Finance (Local Property Tax) (Amendment) (No. 2) Bill 2015 [Seanad]: Committee and Remaining Stages

Section 1 agreed to.
Amendment No. 1 not moved.
Section 2 agreed to.
NEW SECTIONS

Amendments Nos. 2 and 3 are related and may be discussed together.

I move amendment No. 2:

In page 3, between lines 11 and 12, to insert the following:

“3. (1) The Local Government (Household Charge) Act 2011 is hereby repealed in its entirety.

(2) This repeal will be deemed to have come into operation on the date of enactment of this Act.”.

The purpose of the Sinn Féin amendment is to exempt everybody in society from the local property tax, LPT. We seek to repeal the LPT to build a link between income and taxation in order that there is some recognition for the level of taxation a person pays on the basis of that income. Everybody in this Chamber will have had dozens of people come to them over recent years who are living in properties valued at €200,000 or €300,000 but may have no income coming in. I know people who are scrimping at a phenomenal rate. They live a subsistence type of life, eking out everything they can themselves and not purchasing very much in order that they can survive and pay a mortgage. The Government does not recognise this and charges them a property tax. We all know individuals who are put to the pin of their collar. The Government does not allow for these situations.

Our strong view is that if we want to build a stable tax base, we need to have a firm linkage between tax and ability to pay. If we want to ensure we do not have another crash, we need to ensure personal taxation is the source of revenue and that we do not go towards less stable, more volatile corporation taxes, for example, as our tax base.

The Government brought through legislation on the basis that property value is some kind of representation of the wealth of the family, yet today it has come back to the table saying that the value of a house is no longer in its eyes a proper representation of the wealth of the family. By 2019, the average house price will have risen by €68,000, leading to an extra €180 per house in this tax. The Government realised it needed to apply a brake. There is a fault in the system. If taxation were allowed to develop in exactly the way the Government had envisaged, it would all of a sudden create increased havoc for families.

A lot of the problem is that the Government seeks to reduce the taxation on upper earners. USC has been cut for those on more than €70,000 by €180 million when housing gets €69 million or health gets €18 million. There might be some confusion on this. I point out that Sinn Féin is not opposing each of these sections. It is looking at local authority level and anywhere else to ameliorate the damage this tax is doing to people. The purpose of our amendments is to repeal this unfair, noxious tax in its entirety.

I find the hypocrisy of Sinn Féin extraordinary. It seeks the repeal of this tax, which it has been consistent about South of the Border, whereas North of the Border in Newry where Sinn Féin is in control of the local council it has increased the rate while the non-domestic regional rate is maintained at the same level. Sinn Féin is hypocritical when it says "Let's get rid of it down the South and let's screw the people in the North of Ireland". What it has done in the last number of weeks has been to renege on tax and allow it to be taken over by Westminster. It has handed it back and neglected the people it says it represents on social welfare in the North of Ireland by handing back the role of funding of that to Westminster. It shows the cowardice of Sinn Féin. Down here it hypocritically seeks the complete repeal of the legislation, but in the North of Ireland where it is in control of a lot of local councils, it increases the pain of people who are in difficulty and suffering in places like Newry. This year alone, Sinn Féin increased the local rate within Newry from 0.007289 in 2014 to 0.007570 in 2015. That was done by Sinn Féin councillors in Newry.

Deputy Lawlor has summed up the position very well on behalf of the Government. It shows the hypocrisy of Sinn Féin policies North and South. The Bill is one in which the Government is undertaking to legislate in a number of areas where we gave commitments arising from the report of Dr. Thornhill. The Minister made it clear on budget day that it was his intention to do that. There will be a space and opportunity for all political parties in the not-too-distant future to spell out their economic visions. I advise that it will be important for the figures to add up and for parties to ensure that they do not do anything to impact adversely on job creation. If a party talks about wanting a united Ireland, it seems weird that it wants to have an income tax system in the Republic that does not tally with the taxation system in Northern Ireland. Does the party really propose, as we saw in its budget submission this year, that the marginal tax rate in this jurisdiction should be almost 20 percentage points higher than the marginal tax rate a short drive up the road in Belfast and that taxes on business in this jurisdiction should be much higher than in Northern Ireland? From the perspective of citizens in the Republic of Ireland and, I hazard a guess, Northern Ireland, that does not do much to encourage an all-Ireland economy.

The local property tax is forecast to collect €440 million in 2015. These receipts would be lost if the LPT was abolished and there is an onus on everyone to spell out how that would be replaced. I am sure Sinn Féin will do so and the Irish people can adjudicate on its proposal. Obviously, the loss of €440 million would be a substantial loss to the Exchequer, in particular given the point Deputy Tóibín made earlier. Under the terms of the Growth and Stability Pact, Ireland may not introduce discretionary revenue reductions unless they are matched by other revenue increases or expenditure reductions. This means that Government must consider very carefully any tax changes as any reduction will have to be offset elsewhere. I am further advised that there would be significant administrative issues and costs associated with such a measure for Revenue.

While the introduction of a value-based property tax was part of our obligation under the EU-IMF programme when it was first negotiated by Fianna Fáil in 2010 and remained a condition of the programme following subsequent reviews, the arguments in favour of a property tax go well beyond our obligations under the programme. The introduction of a property tax is part of a much broader approach to taxation of property, its aim being to replace some of the revenue from transaction-based taxes, including stamp duty on property, which had proven to be a very unstable source of Government revenue. We all know how costly such mistakes were to the Irish economy. The OECD has highlighted that annual taxes on land and buildings have a relatively small adverse impact on economic performance. I refer the House to the report, Searching for an Inclusive Growth Tax Grail: The Distributional Impact of Growth Enhancing Tax Reform in Ireland, on the benefits of having a property tax rather than having an economy without one. Therefore, the Government does not intend to repeat the mistakes of the past and I am not in a position to accept the amendment.

There will be bonfires in the Falls Road, the Creggan and maybe even County Tyrone now that Lord Kildare here has joined the fight for Irish unity and the freedom of this country.

Not on a lower tax basis.

I welcome that greatly.

Let us stick to the Bill.

The fiscal powers of the North are, unfortunately, located in London.

Sinn Féin has handed them back more.

My party alone of all the political parties in the House is working tooth and nail, night and day to bring those fiscal powers from London back to Ireland. That is our clear objective.

Will Sinn Féin remove the property tax in Northern Ireland?

We welcome the sunny day that we will have those taxes back in this country.

Will Sinn Féin remove the property tax in Northern Ireland?

Deputy Lawlor had his say.

Let him say it, please.

No one interrupted you, Deputy Lawlor.

There is no doubt in my mind that on the sunny day when fiscal power has been returned to Ireland from London, we will order our taxation system in the manner we seek to here also.

It is what it seeks to do down here.

Some of the political parties in this Chamber often say that while Sinn Féin is in government in the North, it is not a real government and is only an Administration.

Sinn Féin was allowed to increase the rate.

Deputy Tóibín has the floor.

On the flip side, however, when we talk about fiscal powers, they complain about our policies on fiscal powers in the North. It is incongruous to say on the one hand that the Administration is not the same as the Government down here and then to blame that Administration for its lack of taxation powers in the North.

Sinn Féin has the right to increase the rate.

The SNP is fighting tooth and nail like us against London to stop the Tory cuts within society. That does not mean that there does not need to be public services provision. The tax-to-GDP ratio in this State is far lower than the average in Europe. With regard to taxation, we have a bit to go before we can say that we are taxing people too much. The Netherlands has one of the highest marginal rates of taxation in the EU and one of the highest levels of foreign direct investment. As such, it is nonsense to say that personal taxation is a tax on jobs. It is not. We are clearly saying that if one believes personal taxation is a tax on jobs and that jobs are good, the logic is to go down the Renua road and gut taxation further.

The small man in the semi-D in Newry is being taxed higher because of Sinn Féin.

Our worry is that the Fiscal Advisory Council is saying Fine Gael is a threat to stability.

It did not say that.

It did not say so in so many words. I admit that I am paraphrasing. It said the party's taxation policies and the shift from personal taxation to a volatile corporation taxation sector is very damaging.

Sinn Féin wants that system in the North of Ireland.

It is also talking about the reduction of USC constituting a threat of inflation or to the delivery of public services. Sinn Féin is saying, "By all means create a broad tax base, but do so in a way that reflects the incomes of individuals". Why design a tax rate that is ignorant of the incomes of individuals? For nearly 300 years, western society has been trying to order its tax to take individuals' incomes into consideration. The Bill admits that the tax does not take incomes into consideration. Why alter the key element of the tax in the first place and divorce it from the value of the house? The Bill is an admission that the tax in its own right does not work. The Government should bring it to its full fruition and take a bit of advice from Sinn Féin in the future.

I note to Members that we have 18 minutes left and I would like to keep contributions as brief as possible.

In the interests of time, I note that while I disagree with the various assertions Deputy Tóibín made for many reasons and while the tax powers may be in Westminster, I presume that Westminster does not write Sinn Féin's budget submissions, which is what I have a difficulty with in terms of the difference in marginal tax rates. I will wait to debate the other issues during the election and move on to Deputy Clare Daly's amendments.

Amendment put and declared lost.

I move amendment No. 3:

In page 3, between lines 14 and 15, to insert the following:

4. (1) All payments made by liable persons under the Finance (Local Property Tax) Act 2012 shall be reimbursed where such payments are payments liable to be made for the year in which this Act is enacted.

(2) Reimbursements under subsection (1) shall be of the same amount as the amount of tax paid by the liable person and shall be paid through the same method as the method through which the payment was received.”.

Amendment put and declared lost.
Section 3 agreed to.
Section 4 agreed to.
SECTION 5

Amendments Nos. 4 to 8, inclusive, are related and may be discussed together.

I move amendment No. 4:

In page 3, line 25, after “it,” to insert “or”.

Maybe Deputy Lawlor will be as interested in this issue, which affects his constituents and their inability to access their lawful entitlement to an exemption from property tax when they have pyrite, as he is in the welfare of Northern Ireland citizens.

I am very interested.

This group of amendments deals with the Government’s changes to the pyrite exemption which are better than what was in place but not good enough.

I am very aware of this.

My amendments seek to make the Government’s changes in this Bill a little better than that under several headings. I am a bit worn out with this issue which we have been discussing since the local property tax, LPT, was introduced. The Government’s change to the effect that once properties have been included for remediation in the scheme or have been remediated by the insurer or developer, they can automatically access their property tax exemption is a good one. We still, however, have the problem I am trying to address in amendment No. 5 that the Minister for Finance has decided that the only properties which gain an exemption are those with a damage condition rating of 2 or 1 with progression. As we have articulated many times here, there are properties which have damage, which have pyrite, as established by an underground infill test costing the home owner thousands of euro, or are in an area where we know pyrite is present so we can say the damage is there but has not developed enough to get a damage condition rating of 1 with progression. This means that property is valueless or worse because the owner cannot decorate, extend or sell it but cannot access the lawful pyrite exemption because the Government has set the bar too high for damage. My amendment No. 5 seeks that where damage is present, the homeowner should be able to avail of the exemption if the area has pyrite or tests have been carried out.

Amendments Nos. 6 and 7 try to address the way the Bill is worded, which suggests that the Revenue Commissioners may ask for any number of items to support the application for the exemption. By not including the word “or”, the section could read that Revenue must ask for the full list of items. It will need the address, but apart from that, one of the other items should be enough for the home owner to access the exemption. The amendments make it clear that Revenue will not look for a ridiculous amount, which I would think is what the Government would want and could accept.

Amendment No. 8 concerns the duration of the exemption. I note and welcome that the Government has increased the exemption period to six years for properties with serious damage. That is a very good thing. If a house has a building condition assessment, BCA, rating of 2, has been included in the scheme and has been remediated, it will get the exemption for six years. This does not, however, deal with the other category of people.

The Minister of State needs to consider the bigger pool of houses, those which have not been included in the scheme, have not been remediated, do not have a BCA of 2 and which are still valueless. My amendment is critical because it states that if the houses have damage in a pyrite area, they should be exempt indefinitely until the property is remediated or a green certificate has been issued. Unless one of those criteria has been met, the property remains valueless and the Government is levying a tax on it. This group of amendments is trying to incorporate that significant group of property owners whose property has pyrite, whose property is valueless but who, even with the changes the Government is bringing forward, cannot access their lawful exemptions.

I know Deputy Daly appreciates Deputy Lawlor’s interest in this and it is an issue he has raised. I accept Deputy Daly’s bona fides on this issue which she has been pursuing for some time. The Minister for Finance and I are very aware of the issues she is trying to address with her proposed amendments. I acknowledge the stressful situations that individuals face when issues arise post-completion or when building works are not completed to the required acceptable standard. This is particularly difficult when issues manifest in people’s homes that they have worked hard to purchase and maintain which, when not resolved, impact greatly on the lives of those affected.

This amendment seeks to exempt properties from local property tax, LPT, where the property has a BCA which establishes a damage condition rating of above 0. I am advised by the Department of the Environment, Community and Local Government that the damage condition rating is classified as follows: 0, none, which means no damage or only aesthetic damage that could be attributable to pyrite-induced heave; 1, minor, meaning some damage that could be attributable to pyrite-induced heave or other causes; and 2, significant, meaning significant damage identified that is consistent with pyrite-induced heave. A property must have a damage rating of 2 to be included in the pyrite remediation scheme provided that the Pyrite Resolution Board is satisfied that the damage has been caused by pyrite.

The BCA to which the Deputy refers is the first stage in the process of identifying and assessing the presence of pyrite in the hard core infill material underneath the building and whether it has caused or is likely to cause structural damage to the building. This assessment must be carried out by a suitably qualified person such as an engineer. It is a non-invasive assessment based on an internal and external visual inspection of a building which aims to determine the presence or absence of apparent damage that is consistent with pyritic heave and to quantify the extent of such damage. It is not, however, capable of establishing that the presence of pyrite is the cause of the damage. This is our fundamental problem with the Deputy’s proposal. The damage could be due to other causes such as subsidence or substandard building work. Actual pyrite damage can be established only by analysing a sample of the hard core material in a laboratory to determine its susceptibility to expansion as a result of various chemical reactions. The BCA assesses the extent of the damage and this damage condition rating determines the requirements for sampling and laboratory testing by a geologist and for reinspection to establish whether damage is progressing. At the end of the process a certificate is completed by an engineer stating the category assigned to the building. It is this certificate that must be submitted to Revenue when claiming the exemption, and that will continue to be required in making a claim for the LPT exemption.

On foot of the report and review of LPT, however, which the Minister commissioned and which was submitted to him by Dr. Don Thornhill, the Minister has decided to extend the exemption to some additional categories of properties that have been badly damaged by pyrite but have not obtained the required certification of damage. These are properties that have been accepted for the remediation scheme where the Pyrite Resolution Board is satisfied that laboratory testing is not necessary to establish the damage is caused by pyrite. The exemption will also be available for properties that have been remediated, either as a result of a successful claim for structural damage under an insurance policy or by the builder who built the property. Alternatively, either of these parties could have compensated the property owner with sufficient funds to remediate the property.

Dr. Thornhill considered it important to emphasise the self-assessment nature of the valuation of a property for LPT purposes. It is a matter for the property owner in the first instance to calculate the tax due based on his or her assessment of the market value of the property. Issues such as structural damage to the property and the established presence of pyrite in a particular area would be a relevant factor to be taken into account when self-assessing the value. It was made clear during the passage of the Finance (Local Property Tax) (Amendment) Act 2013 that the exemption being provided at the time for homes affected by pyrite would be restricted to properties with significant pyritic damage and that not all damaged properties could avail of the exemption. The Minister believes the Deputy’s proposal is far too broad. It seeks to exempt properties which have a damage rating of minor which, while it could be attributable to pyrite-induced heave, could also be attributable to other causes. The Minister is not prepared to go beyond the measures recommended by Dr. Thornhill in his report.

In line with the extension of the valuation date to 1 November 2019, the period for which exemptions apply, including that for pyrite, is also extended by an additional three years. Furthermore, depending on when in the period an exemption first applies a pyrite-damaged property could be exempt for up to eight years.

This could provide significant additional relief to people in the most affected categories.

As the Minister has advised in exchanges the Deputy has had with him on many occasions, a liability to LPT should apply to all owners of residential properties, with a limited number of exemptions. Limiting the exemptions available allows the rate to be kept low for those liable persons who do not qualify for an exemption and ensures the tax base is as broad as possible. There is a cost to any tax exemption and keeping exemptions as targeted as possible minimises the need for other taxpayers to pay higher rates or for the Government to reduce investment in public services.

On amendment No. 7, Revenue will seek only relevant details. Not all the items specified on the list will be relevant for each property and not all will be automatically requested. However, it is likely that items other than the address will be relevant in particular circumstances. Therefore, I am not prepared to accept the amendment. The Revenue has advised the Minister for Finance that it will take a reasonable approach when seeking information to establish the exemption. The exemption, where merited, should be provided with as little hassle as possible to the home owner and the Revenue will seek only the information it needs and deems relevant to make the determination.

Would that it were so. Sadly, part of my reason for tabling the amendment is the bitter experience of homeowners who have found inconsistency in the Revenue's approach to these matters. It should be perfectly easy for the Revenue to know which estates and general areas are affected by pyrite and which are not. The Bill leaves too much scope for the Revenue to make onerous requests, which is not good for the Revenue or the homeowner. The issue is one's perspective on the issue. The Government is regarding it from the point of view of limiting exemptions, whereas I am regarding it from the point of view that anybody with a dwelling in the areas affected by pyrite has a valueless property.

The reason for the problem with the original legislation was that the Government was making it far too onerous for homeowners to prove they were affected by pyrite and the cost was prohibitive. While we have largely removed the under floor testing, which costs thousands of euro, it is not good enough. If a person's neighbour's house and hundreds of other houses in an area have pyrite damage, the chances are that his or her house will also have pyrite damage. If somebody from Tipperary, or somewhere there is no pyrite damage, chances his or her arm, the Revenue will tell him or her to move along. The symptoms are clear. There are engineers in these areas. It affects tens of thousands of houses. It is not huge. The presence of pyrite is an important barometer.

There is not enough consistency in the Revenue's approach to self-assessment. It is critical. There are properties where we know for a fact there is pyrite damage, but the damage is not bad enough yet. That is why we need the amendment, and I will press it. A category of people have their backs against the wall and they are in the worst category. We need to build a remediation process that gives people closure by providing certification or remediation. There is no other way of restoring the value of the properties. Until this happens, these people must be exempt from LPT.

Amendment put and declared lost.

I move amendment No. 5:

In page 3, between lines 25 and 26, to insert the following:

“(b) the property has a BCA rating of more than zero, regardless of whether or not a hardcore infill test has been carried out, or”.

Amendment put:
The Dáil divided: Tá, 17; Níl, 44.

  • Cowen, Barry.
  • Daly, Clare.
  • Fitzmaurice, Michael.
  • Flanagan, Terence.
  • Fleming, Sean.
  • Mac Lochlainn, Pádraig.
  • Mathews, Peter.
  • McGrath, Finian.
  • McLellan, Sandra.
  • Murphy, Catherine.
  • Murphy, Paul.
  • Ó Fearghaíl, Seán.
  • O'Sullivan, Maureen.
  • Shortall, Róisín.
  • Smith, Brendan.
  • Tóibín, Peadar.
  • Wallace, Mick.

Níl

  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Catherine.
  • Byrne, Eric.
  • Carey, Joe.
  • Conaghan, Michael.
  • Connaughton, Paul J.
  • Conway, Ciara.
  • Corcoran Kennedy, Marcella.
  • Creed, Michael.
  • Deasy, John.
  • Doherty, Regina.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • Feighan, Frank.
  • Fitzpatrick, Peter.
  • Griffin, Brendan.
  • Hannigan, Dominic.
  • Harrington, Noel.
  • Harris, Simon.
  • Howlin, Brendan.
  • Keating, Derek.
  • Kehoe, Paul.
  • Kenny, Seán.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lyons, John.
  • McEntee, Helen.
  • McFadden, Gabrielle.
  • McGinley, Dinny.
  • Mitchell O'Connor, Mary.
  • Murphy, Eoghan.
  • Neville, Dan.
  • Noonan, Michael.
  • O'Dowd, Fergus.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • Ryan, Brendan.
  • Shatter, Alan.
  • Stagg, Emmet.
  • Stanton, David.
  • Tuffy, Joanna.
  • Varadkar, Leo.
  • Wall, Jack.
Tellers: Tá, Deputies Clare Daly and Mick Wallace; Níl, Deputies Emmet Stagg and Paul Kehoe.
Amendment declared lost.

On a point of order, as the time for debate has concluded and before the Leas-Cheann Comhairle puts the vote, 13 amendments were to be discussed on the Bill but only 30 minutes were allocated and five amendments debated.

That is not a point of order.

(Interruptions).

One amendment dealt with houses that were flooded-----

The Deputy only had four Members with him.

-----and exemptions from the local property tax.

(Interruptions).

This issue was addressed yesterday.

We were dealing with the Bill while the Deputy was being populist.

I would conclude were those opposite not jeering.

We are not jeering at all.

Since we were not allowed to put the amendment-----

The Deputy only had four Members with him.

-----exempting those households from the property tax, I oppose this approach.

I must put the question.

We have already put measures in place for the people whose properties have been flooded.

As the time permitted for the debate has expired, I am required to put the following question in accordance with an order of the Dáil of 10 December: "That each of the sections undisposed of is hereby agreed to, the Title is hereby agreed to in Committee, the Bill is accordingly reported to the House without amendment, Fourth Stage is hereby completed and the Bill is hereby passed."

Question put:
The Dáil divided: Tá, 45; Níl, 17.

  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Catherine.
  • Byrne, Eric.
  • Carey, Joe.
  • Conaghan, Michael.
  • Connaughton, Paul J.
  • Conway, Ciara.
  • Corcoran Kennedy, Marcella.
  • Creed, Michael.
  • Deasy, John.
  • Doherty, Regina.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • Feighan, Frank.
  • Fitzpatrick, Peter.
  • Griffin, Brendan.
  • Hannigan, Dominic.
  • Harrington, Noel.
  • Harris, Simon.
  • Howlin, Brendan.
  • Keating, Derek.
  • Kehoe, Paul.
  • Kenny, Seán.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lyons, John.
  • McEntee, Helen.
  • McFadden, Gabrielle.
  • McGinley, Dinny.
  • Mitchell O'Connor, Mary.
  • Murphy, Eoghan.
  • Neville, Dan.
  • Noonan, Michael.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • Ryan, Brendan.
  • Shatter, Alan.
  • Stagg, Emmet.
  • Stanton, David.
  • Tuffy, Joanna.
  • Varadkar, Leo.
  • Wall, Jack.

Níl

  • Cowen, Barry.
  • Daly, Clare.
  • Fitzmaurice, Michael.
  • Flanagan, Terence.
  • Fleming, Sean.
  • Mac Lochlainn, Pádraig.
  • Mathews, Peter.
  • McGrath, Finian.
  • McLellan, Sandra.
  • Murphy, Catherine.
  • Murphy, Paul.
  • Ó Fearghaíl, Seán.
  • O'Sullivan, Maureen.
  • Shortall, Róisín.
  • Smith, Brendan.
  • Tóibín, Peadar.
  • Wallace, Mick.
Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Sean Fleming and Seán Ó Fearghaíl.
Question declared carried.