Government to introduce vacant property tax ‘as early as possible’

Paschal Donohoe says Revenue will use local property tax returns to design new levy

Minister for Finance Paschal Donohoe. Photograph: Gareth Chaney/Collins
Minister for Finance Paschal Donohoe. Photograph: Gareth Chaney/Collins

Minister for Finance Paschal Donohoe says he intends to introduce a vacant property tax "as early as possible".

He said information on vacancy included in the local property tax (LPT) returns was being analysed by Revenue and this would inform the design of the tax.

“Before introducing such a tax it is vital to have a sound understanding of the quantity, locations and characteristics of long-term vacant properties and the reasons why they are vacant,” Mr Donohoe said during a committee stage hearing of the Finance Bill. “It’s important to identify the reasons for vacancy and whether this is long or short-term in nature.

“There may be genuine and acceptable reasons for vacancy, such as refurbishment work, the temporary absence of the owner for medical reasons, or pending the granting of probate for the deceased person’s estate. Appropriate exemptions for any charge will have to be considered in addition to acceptable periods of vacancy,” Mr Donohoe said.

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The Republic has one of the highest levels of vacancy in the world. According to a recent report by UK price comparison website money.co.uk, 9.1 per cent of the State’s housing stock, equating to 183,312 units, are classified as vacant.

This is the 10th-highest rate in the world.

Vacancy surcharge

The Government is understood to be examining the possibility of imposing some kind of LPT surcharge on properties that are left vacant.

Sinn Féin finance spokesman Pearse Doherty claimed the Minister had rejected the idea of a vacant property tax in 2018 and that the State had lost time in implementing such a measure.

Mr Donohoe said his department did not have adequate information on vacancy back then but would have now via the LPT returns.

“And I accept as part of Housing for All, a tax that can apply to vacant properties can be part of how we respond back to the needs that we have,” he said.

The Oireachtas finance committee also considered various amendments to the Finance Bill relating to the Government's proposed residential zoned land tax, which will – in two years' time – replace the vacant site levy.

Under the measure, land zoned for housing that is not being developed will be subject to an annual levy of 3 per cent as opposed to the 7 per cent tariff that applies under the vacant site levy.

Land prices

Mr Donohoe said a much bigger tranche of land and sites would fall under the new measure and the relatively long lead-in time was there to give landowners a chance to prepare.

He indicated that 501 hectares nationally at the end of 2019 fell under the scope of the vacant site levy, whereas the new tax will cover about 8,000-9,000 hectares, 16-18 times more land.

He said the lower 3 per cent rate had to strike a balance “ between achieving its essential purpose of encouraging the release of land for house-building purposes, but at the same time not being too penal, so that it runs the risk of being challenged in the courts.”

“I am of the view it will encourage landowners to either develop their land, or sell it to others for development purposes. By doing this the supply of land available will increase, and this will be reflected in a stabilisation of land prices,” he said.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times