Taoiseach rules out sharp increase in property tax

Despite increase in house prices, Varadkar does not envisage hike in property taxes

Mr Varadkar said he would “move might and main” to avoid any sudden hike in property taxes for people in 2019. Photograph: EPA

Mr Varadkar said he would “move might and main” to avoid any sudden hike in property taxes for people in 2019. Photograph: EPA

 

Taoiseach Leo Varadkar has said he does not want to see sharp increases in property tax on the back of rising house prices which have increased 60 per cent since 2013.

“There has been a very significant increase in property values, particularly in the greater Dublin area, but I certainly don’t envisage, nor do I want to see, a sudden dramatic hike in property tax so we will be working hard to avoid that,” he said.

Mr Varadkar added he would “move might and main” to avoid any sudden hike in property taxes for people in 2019.

Each local authority has the power to alter the rates set up by Government up or down by 15 per cent.

“My own local authority in Fingal has voted to alter it downwards, but only by 10 per cent instead of 15 per cent thus freeing up I think about €2 million for housing and homelessness.

“Those are the kind of decisions that councils are free to make and individual councils have to make those decisions for themselves at a local level,” added Mr Varadkar.

The Taoiseach’s comments in London on Monday come as local authorities are voting on whether to change the tax rate.

Many councils have said they would like to reduce the local property tax (LPT) but said they could not as a cut in income would result in a reduction of local services.

Former minister for finance Michael Noonan postponed the revaluation date for the property tax until 2019, thereby freezing the rate paid by homeowners.

At the moment the local property tax is charged at 0.18 per cent of the price of a house up to €1 million and 0.25 per cent on the amount over €1 million.

For houses valued up to €1 million, there are a range of valuation bands and households had to choose in 2013 which band they were in.

Housing Minister Eoghan Murphy admits it is likely house prices will continue to increase until supply increases.

The property tax is collected by the Revenue and has compliance rates above 90 per cent.

Fine Gael backbencher Josepha Madigan maintains local property tax should be calculated in another way.

She said the Government cannot justify a calculation based on a fluctuating market.

Ms Madigan told RTÉ’s Today with Sean O’Rourke show she hoped the Taoiseach would look at the issue.

“Nobody is disputing that there should be a property tax, but it is disproportionate and unfair to those who live in Dublin” she said.

She added that there were a lot of people in the middle ground, where their income has not matched the increase in value of their property.

“They are at the mercy of the market. There is too much volatility,” she said.

Leading economist Prof John Fitzgerald of Trinity College Dublin is urging the Government to raise taxes not cut them in the forthcoming Budget.

Prof Fitzgerald told RTE’s News at One that there is a need to “slow things down” andpostpone enjoyment of the current boom “for a year or two.”

He added that property owners should pay Local Property Tax, which can be used to tackle the issue of homelessness.

“They can give it back then when things slow down” he said. The economic lesson was “be prudent.”

On the same programme Fianna Fáil’s finance spokesperson Michael McGrath said that his party had advocated for a “rainy day fund”.

Mr McGrath said that Fianna Fáil has not heard from Fine Gael and as far as they were concerned they expected Fine Gael to honour the confidence and supply agreement.

The confidence and supply agreement between the two parties stipulated reductions in the Universal Social Charge (USC).

If Fine Gael wants to go beyond that (reduction in USC and mortgage interest relief) then they will have to raise the money to do so, he said.

“They will have to spell out where the money will come from.” Mr McGrath added.

He also called on the Government to “go back” to the Thornhill report on Local Property Tax and for the remainder of its recommendations to be implemented.

In a 2015 report, Dr Don Thornhill, outlined a number of options for the future of the tax. His favoured one was to recast it as a local authority charge, raising funding each year based on the need of the local council. In this scenario annual increases could be tied, for example, to general inflation, rather than house prices which tend to be volatile.

There is a need to deal with reform of the growing anomalies, Mr McGrath said.

Overall, the average house price across the country has risen by 11.2 per cent in the past 12 months.

In Dublin, the average price of a three-bed semi-detached home has risen in value by €17,000 in the three months to the end of September and now costs an average of €431,500.