Amendments Nos. 1 and 2 are out of order. Amendment No. 1 is in conflict with the principle of the Bill and amendment No. 2 is not relevant to the subject matter of the Bill as read a Second Time.
Finance (Local Property Tax) (Amendment) Bill 2013: Committee and Remaining Stages
Section 1 agreed to.
NEW SECTIONS
Amendments Nos. 1 and 2 not moved.
Amendments Nos. 3, 6, 10 and 17 are related and may be discussed together, by agreement. Is that agreed? Agreed.
I move amendment No. 3:
In page 3, before section 2, to insert the following new section:
“2.—The Principal Act is amended in section 2 by substituting the following for the definition of “chargeable value”:
“ ‘chargeable value’, in relation to a relevant residential property, means the price which the unencumbered fee simple of the property might reasonably be expected to fetch on a sale in the open market were that property to be sold on the valuation date in such manner and subject to such conditions as might reasonably be calculated to obtain for the vendor the best price for the property and with the benefit of any easement necessary to afford the same access to the property as would have existed prior to that sale, net of any outstanding liabilities on the mortgage of the relevant residential property;”.
I also wish to speak to the section in respect of amendments Nos. 1 and 2, which were ruled out of order. The Minister of State referred to recent ESRI research and suggested that the property tax has the advantage of being six times more job friendly than taxes on work and income. However, I argue that it is unfair and non-egalitarian because it contains only the tiniest element of taxation according to one's ability to pay. He noted that it is a type of wealth tax but, as I pointed out in my contribution to the debate in December, we are only taxing the house or the family home as opposed to the wider legal definition of property that would be encompassed by a wealth or assets tax. Even if this tax is more friendly to the domestic economy than a tax on income or work, how many additional people will it tip into mortgage arrears? The Taoiseach and the Tánaiste, in reviewing the programme for Government today, stated that they want most families on mortgage arrears to be offered a sustainable solution by next year. What will this tax on debt do for people who are in mortgage arrears?
Amendment No. 3 is grouped with amendments Nos. 6, 10 and 17. This group of amendments is designed to exclude certain categories of properties and persons. Amendments Nos. 3 and 6 seek to include liabilities arising from negative equity in the chargeable value under the terms of the tax. A property tax is meant to be a tax on an asset but people who live in negative equity own a debt not an asset. Given that they cannot realise any value from their property, they will be paying tax on their debts. This amendment would ensure that when a property is being valued the negative equity is deducted from the current market value. Amendment No. 6 re-emphasises this point, while amendment No. 17 repeats the proposition.
It says something about the Government if it believes it acceptable to tax a debt rather than an asset. The family home tax is full of such anomalies. People who live in the private rented sector will end up paying the tax even though they do not own the asset. Local authority tenants will face a similar fate. These anomalies demonstrate that the tax is not a property tax in the normal sense of that term. It is a tax on the privilege of living in a family home, irrespective of whether it is owned or rented, and regardless of whether it has any real value. I will be pressing amendment No. 3 for these reasons.
Amendment No. 17 deals with the negative equity with which many people are dealing. As my colleague, Senator Kathryn Reilly, pointed out, this is a tax on debt. People who are in debt will not get any relief. When rates were abolished in 1977, it was a retrograde step for local financing but it is neither fair nor equitable to introduce a property tax in the absence of relief for the many people who are in negative equity with large mortgages. The Revenue Commissioners point out that a tax has to be fair and equitable if it is to be applied. This is why I propose amendment No. 17 to deal with negative equity.
In tabling this amendment, the Sinn Féin Senator spoke about tenants. Another Sinn Féin representative, Eoin Ó Broin, stated that if council tenants are made to foot the bill they will be paying for properties they do not own. However, that is the norm in Northern Ireland. Private and council tenants pay property taxes. A party cannot take two different positions on tenants of a property.
A tenant in Northern Ireland does not own the house in the same way as a tenant in the Republic does not own the house. One cannot force a person in Northern Ireland to pay a tax when he or she is a tenant and not do the same in the Republic. It is the same principle that must be adhered to, irrespective of whether it is €1 or €500 a year. Sinn Féin's principles are all over the place and I cannot find a word in the English language to describe its policy. One could call it a cross-Border tax, because it is different on each side.
I support the amendment. It is reasonable to have different positions on different parts of the island in view of the fact that Sinn Féin is in an all-party government in Northern Ireland, but also in view of the fact that the rates system there goes back to direct rule. I do not see it as a perfect system but at least I am honest and can come into this Chamber and say I do not see it as the fairest or perfect system. I would like to see it reformed. I told the Minister on several occasions - it is a bit like "Groundhog Day" in this House - that we want to get fiscal powers for the Northern Ireland Assembly in order that we can make such decisions. Without that, the entire Assembly is constrained, including the party with which the Labour Party, Fine Gael and sometimes Fianna Fáil say they are affiliated, namely, the SDLP. It is interesting that all of the criticism in respect of what happens in the Assembly is directed at Sinn Féin but never at the SDLP or any of the other parties in the assembly. Obviously, that tells its own story.
It is not a 32-county party.
I like all the noise in the background when I speak.
The time is slipping by.
I remind the Labour Party about what it promised in its manifesto, because this goes back to the issue of negative equity. I wish to read a section of its manifesto, on page 16.
Does it relate to the amendment?
It is relevant to the amendment.
I do not want the Senator to wander too far from the amendment.
I have no intention of doing so. I will read directly from page 16 of the manifesto. It states:
Labour accepts that it will be necessary to introduce a site value charge, in order to prevent higher taxes on work. The Government has not, however, carried out sufficient work to allow such a charge to be introduced in the short-term. Further detailed study will be required to devise a fair basis for such a charge that takes account of the value of property in different regions, the need to exempt some categories of homeowners, and the need to take account of those who have recently paid large sums in stamp duty or who are in negative equity.
We have already highlighted the position of Fine Gael, which was opposed to an annual recurring charge. I am making the point that this was the position of both parties. Everybody, including Fianna Fáil, recognised before the election that a significant section of the population was in negative equity and bought at the wrong time through no fault of their own. They were victims of bad policies and the property boom and their houses might now be worth less than the amounts they paid for them. We have put forward a reasonable request in respect of dealing with the chargeable value. I again ask the Minister to rethink this issue. I know it is very difficult for him to do so when he is rushing through this Bill, which is one of the reasons we wanted more time to put forward suggestions constructively. Even when opposing the charge, it is again reasonable for us to try to take the rough edges off it, if we can, to make it a bit easier for those families in negative equity, which is what we are trying to do with this amendment.
Both the legislation and this amendment are unfair because they both have the effect of punishing the prudent. If somebody has paid off his or her mortgage with great difficulty over a number of years, he or she will still be paying for it, which is a pity. I have tabled an amendment to this section, but it deals with historic houses. Obviously we will not get to it, because the debate on this Bill is being guillotined. Would the Minister of State be able to stretch things and give me an answer? It has not been ruled out of order or grouped but simply states that residential property shall be regarded as a relevant residential property where the property is a building listed for protection as being of historic architectural or cultural interest in a special conservation area. That is in direct line with the Government's objectives, is limited by two factors and would help give the Government scope to protect the great historic houses that have been acknowledged in a debate in this House by a Government Minister within the past couple of weeks as being a very important element in the development of cultural tourism. I am thinking of houses such as Birr Castle, Westport House, Kilruddery House and Glin Castle. These will all end up derelict if we do not do something to protect them. This harks back to the days of punishing the alleged Anglo-Irish, although many of these people, such as the O'Conors of Clonalis House, are remnants of the ancient Irish nobility. We should think in a long-term fashion rather than destroy our cultural heritage through the operation of this Bill.
I will concentrate on the coherence of the amendment. It has no coherence. Sinn Féin's spokespersons have seemingly decided not to discuss property tax at all today and have concentrated their entire efforts on criticising the Government. That points to the populism of the party in the first instance and the generality of the Bill, and the party's popularity in this instance. We hear it said constantly that the property tax in the North covers medical and educational services as well as a vast range of other services. It is valued at about £1,200 per year. Sinn Féin seems to support it in the North, because it has been in power for I know not how long and has done nothing to repeal it.
I can offer a yawn.
The Senator is inclined to make a political point about another jurisdiction. I advise him to stick to the amendment and make his criticism more relevant because our time is very limited.
I appreciate how important this issue is and ask the Leas-Chathaoirleach to indulge me because I have no intention of trying to waste time in the Chamber. Would Sinn Féin include a commitment in its next election campaign to roll out in the South the model of which it seems so fond in the North and campaign in favour of that?
That comment is ultra vires.
I will leave it at that.
I am trying to be fair to all sides in the time left.
These amendments deal with the issue of negative equity and the proposals by Senators Kathryn Reilly and Darragh O'Brien to exempt the properties of those in negative equity. Obviously, we considered this issue, but were guided by the recommendations of the Thornhill report, which was the initial report for which the Government asked before coming to a full decision on this. The report made it clear that deferral systems are a better way to go. It is worth saying this does not apply to people with incomes of less than €15,000 and couples with incomes of less than €25,000. There are strong sections within the Bill which allow people in negative equity to defer this charge and tax until such time as they are up on their feet again. We have gone down the route of deferral as a means of helping people in negative equity.
It is worth pointing out that one of the promises my party gave at the time of the last election, which was supported by the Labour Party, was for an increase in mortgage interest relief for people who bought houses between 2004 and 2008 to recognise the fact that this cohort of the population was badly affected by negative equity. We delivered that in our first budget. I am not suggesting that this has made a huge difference to people's personal income, but it has made some difference and is what we said we would do during the last election. We are conscious of the difficulty experienced by people in negative equity.
That is why the deferral system is in place.
We have done everything in our power to keep the rates low. Senator Michael D'Arcy has stated the rate is 0.18%. We have given a commitment that neither this rate nor the position on valuations will change during the lifetime of this Parliament. As a result, there will be certainty for those who must pay six months worth of the tax this year and a full year's worth in 2014 in the context of what they will be facing. Some 80% of people live in homes with a valuation of €300,000 or less. If one took the latter amount as being the maximum, those in the cohort to which I refer would pay a charge of €540 per year.
That is a lot for some.
I accept that it is a lot of money in circumstances where people have very little. However, there are still those who can afford to pay it. We are confident that in the context of the deferral system which is being tweaked in the legislation before the House, we are doing our best to assist those of very low means or whose homes are in negative equity.
It is worth stating the Bill needs to be passed in order to give Revenue full powers to proceed with the next stage of the implementation process relating to the tax and also to allow it to give guidance. That guidance will be crucial for all homeowners in assisting them in understanding the valuations which have been arrived at. Where a person honestly values his or her house on foot of guidance from Revenue, there will be no further questioning of that value. If honest mistakes are made, people will not be criminalised. We are going to work to ensure the assessments which will be sent by Revenue in the coming weeks will reflect people's perspectives on value. However, there is a substantial degree of self-assessment involved. If people choose to challenge the system, they are entitled to do so in the context of the legislation. They must be able to show the basis for their valuation of their properties. If a person whose home is in negative equity or someone of very low means chose, for example, to defer payment for 20 years on the trot, the total liability at that point would be less than 5% of the value of the house in circumstances where it was to be sold.
I accept that people have genuine concerns about this matter. I have been advising elderly constituents and they should get their loved ones to pay the tax on their behalf at some point in the future. I accept this is a real issue for people, but it must be remembered that what we are talking about is such a small percentage of the total value of the property. The substance of the amendment relates to exempting people whose homes are in negative equity. We are of the view that the deferral provisions we have included are fair and balanced and that they will allow us to raise the tax, while also recognising the very difficult position in which those whose homes are in negative equity find themselves. We have gone as far as we can in terms of deferral.
When the Minister for Finance introduced the property tax on budget day and mentioned the deferral system, there was an element of relief among Government backbenchers who appeared to be of the view that there might be something positive in this. The sting in the tail is that the interest rate applicable to those who choose the deferral option is 4%. In effect, we are penalising people who cannot afford to pay the property tax by charging them interest. Why we have to do so is beyond me. This is clearly a punitive measure which is being applied to those who may be forced into opting for deferral. It is appalling that we would either give advice to people or that individuals, by virtue of their circumstances, will be obliged, as the Minister of State said, to ask their loved ones to pay their property tax when they die. Why is Senator Aideen Hayden gasping?
I gasped because I did not think promoting inheritance was part of Sinn Féin's policy.
I accept that certain individuals in the Labour Party say one thing outside the Chamber and then adopt a different position in respect of low and middle-income families when they are in the House. Regardless of whether those to whom I refer like it, I must make the point forcefully that we are referring to people on very low incomes who are being given the option to defer. If they choose deferral, it will mean that they will be obliged to pay interest. The Minister of State is essentially saying they should not pay the property tax and should allow their loved ones to pay it for them when they die. I do not believe that is fair. In the context of dealing with low and middle-income families, there are better ways to proceed and I certainly will not take lectures from the Labour Party on this matter.
It is not true to state the tax will remain the same up to 2016. I accept that the Government is not going to increase it, but we know that, regardless of the spin in this regard, local authorities have been given the power to increase the charge in 2015. They will also have the power to reduce the charge. We are all wise enough to know that if a local authority uses the powers at its disposal to do anything, it will be to increase the tax. It will certainly not be reduced. God only knows the level to which property tax will rise post-2016. The Minister of State referred to small and reasonable amounts and accepted that it would be difficult for some families to pay the tax. The average payments will be €225, €315 and €405 annually. Most people will broadly fit into one of these three payment categories. Any of the amounts in question will be huge for families genuinely struggling and suffering. There are better ways of raising the money required. It could, for example, be done by means of the income tax system rather than by imposing a tax on family homes which do not generate income. That is the core philosophical point I wish to make.
The Government has not done enough for people whose homes are in negative equity. It has not done enough across the board for those who are finding it difficult to pay their mortgages. Even in introducing this charge, it simply has not done anything to support the families to whom I refer. Where something has been done in the context of the deferral system, it is proposed to penalise those who take this option by obliging them to pay interest at a rate of 4%. That is not fair.
Whether unwittingly, the Minister of State appeared to give the impression that people should be very grateful that the amount would only be 5% of the overall value. As opposed to what - 100%? In the context of the overall value, 5% is an enormous amount. For the overwhelming majority, buying a home is their major investment and they pay for it for most of their working lives. Now they are supposed to be grateful that the call made on them at the end of the day will only be 5%, which is a vast amount of money. Let those involved take 100% because it is all moonshine.
Will the Minister of State reply to my query about heritage houses, etc? Someone very kindly drew my attention to the fact that what was proposed was being referred to as the "David Norris tax break" in a vulgar newspaper which I refuse to read. The person in question used a tongs to hold up the offending publication in order that I might read the relevant article from a distance. The matter in question relates to the position in Waterford and Limerick. I am delighted for these cities, but the principal core of Georgian houses is to be found in Dublin. That fact is not mentioned in the context of the tax incentive. Is it possible for the Minister of State to indicate where it will come into play? Will it be extended to other cities? The incentive only relates to what will happen in the future. Those who have already invested and completed the very hard work of restoration, year by year and on very modest incomes, are not included.
A number of Senators on this side raised concerns about those whose homes are in negative equity, those who paid substantial amounts in stamp duty and so on. We have asked the Minister to ensure this measure is kept under review and revisited should the need arise.
On being lectured and harangued by Sinn Féin, it is quite incredible to hear members of that party justifying inheritance. It is one thing to be obliged to take actions which we know are going to hurt people but which we believe to be correct; it is an entirely different matter to be obliged to listen to Sinn Féin preaching about income tax as though it were God's gift in the context of the country's taxation system and Government policies related thereto.
Sinn Féin is not actually accepting that income tax in this country has been regressive and our taxation system has been too narrow. For a very considerable period of time we have gone nowhere in terms of expanding the tax base. Instead of welcoming this measure, which will hit certain people like Denis O'Brien and other people whom I know I should not be mentioning in the House, and bringing into play assets owned by these very wealthy people, I am sitting here being lectured by Sinn Féin about the benefits of inheritance. Really and truly, it is quite gobsmacking.
The Senator should sit down; she has done enough damage.
I very much agree with Senator Aideen Hayden.
Of course, the Minister of State does. She has just given a Fine Gael rant.
No. This is a form of wealth tax. The Senator is opposing something which will be a significant liability-----
Bonds, shares, yachts; that is wealth.
-----a significant debt on people who have very substantial means and incomes in this country. I refer to the fact that the OECD has published information that Ireland has the second most progressive tax system in OECD countries, because of the adjustments occurring in recent years. The European Commission has stated that of the six most significant adjustments made by member states, Ireland was the most progressive country in terms of taking money from those at the top of the tree. This is internationally recognised. We have come through this very difficult period with those at the top rightly paying more.
They would say that; as they are forcing us to do these things, why would they not say it?
Senator David Cullinane suggests he wants a wealth tax, yet he is against this one where all the evidence shows that those who have very substantial homes and means will pay a hell of a lot more than other people. I find Sinn Féin's argument difficult to understand. It has no difficulty in imposing such measures in Northern Ireland. Sinn Féin in Northern Ireland claims it wants full fiscal autonomy from London. It claims it wants tax-raising powers but its members do not tell us how they intend to tax people in circumstances where the British taxpayer writes a cheque every single month-----
Could we stay in this jurisdiction, please?
-----which is put on the mantelpiece and which puts this subsidy in place. Sinn Féin members do not tell us how they would structure the taxation system when that subsidy would not be paid.
I do not care how they do that in Northern Ireland; I am worried about down here.
The issue is very simple. The 4% interest is simple interest, not compound interest. It is not 4% interest on accumulation but rather it is 4% on what has not been paid. That is fair, in my view. Senator David Norris argues that 5% is a hell of a lot but, in my view, 95% is even more.
We are very grateful.
If in a circumstance-----
I am on my knees.
It depends to whom one wants to leave it, of course. Some 95% is a substantial asset to be given to someone at some point. I listened to colleagues talking about the aspect of uncertainty and that local authorities can change it from 2015 onwards. I thought we were supposed to be in favour of giving significant fund-raising powers to local authorities which they can justify to their electoral base in their respective areas, notwithstanding the equalisation issue raised by Senator Aideen Hayden. I would have thought that was a good thing in a progressive, modern tax base, to give powers to local authorities to change the tax base locally for the purposes of doing things differently in the provision of local services. We stand over that.
I apologise for failing to reply to Senator David Norris earlier. While I am conscious that the upkeep of historic properties is performed at significant effort and expense to the residents and owners of those properties and that a very valuable contribution to our built heritage is made by these persons, I do not intend to allow exemptions from the local property tax for listed properties. Tax relief in respect of expenditure incurred on the repair, maintenance or restoration of the approved building or garden is currently available from income tax or corporation tax to the owner-occupiers of such approved properties. I am satisfied that this is a more appropriate way to target support in this area. Support is available through the taxation system for people who have these very substantial historic properties. We all have an interest in ensuring they carry out such restoration work. This is how relief will be directed rather than giving an exemption to those who currently own the property.
That is old hat and of no use.
As it is now 2.45 p.m., I am required to put the following question in accordance with the order of the Seanad of this day: "That amendment No. 3 is hereby negatived; that in respect of each of the sections undisposed of, the section is hereby agreed to in Committee; that the Title is hereby agreed to in Committee; that the Bill is reported to the House without amendment; that the Bill is hereby received for final consideration; and that the Bill is hereby passed."
Question put.
The Seanad divided by electronic means.
Under Standing Order 62(3)(b), I call for the division to be taken other than by electronic means.
As Senator David Cullinane is a Teller, he is entitled to call a vote through the lobby.
Question put:
The Seanad divided: Tá, 28; Níl, 19.
Tá
- Bacik, Ivana.
- Bradford, Paul.
- Brennan, Terry.
- Burke, Colm.
- Clune, Deirdre.
- Coghlan, Eamonn.
- Coghlan, Paul.
- Comiskey, Michael.
- Conway, Martin.
- Cummins, Maurice.
- D'Arcy, Michael.
- Gilroy, John.
- Harte, Jimmy.
- Hayden, Aideen.
- Healy Eames, Fidelma.
- Henry, Imelda.
- Higgins, Lorraine.
- Keane, Cáit.
- Landy, Denis.
- Moloney, Marie.
- Moran, Mary.
- Mulcahy, Tony.
- Mullins, Michael.
- O'Donnell, Marie-Louise.
- O'Keeffe, Susan.
- O'Neill, Pat.
- Sheahan, Tom.
- van Turnhout, Jillian.
Níl
- Byrne, Thomas.
- Crown, John.
- Cullinane, David.
- Daly, Mark.
- Leyden, Terry.
- MacSharry, Marc.
- Mooney, Paschal.
- Norris, David.
- O'Brien, Darragh.
- O'Sullivan, Ned.
- Ó Clochartaigh, Trevor.
- Ó Domhnaill, Brian.
- Ó Murchú, Labhrás.
- Power, Averil.
- Quinn, Feargal.
- Reilly, Kathryn.
- Walsh, Jim.
- Wilson, Diarmuid.
- Zappone, Katherine.
Tellers: Tá, Deputies Aideen Hayden and Paul Coghlan; Níl, Deputies David Cullinane and Kathryn Reilly.
Question declared carried.