Dáil Éireann Debate, Thursday - 30 November 2017
5. Deputy Catherine Murphy asked the Minister for Finance if the cross-departmental group has considered the overall funding available to local authorities in the context of the review of local property tax; if it is planned to deviate from the baselines set for each council; and if he will make a statement on the matter. [45570/17]
View answerThis question relates to the cross-departmental group that is considering local property tax and the revaluation expected to occur in 2019. Will the baseline figures for local authorities form part of its consideration? The baseline figures were set according to an analysis conducted in 2001, but they would have since been affected by the dramatic population changes.
The Department of Finance engaged Dr. Don Thornhill in 2015 to conduct a review to consider and make recommendations on the operation of local property tax, LPT, in particular any impact on LPT liabilities owing to property price developments. Dr. Thornhill made a number of recommendations in his report. His central recommendation was for a revised system whereby a minimum level of LPT revenues in each local authority area would be determined by the Government, ideally having regard to the apportionment between local authority areas of the historical yield. This, in turn, would allow for the estimation of LPT rates for each local authority area and their application by taxpayers and Revenue. Local authorities could adjust the rate upwards by a factor of up to 15%.
The new system was recommended by Dr. Thornhill, with a possible interim deferral of the next valuation date until November 2018 or November 2019. The previous Minister for Finance subsequently proposed to the Government that the revaluation date for local property tax be postponed from 2016 to 2019. This postponement meant that home owners were not 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 made in Dr. Thornhill's report to be considered fully by the Government.
The Finance (Local Property Tax) (Amendment) Act 2015 gave effect to the postponement of the revaluation date of residential property for LPT purposes and also to two of the recommendations in Dr. Thornhill's report, involving LPT relief for properties affected by pyrite and for those occupied by persons with disabilities.
I have consistently stated that my Department will consider issues relating to the implementation of other recommendations in the Thornhill report in line with the 2019 timeline. The Government will make its position clear so that households will know well in advance what are its plans for LPT. In that regard, it is very important that the principle that formed a central part of the terms of reference for the 2015 review of LPT, that is, achieving relative stability in LPT payments of liable persons over both the short and long term, will inform our consideration of the matter.
My Department will consider work on this matter in the new year in conjunction with the Departments of Public Expenditure and Reform and Housing, Planning and Local Government and the Revenue Commissioners.
The Minister is indicating that the baselines will not be considered. The problem is that he is discussing historical information. The baselines were based on a needs and resources model that was developed in 2001 and that has been tweaked since then. Places exist now that did not exist then. How can the needs of such places have been taken into account? I appreciate the point on the amount that is retained and I have done quite an amount of work in seeking to understand the issue and the process behind the amount that goes into the equalisation fund. As regards the self-funding element, in 2016, for example, there was €108 million involved in self-funding, €85 million of which came from Dublin. That amount will increase because the Minister has not changed the baseline rates and is not counting new needs due to population changes. Why do we have a census of the population? Why do we advertise that a census is to be carried out because we want to decide where services are needed and yet the Minister does not factor that into the methodology of deciding where resources are allocated? There is no doubt that there are new needs in places with increased populations. There must be a way of building that into the system or there is a fundamental unfairness therein. If people feel a tax is unfair, they are more likely to destabilise it. There is an inherent unfairness in the LPT. Will the Minister address it?
We will consider the baseline issue in the context of the review that will start in the new year but we have made no decisions in respect of how the tax will be structured beyond the dates I have indicated. We will put the group in place to make recommendations to me and I will decide on what to do well in advance of the decision point for 2019. My objective is to ensure stability in regard to the LPT such that people know what their future liabilities will be and that organisations such as local authorities that are dependent on the LPT and the payments that come from it via the equalisation fund will know where they stand. It is worth acknowledging that, to date, seven local authorities have voted to increase LPT and four have sought to reduce it. The current broad trend is that more local authorities are deciding to increase the tax than seeking to cut it. That reflects the fact that the demand for increased services to which the Deputy refers manifests itself at local authority level.
The baseline in Wicklow, which has a population of 142,000, is €8.5 million. In Mayo, the population of which is 12,000 fewer, it is €19 million. In terms of overall spend, Mayo had approximately €130 million compared to €98 million or €99 million for Wicklow, yet the latter is a net contributor. If one pairs counties such as Wexford and Kerry or Tipperary and the part of Galway outside the city and if one looks at growing areas, one sees the same trend. The baseline ends up being a substitute for funding that would otherwise come from the Exchequer for services such as housing, transport and so on. Local authorities are unable to provide for increased needs because of that baseline. It is a fundamental flaw in the system. I will send a submission on the issue to the Minister and I hope it will be taken into account in the context of the review.
It is not a fundamental flaw in the structure. The structure is as it is because it has a historical link. When the fund was being organised and the structure for the LPT was being put in place, the Department looked back at funding that was previously received by local authorities, through the local government fund, by means of a general purpose grant. I then considered the level of pension-related deductions retained by local authorities. The LPT allocation now takes the place of the two previous sources of funding. As I said, issues regarding baseline, current and future liability and so on will be considered in the work that will be done in the first half of next year. If the Deputy wishes to make a submission on the matter, I would be very happy to receive and consider it.
I anticipate, given the views of the Social Democrats on the need to prioritise service improvements over tax cuts, that the Deputy will support the continued role of the LPT as a way of collecting revenue to fund public services in the future. It seems the Deputy is open to it playing a larger role in the future and that is part of the debate we need to have in this regard.
The next question is in the name of Deputy Alan Kelly but he is not present. We will move on to-----
I made an arrangement with the office of the Ceann Comhairle to take the question on behalf of Deputy Kelly.
Was the permission of the Ceann Comhairle given?
Yes.
I will take the Deputy at her word.
