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

Section 1 agreed to.

Amendment No. 1 has been ruled out of order.

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

Amendments Nos. 2 and 3 are related and will 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 (1) The Local Government (Household Charge) Act 2011 is hereby repealed in its entirety.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.”.

As I mentioned on Second Stage, we submitted a raft of amendments that would have the effect of completely repealing the Finance (Local Property Tax) Act, for the reasons we underlined on Second Stage. The Minister of State knows we do not agree with the property tax, do not believe it is working and that is why we are calling for a review of it. We believe it should be removed completely. The raft of amendments we submitted were to be read together. However, they were not included as we wished. The reason behind the amendments was the hope the tax would be repealed.

I thank the Senator for putting forward these amendments. I am advised that the local property tax is forecast to collect €440 million in 2015. These receipts would be lost if local property tax was abolished and would need to be found elsewhere. This would represent a substantial loss to the Exchequer, particularly as under the terms of the Stability and Growth Pact, Ireland may not introduce discretionary revenue reductions unless they are matched by other revenue increases or expenditure. I look forward to hearing Sinn Féin outline what those expenditure reductions or revenue increases would be. This means that the Government must carefully consider any tax changes, as any reductions will have to be offset elsewhere.

I am further advised that there would also be significant administrative issues and costs associated with such a measure for Revenue. Senators will be aware that the introduction of a value based property tax was part of our obligation under a bailout programme at the time. Regardless of this, it is a stable source of income. It should be noted that the arguments in favour of a property tax go well beyond any obligations under an EU-IMF programme. It is part of a broader approach to taxation. The aim is to replace some of the revenue from transaction based taxes, including stamp duty on property, which had proven to be an unstable source of revenue, with an annual recurring property tax which international experience has shown to be a stable source of funding. The taxation of property through recurring annual tax is less economically distortional than the imposition of tax on either income or capital. This is supported by economic literature and OECD analysis. The recent OECD economics department working paper No. 1270 shows that property taxes are less harmful than other types of taxation, particularly for Ireland. Therefore, the Government does not intend to repeat the mistakes of the past and I am not in a position to accept the amendments.

Amendment put and declared lost.
Section 3 agreed to.
NEW SECTION

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 4 agreed to.
NEW SECTION

I move amendment No. 4:

In page 3, between lines 17 and 18, to insert the following:

“5. The Principal Act is amended by the insertion of the following new section 8A:

“8A. A residential property shall not for the purposes of this Act, be regarded as a relevant residential property in a case where the property—

(1) is occupied by a liable person as his or her sole or main residence, and

(2) is subject to a mortgage which is in arrears until such time as a mortgage arrears resolution process is completed.”.”.

This amendment proposes that people who are not in a position to pay their mortgage on their principal private residence and who are in a mortgage arrears situation should not be liable for the property tax until such a time as the mortgage arrears resolution process is completed. This makes sense to me and this proposal would go some way towards dealing with the ability to pay issue, a provision which is not covered in the Bill. The amendment is clear. People proved to be in arrears should be exempt from the local property tax for the period they are in arrears until the arrears resolution process is completed.

This amendment relates to reliefs sought from the local property tax relating to properties which are mortgaged and where there are mortgage arrears or mortgage restructuring arrangements in place. The Finance (Local Property Tax) Act of 2012, as amended, provides for reliefs from the LPT in such circumstances, whereby a person may opt to defer or partially defer payment of the tax.

Where a person qualifies for a full deferral, 100% of the liability can be deferred. Where a person qualifies for partial deferral, 50% of the liability can be deferred and the balance of 50% of the tax must be paid. Relief may apply under one of three separate categories: income threshold for individuals whose income is under a certain limit; personal insolvency where a debt settlement or personal insolvency arrangement has been formally agreed with the Insolvency Service of Ireland; and hardship grounds. Where a person does not qualify for a deferral under the other categories and has had both an unexpected and unavoidable significant financial loss or expense, as a result of which they cannot pay the local property tax, LPT, without causing excessive financial hardship, that person can apply for a full or partial deferral. Where the deferral criteria are met, liable persons can opt to defer the full LPT until financial circumstances improve or the property is sold, whichever is first.

Conditions for deferral of the charge specify that the residential property must be the sole or main residence of the person. Where their estimated gross income from all sources does not exceed €15,000 for a single person or €25,000 for a couple during the year covered by the return, they will be eligible to apply for a full deferral of the LPT charge. In addition, for income-stressed owner occupiers who have an outstanding mortgage, an adjusted gross income limit will apply. In these cases, the income thresholds of €15,000 or €25,000 may be increased by 80% of the annual mortgage interest payments.

It is important to make clear that this is not an exemption from the LPT. Interest of 4% per annum, half of the normal Revenue interest rate, is charged on the deferred amount and it does remain a charge on the property until discharged. Any amount deferred will, however, be a relatively small part of the overall value of a property, even where the deferral lasts for a number of years. Owner occupiers may be eligible to apply for a partial deferral where the gross income from all sources is less than €25,000 in the case of a single person and €35,000 in the case of a couple.

I do not want to use up the Senators' time. I am satisfied that the provisions which are in place, which give the Revenue Commissioners scope to permit deferrals in cases of hardship, are sufficient to target the cases in need. For that reason and given that to extend provision for deferral or exemption from the tax in the manner suggested by the Senator's amendment would decrease the yield and would, in turn, require others to pay a higher rate of tax to make up for that loss, I am not persuaded to accept the amendment.

Amendment put:
The Committee divided: Tá, 15; Níl, 22.

  • Barrett, Sean D.
  • Bradford, Paul.
  • Craughwell, Gerard P.
  • Healy Eames, Fidelma.
  • Leyden, Terry.
  • Mooney, Paschal.
  • Mullen, Rónán.
  • Norris, David.
  • Ó Murchú, Labhrás.
  • O'Brien, Darragh.
  • Power, Averil.
  • Quinn, Feargal.
  • Reilly, Kathryn.
  • White, Mary M.
  • Wilson, Diarmuid.

Níl

  • Bacik, Ivana.
  • Brennan, Terry.
  • Burke, Colm.
  • Cahill, Máiría.
  • Coghlan, Eamonn.
  • Comiskey, Michael.
  • Conway, Martin.
  • D'Arcy, Jim.
  • Hayden, Aideen.
  • Henry, Imelda.
  • Higgins, Lorraine.
  • Keane, Cáit.
  • Moloney, Marie.
  • Moran, Mary.
  • Mulcahy, Tony.
  • Mullins, Michael.
  • Naughton, Hildegarde.
  • Noone, Catherine.
  • O'Neill, Pat.
  • Sheahan, Tom.
  • van Turnhout, Jillian.
  • Whelan, John.
Tellers: Tá, Senators Paschal Mooney and Diarmuid Wilson; Níl, Senators Aideen Hayden and Michael Mullins.
Amendment declared lost.

As it is now past 3.45 p.m., I am required to put the following question in accordance with the order of the Seanad today: "That section 5 is hereby agreed to in Committee; that, in respect of each of the sections undisposed of, the section is hereby agreed to in Committee; that the Title is hereby agreed to in Committee; that the Bill is, accordingly, reported to the House without amendment; that Fourth Stage is hereby completed and that the Bill is hereby passed."

On a point of order, can the Leas-Chathaoirleach illuminate-----

Once a question is put and a vote in train, no point of order is allowed.

Question put and declared carried.