of peters out at €1 million or €2 million. What about properties worth €3 million or €4 million?
I have another concern, and some amendments to ask the Minister of State to look at it. There is a big difference between those who own a property, which may be their home or their family home, or even those who own two properties because we have a mechanism in the form a second home tax, and those who own 1,000 properties or 500 or 100 or 60 or 50. If we want to use property tax as a meaningful tool and if we also want to address some of the concerns the Minister of State will be hearing from the public, I suggest that we perhaps look at a different higher rate for those who own many properties. I will not read all the tiers I have set out as we will come to them in the amendments but consider those who own 100 houses or 100 dwellings or two apartment buildings or those who own 1,000 rental properties. Property tax may need to be changed and shifted on that. That might be something the Government is considering or something that can done through the current system, but it is something that would be useful. It would be really useful to have nuance and maybe more flexibility for local authorities, not simply to turn on or off the property tax or the amount involved but to be able to address these different situations. We talk about recognising specific circumstances and exemptions at the bottom, and there will be concern that some of the exemptions at the bottom are going to be phased out. Much as we recognise particular circumstances at the bottom with respect to vulnerabilities, we should similarly be recognising particular circumstances at the top with respect to people who have a particular ability to pay and a different capacity to pay.
When we engaged on this issue with the Minister for Finance, Deputy Donohoe, at the finance committee I asked him about the vacant property tax. Surely this is a tool we could use to address situations where there might be vacant properties. We were told there are very different situations where people might have vacant properties. This could be as a result of a bereavement but there may also be somebody who has 1,000 or 500 or 50 such properties. There are, as we know, apartment buildings in which half the units are left empty so we need to be moving on a vacant property tax and recognising that. When the Minister was before the finance committee, he told us that this is the gathering of information phase, that the vacant property tax will be coming later and that he would look at that based on the information. However, I am concerned that this Bill, as drafted, will tie the hands of the Minister for Finance and the Minister for Housing, Local Government and Heritage in respect of how that information will be used.
In section 31, which introduces a new section 39A, we have the information-gathering mechanism, which will include the asking of question as to is a property being used, is it empty and why is it empty. Then there is a clause which says that this information will not be used for anything other than the compiling of statistical information in respect of residential properties which are not in use. Thus, almost in advance, the Government is ruling out purposes it should be ruling in. The Government should be stating that it wants the information in question, that it is not attaching a tax to it at the moment but that it may do so in the future. Instead, the Government is stating that it can only be used for statistical purposes and that the data will not be available to Revenue if we decide next year to bring in a vacant property tax. It would be a very small change. I have amendments relating to it and I ask the Minister of State to consider accepting the principle, just to make it clear. We should not end up with a situation whereby if the Government does decide to bring in a vacant property tax we get another year's delay because the Department must do a full survey of everybody again in order to have the same information again for the purposes of a vacant property tax, when the exercise has already been done. That process being done twice would not be good value for money for the State.
On the question of fiscal equalisation, it is really important that this is not seen as the main source of revenue for local government because the position in the various areas across the country is very different. I am concerned in that regard. There should be progressivity in our funding and a move towards equality in how we fund our communities and regions in order that we ensure we do not simply reward those who are already wealthier.
I thank the Leas-Chathaoirleach and welcome the Minister of State. I do not envy the Department of Finance, which has been given the task of arranging this system of valuations for new rates. We are eight years on from the original valuation in 2013 and the Minister is correct in moving to regularise the revaluation of properties to a four-year cycle. The timing of this tax was and is very difficult for many people. However, the Government is trying to be fair to all citizens. It has brought in all new property owners who have not been in the loop since 2013 and a large number of estates classified as unfinished whose residents have not been paying the tax. They are being brought into the net. The Government has made significant attempts to ensure that the vast majority of people will not pay more tax as a result of this Bill. That is an important point to note. Only a small number of people will see their property tax increase, although I know this will not go down well with certain individuals.
I have some concerns about the equalisation fund. At present, more than 17,000 properties are registered for the local property tax in my county, Longford, and 79% of them are on the lowest bands of 1 and 2. Under the proposed new bands, more than one third of people in County Longford will get lower bills. While this is welcome news, the consequence is that there will be a shortfall of revenue for the local authorities of somewhere between €800,000 and €1.5 million. We will not know until Revenue comes up with the exact figures later this year. Consequently, we must ensure we match the shortfall some counties, including my own, will experience. Commitments have been given by the Minister for Finance on this to the effect that no county is going to suffer any reduction but I would like the Minister of State to put on record that this will be the case. The Government Deputy in my county has gone on the local media, putting it out there that there is going to be a shortfall in funding because of the legislation we are bringing in. Thus, that needs to be put on the record and clarified. There should not be scaremongering about how we are going to have a shortfall of more than €1 million in property tax revenue. That must be made clear.
When the tax was first introduced, we were told it was intended to improve services and infrastructure in each county. I firmly believe it has done so, particularly in my county. We must communicate to people what this funding is for and what services it actually funds in the counties because people do not realise it. I contradict the comments by the Sinn Féin representative. If one looks at the figures for the tax on houses in Northern Ireland, where Sinn Féin is in government, they are significant at £1,500 to £1,600. We are looking at putting in minimal charges here to look after our Civil Defence, library services and fire brigade services and provide public lighting in our towns and villages. That is just a small amount of what it does so we need to communicate properly to people that that is what it covers.
In my county, we have worked on this in a cross-party way with Fianna Fáil and Independents. Councils are allowed to increase the tax by 15%. A number of years ago, ours was the first local authority in the country that came to an agreement to increase it by 15%. What we have done with that 15% is pay back a loan for matched funding for infrastructural projects in our county. There was cross-party agreement that every district in the county would benefit from it and they have. We have match-funded our CLÁR, our outdoor recreation infrastructure, our town and village renewal scheme, urban regeneration and development fund, URDF and rural regeneration and development fund, RRDF. In the past three years, we have received three major RRDF and URDF projects of €10 million for Longford, €6 million for Ballymahon and €3 million for Granard. That is what we have done with that money. We have used it to match funds and cover a loan for the costs we have. When we went to the Department of Housing, Local Government and Heritage to put forward our case, we had this money in place. We have been supported by the Government in that, which is a positive.Over the last two years, probably 14 to 15 more local authorities have followed suit in what we have done because they have spoken to our head of finance. That is what that funding is for, which is to provide facilities in every single county. We need to communicate that to the people in each county that this is how the money will be spent. I fully support this revaluation and we need to highlight the infrastructure services and projects that are being funded by these moneys.
There has been some discussion about the local property tax, LPT, system and about its flaws. There is no denying that it is a blunt instrument and is flawed. It is not what any one of us would like to put in place but it is part of what I always understood to be a move towards self-financing of local authorities. As somebody who spent 11 years on Dún Laoghaire-Rathdown County Council, I have always welcomed the idea that local authorities would be self-sufficient and autonomous to the greatest extent possible. In fact, my experience, as both a Member of this House and as a member of a local authority, is that central government seems do things in exactly the opposite direction. It continues to take powers and discretion away from local government and from members of local government, from the people who are on the ground listening to the citizens in a way that officials either at central government level or at local authority level will never do. Something I would often have said in the council is that the chief executive of the council never knocks on a door and asks people what they think about an issue. They do not have time to do that and it is not their role. It is the role of the councillors and they are doing that every day of every week and of every month of the year. They know what people think.
I have always favoured the notion that they would have the real discretion to make changes and decisions at local level. The reality is that since the Planning and Development Act 2000, we have continuously stripped away powers from councillors and have continuously removed their discretion to make decisions in the interests of the people they represent. That is why I have always supported the idea of LPT. It makes sense to pay locally for local services but I also accept the criticisms of the system in terms of how flawed and blunt it is. That is why I also appreciate what is in this Bill because in some respects it updates the system. There are missed opportunities in other respects but the rebalancing is very important in that there are people who bought houses almost a decade ago who have not paid local property tax while their neighbours who have older houses have. There is a fundamental unfairness in that and it is very welcome that this Bill fixes that and creates a level playing field that should have been there. I understand, particularly in the aftermath of the financial instabilities ten years ago, why it took time to do that but it is welcome and it is about time it was done.
I note comments from my colleagues, Senator Carrigy and others, that when this was announced there was much concern among people that they would see an increase in their property tax. I spoke to a neighbour in Deansgrange recently who is on a fixed income, is a pensioner and is particularly worried about an increase she may experience. It is important to remind people that the vast majority of people will not experience an increase and that the 30% of households will see themselves move only one band. Hopefully, this will not represent a very significant change in what they have to deal with.
The real missed opportunities in this Bill are in respect of the discretion of councillors. They are restricted in how much they can vary the local property tax. I come from a local authority in Dún Laoghaire-Rathdown where we pay the highest rates of local property tax in the country. We are not, by any stretch, the wealthiest local authority although that is a common misconception. The reality is that we have a low commercial rates base so the property tax that is collected in Dún Laoghaire-Rathdown - it is also, incidentally, not the largest collection of property tax which I believe is Dublin Council - in the per-household-charge is higher than in any other local authority in the country. We collect about €50 million. In the past €10 million of that was immediately lodged in the equalisation fund, which I am pleased to see is also being rectified in this Bill. In a local authority like ours, it was always appropriate that we would adjust the rate being paid in Dún Laoghaire-Rathdown downwards by the 15% that is allowed under the legislation. It is still not appropriate to restrict that percentage. In 2012 when the original legislation came through, the idea always was that local authorities like Dún Laoghaire-Rathdown would have an opportunity to vary their tax downwards to reflect the fact they pay very high rates and that local authorities, like Longford, Carlow and others where the rates they paid were lower per household, would be entitled to increase their local property tax to reflect what they needed to take from it but also to reflect the individual burdens on households.
When I was a councillor on Dún Laoghaire-Rathdown County Council, and during the entire time Fine Gael has been voting on local property tax in this council, we have voted to decrease it for that reason, which is to reduce the very significant burden per household in this area. Last year, despite the votes of Fine Gael councillors to decrease it, it was de factoincreased by 17.7% which is a regressive move.
The missed opportunity in this Bill is that we could vest in councillors the trust to make the right decision for their area and about how much to vary it, upwards or downwards, and to take away that 15% restrictive margin that is there. That is one of the missed opportunities. Unfortunately, I do not have more time to discuss others.
I welcome the Bill, however, and it is about time that we put a level playing field in place and that we put a little bit of equality back between households. On that basis, I support the Bill.
I am pleased to see the senior Minister, Deputy Donohoe, has arrived. This shows the importance attached by the Government to this legislation as we wind up the session before the summer break. Various issues that have been raised and will be discussed with the Minister, Deputy Donohoe, on Committee Stage, which will be commencing in a few moments. I will make some observations on what has been said and on some of the points that have been raised.
This has been a very useful, important and interesting debate. Many of the issues raised here are probably matters which relate to the Department of Housing, Local Government and Heritage such as use of funds and equalisation. Our role is to collect the tax and many of the policy issues that have been discussed here in respect of local authorities would be for the Minister, Deputy O’Brien, in that Department, which Members will understand. Having said that, these issues impinge directly on the debate around local property tax and I will comment on them as much as I can.
Senator Casey mentioned the question of the equalisation fund. Members are coming to that issue from very different and diametrically opposed perspectives, which is fine and which is what a national Chamber should be about, and it is important to recognise that. There are changes, however, in that the funds collected will now remain locally. The obvious question then being raised today is whether there will be a shortfall for the local authorities which were the beneficiaries of the equalisation fund. There was a commitment in the programme for Government to deal with this. This was a commitment to strengthen transparency and accountability which may result in additional costs to the Exchequer in the absence of other changes. There is a commitment there then that there will be cost to the Exchequer if other changes are not introduced in respect of the equalisation fund. The intention here is not to penalise any local authority which will lose out as a result of this change.
The acre was mentioned. In many pieces of legislation things get legs during the course of a debate and the main issue here was to transfer this measurement to one we all know as all land measurements are now per hectare. All that is being required in this legislation, by and large, is to transfer this measurement to hectare. People felt that that change was needed and it is still equivalent to the old acre. I do not know if that is an Irish or English acre but whatever was understood to be an acre continues to be the case and is now being defined as 0.404686 ha.
Another question raised was about properties that had 4 or 5 acres or more than 1 acre attached to them. Logic tells one that the piece that forms part of the valuation is the land immediately around or abutting the house, including the driveway to the house. If someone has 3 acres out the back for grazing a pony this should not be substituted for the valuable property and the driveway. This is common sense and it is right to have this issue tidied up. In case there is any doubt on this point, 99% of people know that the land immediately abutting the house was the relevant portion. This just clarifies that one cannot substitute that more valuable piece of land, including the driveway in and out of the house, with the valuation for 3 or 4 acres that one might have adjoining the property which would have a much lower value in order to bring down the property value. Common sense prevails here. This is an important point of clarification and there is nothing more to it than that.
Senator Casey also raised the issue of the definition of residential property where some people may have converted some of the property to an office.Revenue will come forward with clear guidelines on that well before the evaluation date, once the legislation is enacted.
Senator Kyne mentioned the equalisation fund. He mentioned the timing of allocations to local authorities. Again, that is primarily a housing and a local authority debate. We understand the issue of timing, but most local authorities and chief executives are in consultation with the Department and can prepare their estimates in reasonable time on an understanding of what might come. They might have to be changed afterwards, but some local authorities get their estimates done very quickly, well before Christmas, while others take much longer. I would say to Senator Kyne to ask the local authorities that get their estimates through. The Senator said the valuation date for the local property tax is earlier than the estimates meeting. That has to be the case because the valuation date is 1 November and Revenue has to be in a position immediately after that to issue the new amounts people should pay by single payment or through the payroll system, which some people have to do, and an extra lead-in time is needed for that.
Senator Gavan opposes the tax, and his views on that are well known. He mentioned the equalisation fund and the deferral. This is good legislation. We are reducing the interest rate on deferred payments from 4% to 3%. That is significant. We are making the process better and more helpful. There are arrangements in place to defer a portion of the tax, not all of it, depending on income limits. We are increasing the income limits by which up to now if one was above a certain income one could not defer, so we are making improvements in that area. I know the Senator will be pleased to hear that, even though he opposes everything we are doing today.
Senator Higgins mentioned a number of issues, mainly vacant houses. That will come up on Committee Stage. We are collecting the information for statistical purposes only, and that is what is in the legislation. The Senator wants to know why the houses are empty, which is much more information. I suggest honestly that if we were to do what she suggests - and I think she will take this in good spirits - I believe she would be one of the first to say we were breaching data protection guidelines on information relating to individuals.
The Senator can come back to that on Committee Stage. We are advised that, under GDPR, to have such a wide-ranging collection of information without good reason could see us run into difficulties and jeopardise the information we can collect. The information we can collect will be helpful, and there is a GDPR issue as to why we cannot get more information on the property owners.
Senator Carrigy from Longford mentioned the issue of the spending on local authorities and said some local authorities are losing out. He said one third of people will pay less and the majority of people will not see an increase at all. He mentioned the question of how the allocation of the local property tax is spent. Again, that is a matter for local authorities and the Department of Housing, Local Government and Heritage. He raised the very interesting point that in Longford it was decided to use the extra money from the local property tax to help co-fund other projects on a county-by-county basis. Some people hand the money over and let the executive come forward with proposals as to how it is to be spent. I know another local authority where the entire increase in the local property fund through the annual adjustment is given over to the local councillors' discretionary fund in order that the local councillor, if he or she wants flashing lights for speed limits or footpaths in a town or village, has the authority to use that fund for that purpose. There are a great variety of ways in which this extra amount of funding can be utilised at local level. That is the essence of local government.
Senator Ward said this is a blunt instrument. He comes from an area that has the highest house values. Generally, the Government tends to fund about one third of all local government activities each year from the central fund. Approximately one third comes from commercial rates and approximately one third comes from other resources or funds such as parking charges plus central government capital funding for major projects the Government is funding, so there are quite a variety of streams.
I thank all the Senators for their contributions. I reiterate that most of what was said is for discussion at a housing committee meeting or a local government committee meeting, but it was very welcome to hear the views expressed and the general support for the legislation. We will now move on to the detail on Committee Stage.