Sandra McLellan
Question:39. Deputy Sandra McLellan asked the Minister for Finance if he has carried out an impact assessment on the potential effect on the numbers in mortgage distress if local property tax is introduced. [10566/13]
View answerThursday, 28 February 2013
Questions (39, 42)
John Halligan
Question:42. Deputy John Halligan asked the Minister for Finance if he has done any analysis on the projected impact on consumer spending and the current mortgage crisis of his plans to introduce the local property tax; and if he will make a statement on the matter. [10633/13]
View answerWritten answers
I propose to take Questions Nos. 39 and 42 together.
The Government has considered the impact of the Local Property Tax (LPT) on those in mortgage distress. In designing the LPT the Thornhill Group acknowledged that in current circumstances an additional case should be made to target assistance on owner occupiers suffering severe financial stress as a result of housing mortgage commitments undertaken during the housing boom period, aggravated in some cases by reductions in income. The Group recommended increased deferral thresholds in cases where the mortgage was taken out between 1 January 2004 and 31 December 2008.
The Government accepted the Thornhill Group’s recommendation but decided not to limit the increased thresholds to those who purchased properties during a particular time period. Therefore, an increased income threshold applies in the case of properties occupied as a sole or main residence and subject to a mortgage. In such cases, the gross income thresholds may be increased by 80% of the mortgage interest payments. A deferral option in qualifying cases in this regard will apply until the end of 2017 and will assist individuals currently in mortgage distress. Where a liable person no longer satisfies the necessary conditions, amounts deferred prior to the date on which eligibility ceased may continue to be deferred. Interest of 4% per annum will apply to any amounts deferred. Liable persons may also qualify for a 50% deferral of local property tax where gross income does not exceed €10,000 over the increased deferral thresholds.
The Finance (Local Property Tax) (Amendment) Bill 2013 provides that a person who has entered into an insolvency arrangement – i.e. a Debt Settlement Arrangement or a Personal Insolvency Arrangement under the Personal Insolvency Act 2012 – may qualify for a deferral of the LPT that falls due for payment by that person during the period for which the insolvency arrangement is in effect where a valid claim is made to the Revenue Commissioners.
Subject to the enactment of the Finance (Local Property Tax) (Amendment) Bill 2013 further new measures will provide for the possibility of a deferral for liable persons who cannot without excessive hardship pay local property tax when it becomes payable, as a consequence of a significant and unexpected financial loss or expense (subject to the application for a deferral from the liable person to the Revenue Commissioners, in line with Revenue guidelines to be published, and notification from the Revenue that a deferral is allowed).
In relation to consumer spending, the main parameters of the Government’s multi-year fiscal plan have been set out in broad terms since Stability Programme Update (SPU) 2011, published in April of that year, just after the Government came into office. Budget 2013 then set out the quantum to be raised from an LPT on the revenue side. However it must be borne in mind that since SPU 2011, the impact of revenue measures on GDP in the 2012-15 period had already been factored into growth forecasts, through the fiscal multiplier effect on private consumption.