The State should aim to receive €500 million a year from the local property tax (LPT) and apply a central rate to achieve that, an Oireachtas committee has said.
While the Oireachtas budgetary oversight committee set out five options for changes to the LPT aimed at minimising charges property owners would face when valuation increases kick in, they selected a central rate which is their preferred outcome. Last year, when collected by local authorities, the tax brought in €470 million for the exchequer.
If its preferred scenario is not achievable, each local authority could set its own yield target and the rate in each location could be adjusted to meet that target, said the committee. Chairman Colm Brophy said the first scenario is "more progressive", however.
“The committee notes the importance of maintaining simplicity and transparency for taxpayers. Further, from an administrative perspective, a costly and complex system runs counterproductive to the objective of generating additional net revenue,” added Mr Brophy.
Broadening tax base
The LPT was originally recommended by the Commission on Taxation in 2009 in a measure to broaden the Irish tax base in the aftermath of the financial crash. It was ultimately introduced in 2013 as a tax calculated on the market value of almost all of the residential properties in the country. However, new builds are exempt from the tax and the committee described this as “not satisfactory”.
“The committee recommends that all new residential properties built between valuation dates should be retrospectively valued as if they had existed on the preceding valuation date.”
While a revaluation of the tax has been deferred twice in the wake of significant price growth, a new revaluation date of November 1st, 2020, has been set by Minister for Finance Paschal Donohoe.
A target yield of €500 million would represent 0.83 per cent of total tax take this year and 0.71 per cent by 2023. The existing yield of 0.6 per cent of national income, the committee noted, is low by European standards. In France, LPT is 2.8 per cent as a share of national income and in the UK it is over 3 per cent.
The committee also recommended situations in which payment of the tax can be deferred, such as where a person’s gross income doesn’t exceed €15,000 or where a taxpayer has entered formal insolvency.