I move: "That the Bill be now read a Second Time."
The objective of the local property tax introduced in 2012 is to broaden the domestic tax base and to replace some of the revenue from transaction-based taxes with an annual recurring property tax. Our reliance in the past on transaction-based taxes proved to be an unstable source of Government revenue. In contrast, the experience internationally has been that property taxes are a stable and secure source of funding. Stability should be at the core of our public finances now and in the years ahead. Moreover, the local property tax enables us to achieve the goal of stability in a way that does not directly impact on employment. This Government has been resolute in its determination to do all in its power to protect and support the creation of jobs. As a measure which is a tax on assets, not employment, the local property tax will not adversely affect job creation.
The local property tax is fair and equitable, as the owners of the most valuable properties pay the most. Properties valued over €l million are subject to a higher rate of 0.25% on the excess over €1 million. The local property tax legislation provides appropriately in relation to ability to pay and conforms to international norms. The local property tax is now well established as an important element of our taxation system. It is essential that its position is maintained and, as research, including recent reports I have read from the OECD, and experience internationally consistently show, taxes on immovable property are among the taxes that are least detrimental to growth. We all want to see our economy continue to grow at sustainable levels into the future.
Given its significance, and conscious of the concerns of home owners over increasing property prices and potential effects on their local property tax liabilities, particularly in urban areas, the Minister for Finance asked Dr. Don Thornhill to conduct a review of the operation of the local property tax, LPT. The review focused in particular on any impacts on LPT liabilities due to property price developments over recent years. Dr. Thornhill is well known to Members of this House as a distinguished former public servant who chaired the interdepartmental group on the design of a local property tax in 2012.
I thank Dr. Thornhill, on behalf of many of us, for his work on this report.
In his report on his review of the LPT, which was published on budget day, Dr. Thornhill makes a number of recommendations. His main recommendation is for a revised system whereby a minimum level of LPT revenue in each local authority area would be determined by Government, ideally having regard to the apportionment between local authority areas of the historic yield. This, in turn, would allow for the estimation of LPT rates for each local authority area and the application of these by taxpayers and Revenue. Local authorities could adjust this rate upwards by a factor of up to 15%. This new system is recommended by Dr. Thornhill with a possible interim deferral of the next valuation date until November 2018 or November 2019. The Minister for Finance announced in budget 2016 that he would propose a postponement of the revaluation date for the LPT from 2016 to 2019. The Bill is designed to give a statutory basis to that commitment. The deferral of the revaluation date means that home owners will not be faced with significant increases in their LPT in 2017 as a result of increased property values. This gives sufficient time for the other recommendations in Dr. Thornhill's report to be considered fully by the next Government.
In addition to the postponement of the revaluation date of residential property for LPT purposes, the Bill will give effect to two of the recommendations in the report, involving LPT relief for properties affected by pyrite, and relief for properties occupied by persons with disabilities. The legislation provides for a relaxation in certain limited circumstances of the requirement for the certification of pyrite damage by a competent person for the purpose of LPT relief. Moreover, in respect of reliefs for properties occupied by persons with disabilities, the changes currently being administered by the Revenue under its care and management provisions will be covered by the legislation, dispensing formally with a requirement that adaptations to property had to have been grant aided by a local authority. It is showing more flexibility regarding how the properties people with disabilities live in interact with the LPT system. Eligibility for LPT exemption for properties occupied by incapacitated persons is being relaxed in order that they will no longer, for example, have to have been the recipient of a court award or an award from the Personal Injuries Assessment Board, PIAB. I will elaborate on these later. Issues relating to the implementation of other recommendations in the Thornhill review report will be a matter for consideration by the incoming Government.
I will outline to the House the main provisions of the legislation. Section 2 concerns a minor technical amendment to section 3 of the principal Act to correct an omission in a cross-reference to the sections contained in Part 2. Section 3 amends section 8 of the principal Act, which relates to an exemption from the charge to local property tax for second-hand properties purchased during the year 2013 and occupied by the purchaser as his or her main residence. The section, as introduced, specifies the period of exemption as the liability dates in the years 2013 to 2015, inclusive, which dates correspond to the years 2013 to 2016, inclusive. The general rule, contained in section 14 of the principal Act, relating to the treatment of properties exempt on a particular valuation date is that they continue to be exempt until the following valuation date. As a result of the retention of the current valuation date of 1 May 2013 for an additional three years, the next valuation date will be 1 November 2019 instead of 1 November 2016. The amendment is required to change the reference in section 8 to 2016 to 2019 in line with the postponement of the next valuation date until 1 November 2019.
Section 4 amends section 9 of the principal Act which relates to an exemption from the charge to local property tax for new properties purchased from a builder in the period from 1 January 2013 to 31 October 2016, which is the date immediately preceding the deferred valuation date of 1 November 2019.
Section 5 amends section 10A of the principal Act, which relates to an exemption from the charge to local property tax for certain properties that have been damaged by pyrite. As recommended by Dr. Thornhill, this exemption is being extended to include some additional scenarios. Up to now, the exemption has been available for properties that have been certified by a competent person such as an engineer as having significant pyrite damage following assessment and measurement in accordance with regulations made by the Minister for the Environment, Community and Local Government. Currently, Revenue is precluded from approving an exemption where a property owner has not obtained the required certificate of damage. Dr. Thornhill recommended that the exemption continue on this basis. However, he considered it should be extended to certain properties that have been shown to have the required level of damage but that have not been certified by a competent person in accordance with the relevant regulations. When the exemption was introduced it was envisaged that all properties that would be accepted into the remediation scheme to be operated by the Pyrite Resolution Board would undergo testing of the underfloor hardcore building material and certification of the level of pyrite damage. However, in some cases, the board is satisfied that the property has the required level of damage without carrying out such testing to verify this. In the absence of testing, the certificate of damage completed by a competent person that is required by Revenue is not available. For this reason, Dr. Thornhill recommended that evidence of acceptance into the remediation scheme be accepted by Revenue in lieu of this certificate.
Dr. Thornhill also considered that properties that are remediated as a result of a successful claim against an insurance company should be exempt. This could happen where builders have insured their properties against structural defects or property owners have insurance policies that provide cover for structural defects. The rationale for this extension of the exemption is that an insurance company would only pay out on foot of a claim for the cost of remediating a property where it was satisfied that the presence of pyrite had caused significant damage to the property. A similar rationale underlies the recommendation that the exemption be extended to those properties that are remediated by the builder or property developer who built the particular property. It was considered that remediation, or the provision of the funds for remediation, would happen only where the builder was satisfied that the presence of pyrite had caused significant damage to a property. While builders may unilaterally volunteer to remediate a damaged property, remediation may also come about following the institution of legal proceedings against a builder or against the person who provided the building material containing the pyrite. The changes are being implemented retrospectively. Thus, in the case of remediation by the Pyrite Resolution Board, the effective date will be the date of acceptance into the remediation scheme. In the case of remediation by insurance companies and builders, the effective date will be when the remediation has been completed and certified or when sufficient funds to carry out the remediation have been provided by the relevant party.
Section 6 amends section 10B of the principal Act, which relates to an exemption for residential properties that are acquired because of their suitability for occupation as a residence by certain severely incapacitated individuals or that are adapted to make them more suitable for this purpose. Eligibility for the exemption depends on an individual being permanently and totally incapacitated, because of a mental or physical infirmity, from being able to maintain himself or herself. When this exemption was introduced, an incapacitated individual was required to have received an award from the PIAB or a court in respect of a personal injury or, alternatively, to be a beneficiary under a trust that was established specifically for the benefit of the individual. However, in practice, there are individuals who are permanently and totally incapacitated to such an extent that they are unable to maintain themselves and whose condition is so severe that it dictates the type of property they can live in and who would be eligible for the exemption were it not for the fact that they have not received the required award or benefited from a public trust fund. For this reason, the Minister for Finance decided in May 2014 to relax these conditions. The exemption no longer depends on the receipt of an award from the PIAB or a court or the establishment of a public trust fund for the disabled individual's benefit. Instead, the nature and extent of the individual's incapacity is established by the submission of relevant information to Revenue. The individual's doctor is required to provide information on the individual's condition and why the particular property or adaptation was considered to be necessary. The Minister for Finance asked Revenue to implement this new procedure on an administrative basis until he had the opportunity to make the necessary legislative amendments, which we are endeavouring to make under the legislation.
The Government agreed to the Minister for Finance's proposal to postpone the next valuation date for local property tax from 2016 to 2019 in line with a recommendation made by Dr. Don Thornhill in his recent review. The valuation date is the date on which property owners are required to establish the market value of their properties. Section 7 amends section 13 of the principal Act to retain the current valuation date of 1 May 2013 for an additional three years up to and including 2019. The Bill provides for the next valuation date to be 1 November 2019 instead of 1 November 2016. This postponement means that property owners will not be faced with significant increases in their local property tax liability in 2017 as a result of increased property values since May 2013. It also allows sufficient time for the other recommendations made by Dr. Thornhill to be considered fully by all political parties and Independent Members and for decisions to be made by the incoming Government.
Section 8 amends section 14 of the principal Act which contains the general rule in relation to the treatment of properties that are exempt on a particular valuation date.
Such properties continue to be exempt until the following valuation date.
Section 9 amends section 15A of the principal Act, which relates to a relief that is available in respect of certain properties adapted to make them more suitable for occupation by a person with a disability. The relief takes the form of a reduction in the chargeable value of a property where the adaptation work has the effect of increasing the chargeable value. A condition for the relief, as introduced, was that the adaptation work had to be grant-aided under one of the local authority schemes available for this purpose. However, as I stated, in practice there are people with a disability who occupy properties that have been adapted to make them more suitable for this purpose but where, for various reasons, the adaptation work was not grant-aided by a local authority. For this reason, the Minister decided in May 2014 to relax this condition and the relief no longer depends on the receipt of a local authority grant. Instead, the nature and extent of the disability is established by the submission of relevant information to the Revenue Commissioners. The disabled person's doctor is required to provide information relating to the disability and why the particular adaptation was considered to make the property more suitable for occupation. At the request of the Minister for Finance, this was implemented on an administrative basis and this Bill will give effect to the procedure in legislation and on a retrospective basis.
In addition to this new procedure, Dr. Don Thornhill recommended a change to the way in which the allowable reduction in the chargeable value of a property is calculated. Currently, the allowable reduction is linked to the maximum grant that would have been payable under the relevant local authority scheme and to the amount of the increase in the chargeable value of a property that is attributable to the adaptation work that was carried out. This is being changed to a reduction of a fixed amount of €50,000, which coincides with the width of the local property tax valuation bands. This change will ensure most people who carry out adaptation work that increases the chargeable value of their property will benefit from a reduction in their local property tax liability of the amount attributable to each one-band increase in value, which is €90. This new method of calculating the allowable reduction in the chargeable value of a property is being implemented with effect from the next liability date of 1 November 2016 with respect to local property tax that will be payable for 2017.
Section 10 amends section 35 of the principal Act, which relates to the submission to the Revenue Commissioners by liable persons of returns relating to residential properties. The information to be included on a return includes, for example, the liable person's assessment of the market value of the property, a claim for an exemption or a deferral of payment and the preferred payment method. In the normal course, a liable person who submits a return relating to a particular valuation date does not have to submit another return until the following valuation date, when the market value of the property has to be reassessed, unless circumstances change in the intervening period. As a result of the retention of the 1 May 2013 valuation date for an additional three years, the number of years for which returns do not have to be submitted is also extended. This amendment provides for an extended period that includes the year 2019.
Section 11 amends section 153 of the principal Act, which contains the list of bodies from whom the Revenue Commissioners may request information. The Revenue Commissioners may only request information that it reasonably requires for the purposes of establishing, maintaining and ensuring the accuracy of its register of residential properties and its administration of the local property tax. The list of such bodies includes, for example, the Local Government Management Agency, the Private Residential Tenancies Board, the Minister for Social Protection and the National Asset Management Agency. Following from other amendments made in the Bill, this amendment adds three new bodies to the list from which information may be requested to verify eligibility for an exemption being claimed by a liable person. The Pyrite Resolution Board may be asked to provide information on properties accepted into its remediation scheme. The Personal Injuries Assessment Board and the Courts Service of Ireland may be asked for information on awards made to certain individuals with disabilities.
In short, the Bill attempts to postpone the revaluation date to 2019 to provide certainty to people, put on a legislative basis the more flexible conditions that have been put in place on an administrative basis since 2014 for people with disabilities and adaptations to their property and how it interacts with the local property tax, and make much sought after and much-needed changes relating to homes affected by pyrite. I commend the Bill to the House.
