Mick Barry (Cork North Central, Solidarity)
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94. To ask the Minister for Finance if he will report on the impact for households of the changes to the local property tax; and if he will make a statement on the matter. [31777/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Programme for Government - “Our Shared Future”– includes a commitment to bring forward legislation in relation to the Local Property Tax 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 the LPT, into the taxation system.

Accordingly, the Government recently gave its approval for the General Scheme of the Finance (Local Property Tax) (Amendment) Bill 2021 which has been published. The measures proposed for this Bill will fulfil the Programme for Government commitments in this area and will secure the future of the Local Property Tax. Properties that were previously exempt or fell outside the tax will now be brought into scope.

The Government has agreed that a modified version of scenario 5 of the 2019 Inter-Departmental Review of LPT should form the basis for the calculation of future LPT liabilities. As outlined in the 2019 Review, there are significant gains to progressivity from the adoption of a scenario 5 approach to a new method for liability calculation. The Review included a Distributional Impact Analysis using the ESRI SWITCH Model (Simulating Welfare and Income Tax Changes) tax and benefit micro-simulation model, which allow an assessment of how regressive or progressive the impact of the different policy scenarios would be for households.

It estimated that scenario 5 would result in average increases of 0.40 per cent to households’ equivalised disposable income as a result of the measures. There would be a broadly progressive trend, with households in the first two deciles gaining the most in relative terms at 0.46 per cent and 0.43 per cent respectively, while households in the top three income deciles experience below average gains of 0.37 per cent. The proposed approach provides for a new valuation band 1 from €0 to €200,000, with an LPT charge fixed at the current rates for bands 1 and 2, of €90 and €225 respectively. This results in the vast majority of current band 1 properties remaining in the new band 1 and continuing to pay the same amount as presently. The approach also provides for higher rates above €1.05million and above €1.75 million. Both of these measures are designed to further improve the progressivity of the tax.

The Government has decided to both cut the rate of the tax and widen the bands to make the changes affordable. This means that the majority of homeowners are likely to see either a decrease or no change. Where increases arise, the majority will be a single band (€90), notwithstanding the significant increases we have seen in property values since 2013. The overall structure of the tax, which is broadly understood and accepted, is being maintained.

I look forward to publication in due course of the Finance (Local Property Tax) (Amendment) Bill 2021.