Property tax must be based on new valuations, think tank says

Freezing current valuations could prompt constitutional challenge, Public Policy says

Using up-to-date valuations is “important in sustaining public support for the property tax”, a think tank has said. Photograph: Bryan O’Brien

Using up-to-date valuations is “important in sustaining public support for the property tax”, a think tank has said. Photograph: Bryan O’Brien

 

It is “critical” that local property tax be based on up-to-date valuations from 2019, a think tank has said – even if it is to lead to increases of as much as 125 per cent for some homeowners.

Public Policy, an independent think tank chaired by Prof Frank Convery and funded by Atlantic Philanthropies, says in a new paper that using up-to-date valuations is “important in sustaining public support for the property tax”, noting that the anomalies which arose from the failure to use up-to-date valuations for houses for purposes of rates was a significant contributory factor to the abolition of rates on houses in 1978.

Moreover, freezing current valuations, which are based on 2013 prices, could potentially expose the tax to constitutional challenge, as occurred in 1982 with local authority rates on agricultural land.

‘Politically difficult’

“Implementing a revaluation is politically difficult. The longer it is postponed the more difficult it becomes ,” Public Policy said.

In 2015, the then minister for finance, Michael Noonan, decided to delay the revaluation date from November 1st, 2016, until November 2019, with the new valuations taking effect from 2020.

However, given the sharp rise in house prices since, the fear is that opting for another valuation could lead to some homeowners in areas where property prices have rocketed paying significantly higher increases than others. A report in this newspaper, for example, found that if the Government sought to impose new valuations based on market prices, some homeowners could see increases of as much as 125 per cent in their annual bill – while others would see only marginal increases.

To address this, Public Policy said that one approach could be to reduce and vary the national rate of tax in each local authority if necessary if it is desired to avoid a substantial increase in liabilities. The tax is currently levied at a rate of 0.18 per cent, but local authorities have the discretion of increasing or decreasing this by 15 per cent.