Dáil Éireann Debate, Tuesday - 23 May 2023
223. Deputy Richard Boyd Barrett asked the Minister for Finance the expected revenue yield from an increase in the vacant homes tax to 25% in a full year; and if he will make a statement on the matter. [24057/23]
View answerThe Vacant Homes Tax is a new measure announced in Budget 2023, which aims to increase the supply of homes for rent or purchase to meet demand. Legislative provision for the tax was made in the Finance Act 2022. The first chargeable period commenced on 1 November 2022. The first self-assessed returns are due on 7 November this year and the tax will be payable on 1 January 2024. Therefore, there is no data available on which to base the costing sought by the Deputy.
The Vacant Homes Tax will be charged at a rate equal to three times the property’s existing base Local Property Tax liability, and must be paid in addition to Local Property Tax. A small number of narrow exemptions are available to ensure that home-owners are not excessively penalised for normal temporary vacancy. As with Local Property Tax, the Vacant Homes Tax will apply only to habitable residential properties - it will not apply to derelict or uninhabitable properties. A residential property will be within the scope of the Vacant Homes Tax if it has been occupied as a dwelling for less than 30 days in a chargeable period.
In developing a new tax, an important consideration is simplicity. It is important to ensure that the tax is easy to understand and to administer. This is why the rate of the Vacant Homes Tax was set at a multiple of a property’s base Local Property Tax charge as the Local Property Tax system is well understood. The property’s base Local Property Tax charge is determined according to the valuation band that applies to a property, rather than the precise value of the property. A vacancy tax charged as a percentage of a property’s market value would therefore require property owners to self-assess the market value of their property precisely. Such a change would add complexity to the operation and administration of the tax and create a significant burden for the taxpayer.
As the Deputy will be aware, certain information on vacancy was collected as part of Local Property Tax returns in November 2021. This data has not been verified by Revenue and was collected for informational purposes only. A preliminary analysis of this data was published by Revenue in July 2022, and is available at: www.revenue.ie/en/corporate/information-about-revenue/statistics/local-property-tax/lpt-stats-2022/index.aspx. In arriving at the estimates for the Budget documentation, certain assumptions were made based on the Revenue analysis and took into account the number of long-term vacant properties (those unoccupied for greater than 12 months), their valuation band, as well as their reasons for lying vacant which may correspond with an exemption from the tax. It was tentatively estimated that less than 15% of the total properties reported as vacant may be in scope of the tax.
This measure aims increase the supply of homes for rent or purchase to meet demand, rather than raise revenue. It is a new measure which comes into operation this year. The estimated yield is low, as I anticipate this tax will influence behaviour and lead to property owners putting their vacant properties to more effective use. As such, the number of properties who will be subject to this tax and the eventual yield may be lower than the estimates provided.
