Tax Collection

I thank the Minister of State, Deputy Cuffe, for being here and the Cathaoirleach for choosing my Adjournment matter.

I want to raise an issue in relation to the second home charge, which is very simple. Many people have been acknowledging the fact for the past year or more that they have second homes. This is a voluntary disclosure and people are making it willingly. Around this time last year many people would have made their first payment of €200. They are now getting notices three months after the July deadline to the effect that their second payment was due then, and they are having penalties imposed of €20 a month, equivalent to about €60 in many cases.

Confusion has arisen from the fact that this payment did not start at a particular point in the year. Therefore, if a person had paid around this time last year, he or she would assume the payment was to be made about this time this year. If one is taxing one's car or renewing car insurance, a television licence or dealing with any of the normal annual charges one is presented with a warning notice, perhaps a month in advance. In the case of the second home charge, despite the fact that people have come forward and want to be in the legal system, there is no prior warning that the deadline is looming. It might be argued that there are advertisements on television and in the newspapers saying the payment must be made, but if one has made such a payment, and on the basis of every other type of annual payment awaiting notice from the local authority or the body responsible before paying the second instalment, the concern is understandable.

The reason I raise this issue is that I believe many people are being unfairly penalised and not because of something they deliberately tried to avoid. Perhaps there are people who have yet to declare they have a second home, but I am referring to people who have come forward and want to be legal and in the system. They believe they are in the system, and yet the local authority cannot be pre-emptive and warn them. It can, however, be reactive and issue a notice saying they are three months in debt and that there is a €60 fine on top of the €200 payment that has to be made.

A number of people have approached me and asked me to do their payment. The system in place at the moment is far from user-friendly. I commend the people in the local authorities dealing with the fall-out because the system is not one that people can cope with very easily. Unless one has been very assiduous as regards pin numbers, passwords etc. it can be difficult and many people are in genuine difficulty at the moment in this regard. I should like to see a much more simplified system. I believe the local authorities could collect this charge as it does motor tax and other levies. People should get a warning before, not after the event and the cases of those who have been awarded penalties of €20 a month should be looked into where their status has already been declared. If someone is found to have a second house who did not declare this last year, that is different, but I know of many people who wanted to be within the system and genuinely cannot understand why they are being warned after the deadline that they now owe €60. That might not sound like a good deal of money, but for the people I am talking about many of those second homes have not been let. Many have been let at a much reduced rate compared to other years. Every cent and euro has been battled for and many might have sold a second home were it not for the fact that its value had depreciated significantly and they now find themselves in negative equity.

I am looking for a commonsense response to this matter and I am asking for a consumer-friendly approach in relation to the system.

The Local Government (Charges) Act 2009 gave effect to the Government's budget 2009 decision to introduce an annual charge on non-principal private residences. The charge was set at €200 and liability for it falls, in the main, on owners of rental, holiday and vacant properties. The intention behind the introduction of the charge was not only to help close the gap between expenditure and revenue but also to broaden the revenue base of local authorities. Proceeds from the charge are being paid to and retained by local authorities and are being used to fund the provision of local services.

The introduction of the charge was significant in that it represented a dedicated new source of funding for local authorities. Senators will be aware that the need for local authorities to have access to additional sources of local finance has been a topic of regular mention. It has been observed that by international standards, the revenue base of local authorities can be viewed as being relatively narrow, with local authorities here being disproportionately dependent on central government funding. The Act is important in that it introduces a relatively stable local source of funding for local authorities that is not, among other things, subject to the volatility associated with transaction-based activity. As such, it represents an important step change in how local government is financed.

The Act is structured from a starting position of a universal liability for the charge in respect of residential property. Liability arises each year on a point-in-time basis which, from 2010 onwards, is 31 March in each year. A number of exemptions from the charge are included, the most significant being where a property is the owner's sole or main residence.

The charge can be viewed as a type of self-assessment because it is for the owner of the property in question to assess in the first instance whether there is a liability to pay the charge. Given the relatively modest level at which the charge is set, it was considered important to minimise the costs associated with its collection. Accordingly, local authorities are not required to issue bills or invoices for the charge. In many cases local authorities have been proactive in reminding individuals who registered property in 2009 of any liability arising in 2010. Some local authorities have sent text message reminders to customers who provided mobile phone numbers, while others have written to customers who registered and paid in 2009.

While the Act does not place any onus on local authorities to issue reminders and doing so is entirely at the discretion of the local authority, the Department of the Environment, Heritage and Local Government continues to emphasise to local authorities the importance of good customer service in this regard. The introduction of any compulsory invoicing procedure in respect of the non-principal private residence charge would make it significantly less cost-effective to operate and increase the administrative and resource burden in its implementation. In the current economic climate, with our emphasis on reducing inefficient work practices as well as public service numbers, such a move would be contradictory and retrograde. I have no doubt the public welcomes efficient practices which mean that less tax paid by the public is spent on bureaucracy and unnecessary and unwieldy administration.

To date, the non-principal private residence charge has raised more than €66 million in respect of 2009 and in excess of €61 million so far in respect of 2010. By these standards, the introduction of the charge has been successful and the figures demonstrate that the public is willing to play its part in keeping costs down and maximising effective use of tax income by being proactive in registering for and paying the charge. I have no plans at this time to amend the legislation dealing with the system of collection of non-principal private residencecharges.

I thank the Minister of State for his response. I agree that the NPPR charge is an important funding mechanism. No one disagrees with that. The difficulty is that there is a seeming sleight of hand to do with the self-assessment aspect of the charge. Warnings are sent for all other taxes and charges. If local authorities can spend money reminding people of the charge after they have forgotten to pay it, why can they not spend it reminding them beforehand?

The Minister of State talked about efficient use of public resources. A local authority — I will not say which one — recently sent out notifications and has since been inundated with inquiries from people who are in a panic about the €60 charge. The person who should be dealing with it is on holidays. The response in the local authority has been manic, according to those I have spoken to, and this is generating a lot of work for all the people in that section. Surely if the local authority can remind someone of the charge three months after it is due, it could have reminded him or her three weeks before it became due. Will the Minister of State contact with local authorities and ask for a review of how the system is working?

The Senator's point is made. We have discussed it at length.

The system is new and I accept that the charge is a good source of income, but there are difficulties that I hear about when I talk to individual staff members.

We have dealt with that matter.

It would be of great value to the local authorities and to the Minister of State if they came together to discuss this issue.

The last thing I or the Minister, Deputy Gormley, wish to do is to micro-manage local authorities. We want to give local authorities more powers and we want them to be proactive and do what is right in their individual locations. The fact that, according to the Senator, in one local authority everything is stalled because one person is on holiday represents everything that is wrong with local government. The Croke Park deal is all about change management and about ensuring the right number of people are in the right place, at the right time, making the right decisions.

If no notice is going out because one person is on holidays, surely change is needed within that local authority. It is up to the manager in question to manage his or her staff better. I have strong views on this issue. If a local authority, because of one member's absence, is incapable of reminding people of a charge that is due, then we are in need of substantial local authority reform. Within some other local authorities, e-mail or text message reminders are sent out. If paper reminders are cost effective, the local authority should send them out. It does not make sense for the Department to micro-manage every last aspect of a local authority's work from the Custom House. That does not represent good or effective local government and is not conducive to the taking of wise decisions by local authorities.

The Seanad adjourned at 2.15 p.m. until 2.30 p.m. on Wednesday, 6 October 2010.