The local property tax was introduced in 2012 and was designed to serve a dual function. First, it provided a stable funding base for the local authority sector, incorporating appropriate elements of local authority responsibility. As such, it strongly reinforced local democratic decision making and encouraged greater efficiency by local authorities on behalf of their electorates. Second, it delivered significant structural reform through broadening the base for taxation in a manner which does not directly impact on employment. Accordingly, it contributed to meeting immediate financial requirements of the EU-IMF programme in place at the time of its inception. The local property tax has met this objective and has replaced some of the revenue from transaction-based taxes with an annual recurring property tax.
We know only too well how our reliance on transaction-based taxes proved to be an unstable source of Government revenue in the past. By contrast, international experience has shown that property taxes are a secure and stable source of funding. No one will deny that stability in its public finances is precisely what Ireland needs, now and into the future. Moreover, the local property tax enables us to achieve our goals in a manner which does not directly impact on employment. The Government has been steadfast in its determination to do everything 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 does not adversely affect job creation.
Owing to its importance and conscious of the concerns of homeowners over increasing property prices and potential effects on their local property tax liabilities, especially in urban areas, the Minister for Finance asked Dr. Don Thornhill to review the operation of the local property tax and, in particular, any impact on local property tax liabilities due to recent property price developments. Dr. Thornhill has a distinguished record of public service and chaired the interdepartmental group on the design of a local property tax in 2012. In his report, published on budget day, Dr. Thornhill made several recommendations. His central recommendation is for a revised system whereby a minimum level of local property tax revenues in each local authority area would be determined by the Government, ideally having regard to the apportionment between local authority areas of the historic yield. This, in turn, would allow for the estimation of local property tax 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 was recommended by Dr. Thornhill with a possible interim deferral of the next valuation date until November 2018 or November 2019.
In his 2016 Budget Statement the Minister for Finance announced he would be proposing to the Government that the postponement of the revaluation date for the local property tax from 2016 to 2019. This postponement means that homeowners will not be faced with significant increases in their local property tax in 2017 as a result of increased property values. The postponement also gives sufficient time for the other recommendations in Dr. Thornhill's report to be considered fully by the next Government. It is appropriate the next Government, whatever its composition, is given the opportunity to deal with that report. The postponement of the revaluation date, alongside the publication of the report and the mandate the next Government will receive, provides the opportunity and the space in which that can happen.
The Bill will give effect to the postponement of the revaluation date of residential property for local property tax purposes. It will also give effect to two of the recommendations in Dr. Thornhill's report, involving local property tax relief for properties affected by pyrite and relief for properties occupied by persons with disabilities. The Bill 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 local property tax relief. In addition, on reliefs for properties occupied by persons with disabilities, the changes being administered by Revenue, under their care and management provisions, will be covered by thie Bill, dispensing formally with a requirement that adaptions to property had to have been grant-aided by a local authority. Eligibility for local property tax exemption for properties occupied by incapacitated persons is being relaxed so that they will no longer, for example, have to have been the recipient of a court award or an award from the Injuries Board. Issues relating to the implementation of other recommendations in the Thornhill review report will be a matter for consideration by the next Government.
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 of the Act.
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, as contained in section 14 of the principal Act, for 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 the year 2016 to the year 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 2019, the date immediately preceding the deferred valuation date of 1 November 2019. Again, this will bring the principal Act into line with the decision to postpone the revaluation date.
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 situations. Up to now, the exemption has been available for those 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. Revenue is precluded from approving an exemption where a property owner has not obtained the required certificate of damage. Dr. Thornhill recommended the exemption continue on this basis. However, he considered it should be extended to certain properties which have been shown to have the required level of damage but which 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 which would be accepted into the remediation scheme to be operated by the Pyrite Resolution Board, would undergo testing of the under-floor hard-core building material and certification of the level of pyrite damage. However, in some cases, the board can be 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 required by Revenue may not be 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 which were 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 where property owners have insurance policies which provide cover for structural defects. The rationale for extending this 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 actually 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 actually 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. Accordingly, 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.
This is about ensuring the people who were originally meant to benefit from the exemption can do so without having undergo too much bureaucracy while ensuring we keep the exemption targeted at those at whom it was originally targeted.
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 those properties 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 - I do not like the word "incapacitated" but it is the word that is used legally - was required to have received an award from the Personal Injuries Assessment Board 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 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 Personal Injuries Assessment Board or a court or the establishment of a public trust fund for the incapacitated 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 in relation to 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. We are now proposing to make those legislative amendments through this section.
With respect to section 7, 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. 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 next valuation date will 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, as I outlined, for the other recommendations made by Dr. Thornhill to be considered and implemented in whatever way the incoming Government considers fit.
Section 8 amends section 14 of the principal Act which contains the general rule in regard 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 that are 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 be grant-aided under one of the local authority schemes available for this purpose. However, in practice, as we all know, 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 necessarily grant-aided by a local authority. For this reason, the Minister decided in May 2014 to relax this particular condition. 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 in relation to the disability and why the particular adaptation was considered to make the property more suitable for occupation by that person. At the request of the Minister for Finance, similar to other amendments, Revenue has implemented this procedure on an administrative basis. This section now gives effect to this procedure on a retrospective basis.
In addition to this new procedure, Dr. 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 that 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 in regard to local property tax that will be payable for 2017.
Section 10 amends section 35 of the principal Act which relates to the submission of returns to Revenue by liable persons in relation 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 in relation 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 their 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 that extended period that includes 2019 and brings the law in line with the announcement by the Minister.
Section 11 amends section 153 of the principal Act which contains the list of bodies from which Revenue may request information. Revenue can 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 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 on from other amendments made in this Bill, this amendment adds three new bodies to the list from whom 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 incapacitated individuals.
Overall, the Bill primarily seeks to achieve three objectives. First, it seeks to postpone the revaluation date until 1 November 2019. Second, it seeks to lessen the burden of proof required for an exemption for properties affected by pyrite and reduce the bureaucracy, difficulty and expenses some people have incurred in trying to avail of it. Third, it seeks to relax the conditions for people with disabilities with respect to the properties they require to live in or that they require to adapt to live in. I hope the Bill will receive broad support from Members on all sides of the House.
