Robert Dowds
Question:149. Deputy Robert Dowds asked the Minister for Finance with regard to deferral of property tax, the reason the rate of interest stands at 4%, nearly twice the current bank interest rate. [32952/13]
View answerTuesday, 9 July 2013
Questions (149)
Written answers
The Finance (Local Property Tax) Act 2012, as amended, provides for the charging of interest on overdue taxes at a daily rate of 0.0219 per cent per day, just under 8% per annum, the same as the rate chargeable in relation to other taxes under the care and management of the Revenue Commissioners. The legislation provides for the possibility of full or partial deferral in certain defined circumstances to qualified liable persons, and in such circumstances, the daily interest rate is 0.011 per cent, just under 4% per annum. This is half the interest rate that applies to cases of non-compliance. The deferred amount, including interest, will attach to the property and will have to be paid before the property is sold or transferred.
Certain events such as the receipt of money by way of winnings, gifts, inheritances or capital sums of any kind will cause the tax deferred up to that point, including interest, to become immediately payable. Deferred LPT and interest will have to be discharged on the sale/transfer of the property. However, a deferral may be allowed to continue where the property passes to another person by way of a gift or inheritance and the new liable person is also eligible for a deferral. Deferrals are voluntary and the tax payer may choose to pay any deferred LPT though not required to do so.
Therefore, the length of time that LPT may be deferred and any amounts deferred will vary depending on individual circumstances. These are some of the factors which make direct comparisons between the rates of interest charged on deferred LPT and bank loans difficult.
Per Central Bank figures (Retail Interest Rate Statistics: April 2013), the weighted average interest rate on outstanding loans to households for consumption and other purposes stands at 6.19 per cent at end-April 2013. The interest rate on short-term loans for consumption and other purposes with an agreed maturity up to one year stood at 9.74 per cent at end-April 2013. The corresponding short-term rate reported by all credit institutions in the euro area was lower at 7.73 per cent at end-April 2013. Short-term loans for consumption and other purposes with an agreed maturity of up to one year include both overdrafts and credit card debt. In terms of longer-term loans, the interest rate reported by Irish resident credit institutions on loans with an original maturity over five years was 3.95 per cent at end-April 2013. This rate fluctuates with the reported rate at 4.17 per cent as of April 2012. In the euro area, the equivalent long-term interest rate reported by all credit institutions stood at 4.88 per cent at end-April 2013.
While a variable rate linked to Central Bank interest rates was considered, a fixed rate was favoured on grounds of certainty to taxpayers over how much they may owe and ease of administration for the Revenue Commissioners in calculating any interest due. I am satisfied that the rate of interest on deferred LPT is proportionate in the context of the higher rate of interest for cases of non-payment of LPT and current interest rates on loans from financial institutions.