Special Committee on the Finance Bill, 1992 debate -
Wednesday, 13 May 1992

SECTION 197.

Question proposed: "That section 197 stand part of the Bill."

Mr. Noonan (Limerick East)

The residential property tax was brought in when Deputy Quinn and I were in Government. We brought it in as a tax which would apply to the very top tranche of property. To do that, it was subject to two restrictions. First, the market value of a property had to be above a certain level before it was liable to tax. Then, the taxpayer, who was the owner of the property, would also have to have over a certain level of income. This was index linked. This is the way it has operated over the years. One major amendment was made to it in the late eighties, when there was an abolition of the tax relief in respect of children. The present Taoiseach restored that subsequently. The tax relief in respect of children is back as it was when the tax was initially introduced.

My objection here is that, for the first time, a Minister has come into the House and has varied the ceilings both on valuation and on income and has brought them down by about ten points. This seems to be the introduction of a more extensive property tax than was intended by those of us who brought in the residential property tax. Certainly the mechanisms are in place for applying a more extensive property tax by simply dropping the ceilings. The Minister has dropped the exemption limits on the property value back down to £90,000 when I think the exemption should now be about £100,000. On the income side he has dropped the exemption limit back down to £27,500 while I believe it should be in excess of £30,000. If the Minister intended to bring in a property tax he should have brought one in along the lines of the various reports available to him.

Mr. Martin

Is the Deputy saying he should have done so?

Mr. Noonan (Limerick East)

No. I am saying if that was his intention, he should have come in and announced that there was a change of policy and that he was moving towards widening the base and taxing property. There are a number of reports available to the Minister, some of which I have read, which show various ways in which this could be done.

Mr. Martin

Would Deputy Noonan agree if the Minister did that?

Mr. Noonan (Limerick East)

This is a property tax by the back door.

Mr. G. Mitchell

By the fire escape.

Mr. Noonan (Limerick East)

There was a commitment in the Minister's speech on Budget Day that the relevant ceilings would be indexed in subsequent years but I do not see an indexation provision in the text here. Is it included?

Mr. Martin

It is.

Mr. Noonan (Limerick East)

The indexation provision was in the original scheme. Perhaps the Minister would point out where it is in the Bill.

We will be opposing it on the grounds I have outlined.

Mr. G. Mitchell

I support the points made by Deputy Noonan in relation to this section. The property returns filed by a number of people before this was announced will have been marginally short of the previous exemption limit of £96,000. Some people would probably not have been sure of the value of their property and might have declared it as £90,000, £92,000 or £94,000 and invited the Revenue Commissioners to value the property if they wished. In one fell swoop, the Revenue, very cutely, persuaded the Minister, or the Minister persuaded the Revenue, to catch all these people who have been making honest returns in the belief that the property in which they resided would be indexed. That was the committment. It was never suggested that there would be reduction in the valuation limit. What is particularly sinister is the reduction of the exemption limit for income from £28,500 to £27,500 when in every area of tax we have been going over to indexing.

This form of residential property tax is not very equitable. The postal districts Dublin 6 and Dublin 8 lie on either side of the Grand Canal in my constitutency. The property on one side, in one postal district, could be valued at £100,000 while on the other side, the same sized house might be valued at only £85,000. The occupants of second house may have a large income coming in while those in the first house might have only barely enough to pay the tax.

The whole system is wrong but the system was there. The Minister instead of indexing them, as he said he would, is now reducing both the valuation of the property and the income level at which the taxpayer has to pay the tax. It is an unfair thing to do. It is contrary to all the indications the Minister has given. Up to now he said he would index these things. Again today he said he will index them from the new low base. I do not accept that. This is a section we will have to oppose. It is not fairly worked out. As Deputy Noonan said, if the Minister really wants to property tax, let him introduce propoals for a fair property tax. This side of the House has been very reasonable on the various sections which have gone through in this Finance Bill. With the income limit lowered to £27,500, if a married couple both on a little over the average industrial wage and with say, a son or daughter working in the supermarket, are now caught in this trap. Incidentially, it is a tax which applies more to Dublin than to any other part of the country which is also unfair. If the Minister wants a property tax, let him introduce a property tax and let us consider it on fair basis. But doing it in this way he is being unfair and it is unacceptable. I oppose sections 197, 198 and 199.

I congratulate the Minister on section 200 which relates to foreign adoptions being recognised, which is a fair, reasonable and proper thing to do.

The other provisions in these sections are grossly unfair in particular to one segment of the community. Close neighbours are not being treated equally.

Mr. Martin

I am somewhat incredulous at Deputy Mitchell's comments. As Deputy Noonan said, his party initially introduced the residential property tax. The changes being made this year are not of any tremendous magnitude. They certainly do not constitute the introduction of property tax by the back door or by the fire escape. It is a total exaggeration to say that. My information is that on a £150,000 house an extra £90 will be payable over what would have been paid last year. The revenue that will arise from the new measures is in the order of £1.5 million in a full year. That rules out any question of its being the re-introduction of a broadly based property tax by the back door. That is a ridiculous assertion.

I cannot equate the position adopted by Deputies Noonan and Mitchell in this House and that adopted by the party generally on the whole question of local taxation and rates. Previous Governments were lambasted for getting rid of rates and therefore causing a problem with the financing of local government. I know the Chairman would agree with me that we have suffered on many occasions at local level from the jibes that Dublin local authorities do not even collect service charges or water charges while we, down the country, have to collect them. In Cork city that was a major bone of contention for a long time.

Mr. G. Mitchell

You want to have your cake and eat it at the same time.

Mr. Martin

We are quite happy that the burden of this tax is falling on the more lucrative development of the capital and we have no objection to that. I think there is a bit of hypocrisy about this entire issue — blatant hypocrisy. Members of that party talk about the need for local taxation, an alternative to the service charges, but when a minuscule amendment to the residential property tax was mooted by the Minister we had cries of foul play. They said we were introducing a property tax by the back door. That is clear nonsense.

Chairman

It is now 6.02 p.m. and we had agreed to an adjournment at 6 o'clock. We will resume again at 6.30 p.m. on section 197.

Sitting suspended at 6.02 p.m. and resumed at 6.30 p.m.

Chairman

Section 197: is that agreed?

Mr. Quinn

In your absence, Chairman, we agreed that we would discuss Part V in general and then deal with the voting terms on the sections in detail. Before the Minister replies, the Fine Gael Deputies have indicated their reservations in relation to the residential property tax, reservations which have some historical validity, but I do not want to deal with that at this point.

I want to ask the Minister a general question in relation to residential property: if the Minister is doing, as Deputy Noonan suggested he is doing — there is some validity statistically in reducing what was considered to be a tax on the very top echelon. If the tax for the 5 per cent property holders or combined income and property holders is reduced to these levels, this is taking on a different dimension to what was orginally intended. Whether the Minister is for or against property tax is irrelevant. What is now proposed in absolute value terms is qualitatively different to what was originally proposed in the earlier stages. For that reason I would ask the Minister two questions: if this is a sign of things to come, then the regional factor that Deputy Mitchell referred to has to be taken into account. The distribution of income across the country on a salary or business basis is probably much more equal than the distribution of the value of property across the country, and some matrix or compensating mechanism would have to be put in place to provide for national equity.

The second question I would like to ask the Minister is a general one in relation to property and it relates to the question of using transactions as a mechanism for bringing people up to date in relation to their tax compliance. If it is acceptable, for example, to require publicans to have a certificate of tax compliance when they apply to renew their licence, is it not also a possibility, since we are talking about not only broadening the base of the tax system but also improving the revenue generating process on a low cost basis, that the Revenue Commissioners, the Minister for Finance and his officials could consider the possibility of requiring a vendor in a residential property sales transation to have a certificate of tax clearance in order to complete the transaction and to enable the Revenue Commissioners to intervene at that point to collect arrears of tax. If it is valid for publicans and others, then it seems logical to me that this could be applied at every point of a transaction that requires either to be renewed or stamped by the State and, you could possibly collect tax from, for example, vendors who would largely have the cash in hand.

Mr. B. Ahern

We will consider that point. It has been examined as a possibility but we will have to consider it in more detail. I would like to assure the Committee that the Government have no proposals to introduce a property tax. There is no possibility that the changes in the 1992 Bill could in any way be regarded as the introduction of a general property tax.

In relation to the indexation provisions in the tables to sections 198 and 199, the residential property taxes have no real relevance for the vast majority of householders. There were only 11,000 payments of tax made last year. The change in the Bill will bring an additional 5,000 houses into the tax net. It is expected to raise £1,500,000. The yield from the property taxes is expected to be £6 million in total.

Mr. Quinn

So that would make it 16,000 households under the new provisions out of a total number of households of 750,000.

Mr. B. Ahern

Three quarters of a million houses, yes. That is the figure we are dealing with.

Mr. G. Mitchell

They are all in Dublin.

Mr. B. Ahern

The other point is that on a £200,000 house we are talking about an additional £90.

Question put and agreed to.