Economy

Local property tax languishes in eight-year limbo

Cantillon: Well-designed and sensible charge appears to be stalling under force of elections

Local property tax: in 2021, either its rate will have to be reduced or bills will soar. Photograph: Nick Bradshaw

Thu Apr 4 2019 - 05:41

When it was first introduced, in 2013, the local property tax was that fairly unusual feature of the Irish exchequer funding reform – a sensible tax, structured transparently and with an efficient system of collection.

Since the abolition of rates as an election gimmick in 1977, there had been only sporadic efforts to introduce taxation on property and, in general, they were criticised as being either unfair, ridden with loopholes or too much trouble to collect.

The genius of the local property charge was to have Revenue doing the collecting, providing a range of lump sum or instalment payment options and establishing the general principle that there should be a charge on property broadly in line with its market value.

It’s not perfect but, in general, it was well-designed.

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All the more mystery then that the Government seems determined to undermine its integrity.

Market revaluations

House prices change all the time and the tax was introduced when the property market was still feeling the effect of the crash. The original plan was to allow for regular revaluations of the market value of the property to ensure the tax’s continued fairness – the first being due in 2016.

It would have been timely with prices generally having risen noticeably in the three years. But politics intervened: 2016 was a general election year and the prospect of significantly higher property tax bills looming was not palatable. So it was put off. And not to 2017 but for a full three years, to 2019.

Now, the prospect of another election is in the air and, having ducked the decision in 2016, any increase in the tax would only be more dramatic. So now, the Minister has put off revaluation to 2020. That means new bills kicking in in 2021 – a full eight years after the original valuation. Either the rate will have to be reduced or bills will soar.

Meanwhile, those paying the tax increasingly look enviously at those who have bought newly built homes since 2013 and have yet to pay the tax at all.

Fairness is becoming the issue, along with good sense. For a State still struggling to deliver consistent budget surpluses, can we really afford to discredit one of the few generally accepted new taxes?

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