Current revaluation process for Local Property Tax needs to be reviewed - Budgetary Oversight Committee report

The report on Local Property Tax which was published today, Wednesday 21 March, recommends, by agreement on an all-party basis that the current revaluation process needs to be reviewed in light of the significant increase in Local Property Tax (LPT) liabilities that would arise if there is no change.  

The Committee notes that in 2015 the Thornhill review raised concerns about the impact that increasing property prices would have on LPT liabilities. On that basis, it recommended that revaluation should not take place without other reforms.  

On foot of the work carried out by the Committee on LPT, it endorses two options originally suggested in the Thornhill Review:

Option 3 - Revalue and adjust rates nationally to maintain Local Property Tax yield, or
Option 4 - Revalue and adjust rates locally to maintain LPT yield.

Other recommendations include

•    that the Inter-Departmental group adopt the suggested approach made by the Parliamentary Budget Office (PBO).  The PBO suggests that the first step in the process should be deciding what amount of revenue is to be raised by LPT.
•    that the analysis carried out by Department of Finance in 2015 should be updated to ascertain the potential impact of increasing property prices on LPT liabilities.
•    that the Department of Finance should request that the Revenue Commissioners and ESRI carry out further analysis on the impact of potential increases in LPT liabilities on people with low incomes to determine if the tax is regressive or progressive in nature and the effect that this may have on the level of deferrals.  
•    that the Department of Finance provides clarity on the remit, and composition of the Inter-Departmental Working Group.  Clarity should also be provided on what they mean by the phrase “maintaining relative stability”, contained in the Department’s press release.
•    The Committee on Budgetary Oversight should be provided with the results of the review carried out by the Inter-Departmental working group in advance of Budget 2019.
•    In advance of Budget 2019, the Department of Finance should engage with the Committee on Budgetary Oversight in ex-ante scrutiny of any proposed reform of the LPT
•    Many people live in managed estates or complexes paying management fees that must also pay local property tax.  The Committee recommends that a review of LPT as it relates to residential management companies and privately managed residential complexes, be included in the work of the Inter-Departmental Working Group.  The results of this review should be reported to the Committee.
•    The Committee notes that at present, approximately 48,000 property owners are exempt from LPT.  The majority of these exemptions relate to new and unused properties built since 2013, and therefore, these property owners are being subsidised by other taxpayers. The Committee recommends that the Inter-Departmental Working Group should endorse the cessation of exemptions in relation to new and unused properties.  This would make the current system more equitable and also broaden the tax base.  

Committee Chairman Colm Brophy said: “The Local Property Tax (LPT) is a self-assessed tax charged on the market value of residential properties.  It is a significant feature of the Irish taxation system, and an important source of funding for local government services, including roads, housing, fire and environmental protection, recreation and community services.

During our Committee’s budget scrutiny process in September 2017, the Committee identified the need to examine the process for Local Property Tax Revaluation, in advance of Budget 2019.

This is because rising house prices potentially mean that under the current revaluation process, householders would face a significant increase in Local Property Tax.  The LPT revaluation, initially due to take place in 2016, was postponed until 2019.

In examining this issue, the Committee held public meetings with officials from the Office of the Revenue Commissioners, and from the Department of Finance.  The Committee agrees on an all-party basis, that steps need to be taken to prevent substantial increases in the LPT, as a result of the revaluation process.  

This report makes a number of recommendations for consideration by the Dáil and the Minister for Finance and Public Expenditure and Reform. Our Committee welcomes a further opportunity to engage with the Inter-Departmental Group set up to review LPT, prior to Budget 2019.”

Read the report here: https://data.oireachtas.ie/ie/oireachtas/committee/dail/32/committee_on_budgetary_oversight/reports/2018/2018-03-21_report-local-property-tax-revaluation_en.pdf