Dáil Éireann Debate, Tuesday - 30 January 2018
75. Deputy Richard Boyd Barrett asked the Minister for Finance his plans to review the impact of the local property tax on the funding of local authorities in the course of the review of the local property tax; when the report on this review will be brought to Dáil Éireann; and if he will make a statement on the matter. [4286/18]
View answer80. Deputy Thomas P. Broughan asked the Minister for Finance his plans with regard to a proposed revaluation of the local property tax; and if he will make a statement on the matter. [3945/18]
View answerTo paraphrase Marx, a spectre is haunting Fine Gael - the spectre of the unfair property tax.
Is that Karl or Groucho?
Karl. The spectre I refer to is the unfair property tax and the dramatic hikes because of property prices increasing by 71%.
The Minister has acknowledged the folly of this unfair property tax by deferring the initial revaluation and is now talking about a cross-departmental review. Does he not think it is time to acknowledge that there is no way of tweaking the property tax that will make it fair because by its nature, it is regressive and will hit low and middle-income families?
Of course, I am aware of the status of the local property tax, LPT, the proposed changes and the debate that is ensuing regarding it. This is why I recently announced a review of the LPT which will look in particular at the impact on LPT liabilities of property price developments. It will include an examination of the outstanding recommendations of the 2015 Thornhill review of the LPT. It is expected that the review will be completed at the end of August and that the review report will provide a number of policy choices for consideration. The review will be informed by the desirability of achieving relative stability, both over the short and longer terms, in LPT payments of liable persons. It will also include a consultation process to enable all interested parties and individuals to submit their views on the future of the LPT.
My Department will advance work on this matter in conjunction with the Departments of Housing, Planning and Local Government and Public Expenditure and Reform and the Revenue Commissioners. The purpose of the review will be to inform me with regard to any actions I may recommend to Government concerning the overall yield from LPT and its contribution to total tax revenue. This will enable me to revert to Government with proposals for change to the LPT in a timely way. Any such change would need to be legislated for in the first quarter of 2019 so that the Revenue Commissioners can be in a position to have the necessary administrative and technical arrangements in place in time in respect of the 2020 LPT year.
Distribution of LPT revenues to local authorities is the responsibility of the Minister for Housing, Planning and Local Government. LPT is an important source of funding to local authorities accounting for approximately one-tenth of their revenue income. LPT supplements local authority income from commercial rates, from the provision of goods and services and from other Government grants. The LPT was introduced to provide an alternative, stable and sustainable funding base for the local government sector providing greater levels of connection between local revenue raising and associated expenditure decisions. Local retention of LPT has helped to strengthen financial autonomy at local authority level. I expect that the current review will look at ways to ensure this continues.
I have not deferred any revaluation. What I have done is reminded the House of the timetable as currently laid out in the legislation passed by this House, which is a revaluation in 2019 to affect bills after that.
It must be said that this Fine Gael tax is grossly fair. I am looking at figures from the statistics and economics research branch of the Revenue Commissioners which lists the percentages of homes with a valuation of over €300,000 based on returns five or six years ago. Dublin city comes in at 22%, Dún Laoghaire comes in at nearly 60%, Fingal comes in at 21%, south Dublin comes in at 19% while Wicklow and Kildare are also in the teens. In most other counties, it is down 0.1% or 0.2% so it is a grossly unfair tax. Its attachment to Revenue and social protection payments made it impossible for people to challenge it in the way they challenged the water tax. Many people would feel that local government should be properly funded but it should be funded on a fair basis across the whole country, which was one of Don Thornhill's four recommendations. At the moment, it is grossly unfair. The Minister is being very unfair to his city and constituents and it is time he did something about it.
In our area, people are already being crucified in many cases but they will be absolutely nailed to the wall if anything even approaching the increase in property values is translated into an increase in property tax. The point about this tax is that it does not take into account ability to pay. Even with the existing tax, there are 46,000 people who have been forced to defer because their income is not sufficient to pay the tax. That will jump through the roof. Already, there is a cohort of people who just cannot pay. Why is the Minister imposing a tax on people who just cannot pay? The pension, social welfare payment or low income of someone on social welfare or a pensioner who happens to own their house in an area like Dún Laoghaire or south Dublin will not be any greater because they live in an area with high property values. What is the Minister going to do to recognise that fundamental injustice?
The Deputy opened up by quoting Karl Marx. I think it was Marx who said that history repeats itself first as tragedy and then as farce. It is a relevant point in the debate we are having here regarding tax policy. In the last Dáil, many of the inquiries that were put in place to look at how we ended up in a place of multiple economic crises - all at the same time - pointed to the fact that previous Governments had narrowed the tax base again and again while increasing expenditure exponentially across that period. Every country against which we look to compare ourselves has a form of property taxation. It is vital in the coming years that our tax base includes a local property tax. I have heard what the Deputy has said about people's fear about the future of the LPT, which I well understand given that the bills for everyone would have come in over the past number of weeks. That is why I will take the opportunity to say now what I have said before, which is that my intention is that any future changes in the LPT will be moderate, fair and predictable. I am confident that the process I have outlined, which is well in advance of any change in the revaluation metric, will be able to deal with it.
Let me remind the Minister that at the time the property tax was brought in, the Minister justified it by saying there would be more money available for local services. Actually there has not been a cent more. The 25% cut in local government funding that preceded it was never replaced. We then had a property tax that reduced central Government funding on a euro-for-euro basis. We got no extra services for this but what we did get was an unfair tax. The Minister has simply not addressed the issue of unaffordability and the regressive nature of the tax.
My proposal to the Minister is what we proposed in our pre-budget submission that the local property tax should be abolished for principal private dwellings and replaced with a landlord's tax. In other words, we should tax second, third, fourth or fifth properties and people who own property that is simply wealth and not the roof over their head. The Government could replace one with the other. That would be a genuine wealth tax which would not hit people on low incomes.
People are very nervous about this as we approach 2019 and 2020 to see what the review will hold. Will the review not be published until August? When will we have it? Could the Minister give us his view on the propositions put forward by the Parliamentary Budget Office, which looked at various ways where we could reach a stable and fair local government tax across the country? There has effectively been a 5% increase in the tax in Fingal and people living in very modest houses might be paying €500, €600, €700 or €800 early next month. This extra 5% is significant. The county manager said that he will do such and such with that money but at the same time, while local government needs to be funded, as Deputy Boyd Barrett said, we have had no additional funding for it and the Minister has not achieved the fundamental constitutional basis of a fair tax. This tax is not one of those.
Deputy Boyd Barrett proposes that we introduce some form of landlord's tax. Let us play that out. Let us play out what would happen if we were to increase taxation on landlords to find the additional revenue to offset the elimination of the local property tax, as Deputy Boyd Barrett proposes.
In order to do that we would need to find an additional €500 million of tax revenue from the landlord sector. How many landlords does the Deputy think would stay in that business?
It is a good idea.
I am glad the Deputy thinks it is a good idea. However, he has failed to acknowledge that his definition of wealth is somebody else's roof under which they are sleeping at the moment. I will not put in place any kind of tax measure as the Deputy is proposing that has the risk of incentivising further landlords to leave the rental sector and exacerbating the kinds of difficulties to which the Deputy regularly and correctly points.
They are making a fortune.
That risk would be there if we took such action.
In response to Deputy Broughan, I am aware of the work of the parliamentary body on the future of LPT. I am also aware of the debate in the Committee on Budgetary Oversight afterwards where it proved very difficult to find consensus on what the new tax model should be. Some members of the committee said we should move to floor-area basis where the tax yield is determined by the size of the property; other members disagreed. Some members said we should continue to have it based on value and other members of the committee disagreed with that. A debate is under way in the committee on that very point.
