Joanna Tuffy (Dublin Mid West, Labour)
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To ask the Minister for Finance his views on a report carried out by the ESRI for the Interdepartmental Expert Group on Property Tax dated April 2012, in particular in relation to the section dealing with waivers (details supplied); if he will consider the introduction of different categories of waivers for people on lower incomes; and if he will make a statement on the matter. [7155/13]

Michael Noonan (Limerick City, Fine Gael)
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The ESRI report mentioned by the Deputy was commissioned by the Interdepartmental Expert Group on Property Tax (the “Thornhill Group”) and was charged with analysing a residential property tax which would yield specified annual revenue yields. The report notes that increasing the income thresholds will have an impact on the rate of property tax that will be applied. As the income threshold increases the rate will also be required to increase to achieve the same revenue yields.

The Thornhill Group, in its approach to exemptions, considered that the local property tax should be centred on the principles of equity, transparency and simplicity. In terms of these principles, it was also considered that a universal liability should apply to all owners of residential property with a limited number of exemptions. The Group considered that waivers were an inefficient and costly method of targeting reliefs, whereas voluntary deferrals can be used to address cases where there is an inability to pay.

The Government agreed with the Thornhill Group’s recommendations that exemptions should be limited and voluntary deferrals were more appropriate for addressing issues of inability to pay. Part 12 of the Finance (Local Property Tax) Act 2012 sets out provisions for deferral of the local property tax charge. The deferral of the charge is granted under specific conditions. Where the residential property is the sole or main residence of a liable person and her, his or their estimated gross income from all sources does not exceed €15,000 for a single person or €25,000 for a couple during the year covered by the return, she/he/they will be eligible to apply for full deferral of the LPT charge.

In addition, for income stressed owner-occupiers who have an outstanding mortgage, an adjusted gross income limit will apply. In these cases, the income thresholds of €15,000 or €25,000 may be increased by 80% of the annual mortgage interest payments. This type of deferral is available until the end of 2017.

Moreover, owner-occupiers may be eligible to apply for partial deferral where the gross income from all sources is less than €25,000 in the case of a single person and €35,000 in the case of a couple. For income stressed owner-occupiers who have an outstanding mortgage, these thresholds may also be increased by 80% of the annual mortgage interest payments. In these cases the owner-occupier will qualify for deferrals of 50% of the LPT liability and the balance of 50% of the tax must be paid.

In recommending the income thresholds the Thornhill Group had regard to the analysis from the ESRI report. An income level of €25,000 for joint and co-owners/spouses/civil partners/cohabitees was recommended in order to enable most households in the lowest 40% of income levels to have the option of deferral. This is considered appropriate, having regard to the findings in the ESRI study regarding potential impacts on households and having regard to the need for balance and equity in terms of the burden thereby imposed on those with higher (but still average or below average) incomes.

The income level of €15,000 for a single person is derived by applying an “equivalence” scale used by the ESRI. That scale is broadly reflected in social welfare payment rates i.e. for any given payment type, such as Jobseeker’s Allowance or State Pension, the payment rate for a couple is broadly 166% that of a single person and is widely accepted internationally.

The Government accepted the income thresholds for a full deferral recommended by the Thornhill Group, and adapted the income thresholds for a partial deferral so that they are €10,000 rather than €5,000 above the thresholds for a full deferral.

I do not plan to introduce different categories of waivers for people on lower incomes.