Heather Humphreys (Cavan-Monaghan, Fine Gael)
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175. To ask the Minister for Finance if he will outline the rationale behind the valuation bands of the local property tax; if consideration was given to introducing more gradual bands than €50,000; and if he will make a statement on the matter. [22174/13]

Michael Noonan (Limerick City, Fine Gael)
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The 1982 and 2009 Commissions on Taxation, and the Thornhill Group, which advised on the design of the Local Property Tax, recommended the grouping of property values into broad bands. Grouping properties into valuation bands, with the rate applying at the mid-point of the bands – in effect creating fixed sum and certain charges for each band – can ease the valuation challenges. In devising the bands, a balance should be struck between the width of the bands and avoiding substantial liability differences between adjacent bands. The wider the band, the easier it is to carry out a self-assessment, but very wide bands run the risk of creating inequities between taxpayers as well as compliance challenges. The 2009 Commission on Taxation proposed five bands of €150,000 width up to €750,000; from €750,000 to €1 million; from €1 million to €1.5 million; and assessment on actual value over €1.5 million. The Thornhill Group recommended the creation of a sufficient number of taxation bands to allow property owners to place their properties in an appropriate valuation band with reasonable confidence. Taking account of all aspects, the Thornhill Group recommended an initial band of €0 to €100,000; bands of €50,000 in width for properties valued between €100,001 and €1,000,000; and no banding on properties over €1 million with the tax liabilities determined on the self-assessed actual value. These bands are significantly narrower than the proposals of the 2009 Commission. The Government accepted the recommendation of the Thornhill Group.

While there may be anomalies for properties that are valued close to the edge of the bands, this is unavoidable no matter what bands are chosen, and as indicated above narrower bands would make it more difficult for taxpayers to decide the correct band for their property. I am satisfied the current system of valuation bands strikes a good balance between ease of assessment and a smooth progression of liabilities between the valuation bands.