Property taxation offers opportunity of taxing the rich
Opinion: Dubliners pay more than their fair share of LPT
‘Through no fault of their own apart from location, Dubliners have ended up paying a disproportionate share of the LPT – simply because their homes are worth more than houses elsewhere.’ Photograph: Getty Images
Ireland is perhaps unique as a country where the most virulent opposition to property taxation has come from the political left – the Socialist Party, People Before Profit Alliance and others. Yet, more often than not, it offers the least avoidable opportunity of taxing the rich.
The revelation last month that 56 Irish citizens had valued their homes at more than €5 million, based on May 2013 values, was a straw in the wind. Because each of these luxury homeowners has a liability to pay an annual local property tax bill (LPT) of €11,800-plus.
The Revenue won’t say where any of these “mansions” are located or give any regional breakdown, but it is a fair bet that many are in Dublin. The same is probably true of a significant share of the 3,200 homes that were self-valued by their owners at €1 million or more.
Through no fault of their own, Dubliners have ended up paying a disproportionate share of the property tax – simply because their homes are worth more than houses elsewhere. Yet there is no guarantee that the revenue will end up being spent in the city.
Given that the purse strings remain firmly in the hands of central government, it could be spent anywhere or on anything. Indeed, we know from Minister for Finance Michael Noonan that €490 million earmarked for local services this year is being diverted to Irish Water.
Although the political left has switched its attention to water charges, most of the political parties have promised at least to tweak property tax to make it fairer. Fine Gael, which introduced it with Labour, says it will not increase the tax at all and will even seek to reduce it where possible.
This would apply in areas where commercial rates raise high levels of revenue, such as Dublin and other cities – although Fine Gael has pledged to reduce them, too.
It also proposes that new municipal district committees would have a role in deciding how money is spent.
Fianna Fáil has gone one step further, pledging that its councillors in Dublin will be mandated to vote in favour of a 15 per cent cut in property tax at annual estimates meetings in September. (Under the legislation, councils have the discretion to vary the tax rate by up to 15 per cent).
The party explicitly says in its manifesto: “Dublin homeowners are paying more property tax than the rest of the country”. With an eye to rebuilding its base in the capital after losing all but one Dáil seat in 2011, it is also proposing to reform the commercial rates system.
Labour, which displaced Fianna Fáil in Dublin, “will seek to implement the maximum possible reduction in the local property tax for residents from 2015, where funding conditions permit”. It also wants to ensure a minimum of 80 per cent of the revenue will be spent locally.
Local authorities in areas where property values are high, such as Dublin, “will be best placed to implement the maximum reduction in the LPT”, a Labour spokeswoman said, adding that Dubliners would also benefit from the base 2013 valuation levels being “held” until 2016.
Sinn Féin, like other left-wing parties, is flatly opposed to the property tax and was quick to highlight the fact that the revenue raised this year was “almost entirely being used to subvent Irish Water” rather than “parks, libraries and public lighting”, as the Government had promised.
The Socialist Party and People Before Profit Alliance have always been staunchly opposed to property tax, branding it as a form of double taxation.
But since the vast majority of householders have paid it, despite being urged not to do so, the left’s focus now is on resisting water charges.
Being different, the Green Party says it always favoured a site value tax on all land, levied at the rate of 0.25 per cent annually, rather than a tax based on the market value of people’s houses. This would be extended to commercial premises, effectively replacing business rates.
However, even while local politicians in the rest of Europe are talking about the need for “multi
level governance”, there has been almost no discussion about the highly-centralised nature of government in Ireland and the absence of any real devolution of power to local level.
This is, of course, the elephant in the room. Yet it is not mentioned by candidates for the obvious reason that nobody wants to acknowledge the powerlessness of the city or county council to which they are seeking election. Until that changes, we will not have “local government”.
Frank McDonald is