Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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110. To ask the Minister for Finance the basis on which his Department set the new vacant home tax at three times the value of the LPT; his views on whether it will be adequate to bring vacant homes back into use; and if he will make a statement on the matter. [55850/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy is aware, the Vacant Homes Tax (VHT) is a new measure announced in Budget 2023, which aims to increase the supply of homes for rent or purchase to meet demand. Further detail on this measure is set out in the Finance Bill which was published on 20 October.

As stated in my Budget speech, this measure aims to increase the supply of homes for rent or purchase, rather than raise revenue. In developing a new tax, an important consideration is simplicity, it is important to ensure that the tax is easy to understand and to administer. This is why I chose to set it at a multiple of a property’s basic local property tax charge as the LPT system is well understood. The purpose of the VHT is to encourage behaviour change. Accordingly, the rate should be set at a level that will influence property’s owner’s decision making. I believe that a tax charged at three times a property’s basic local property tax charge represents a considerable financial penalty to those who leave properties vacant, and will incentivise property owners to bring such properties back into use.

The rate means that, for example, the owner of a vacant residential property valued at €250,000 would face a VHT charge of €675 in addition to their annual LPT charge of €225.

The owner of a property valued at €400,000 would face a VHT charge worth €1,215, in addition to their annual LPT charge of €405, while the owner of a property valued at €500,000 would face a VHT charge of €1,485 in addition to their annual LPT charge of €495.

While a higher rate would mean a greater yield, the policy intent of a vacant homes tax is not to raise revenue. In setting the appropriate rate for the tax, I believe that care must be taken to get the balance right between achieving the objective of encouraging the use of available housing, without excessively penalising a limited group of property owners.

As this is a new measure, it is important to see how the tax operates after coming into effect, and then make an assessment as to whether it is working. My Department will monitor the tax and if it is not considered to be effective in bringing more properties into use, then I will have no hesitation in reviewing the measure including the rate.