Councils should be allowed vary property tax by more than 15%, Varadkar says

Property tax net to include buyers of new-build homes in coming years

Homes built since 2013 will now be subject to the local property change. File Image: The Irish Times

Homes built since 2013 will now be subject to the local property change. File Image: The Irish Times

 

Local authorities should have powers to vary local property tax (LPT) rates by significantly more than the 15 per cent limit that currently exists, Tánaiste Leo Varadkar told Fine Gael colleagues on Wednesday night.

Up until now, councils in Dublin in particular have used the 15 per cent freedom to reduce LPT rates in their areas, though this has led to complaints about the impact of local services.

Fine Gael’s 2020 election manifesto already pledges to offer councillors more discretion to change LPT rates beyond the current ability they have to raise or decrease the rate.

It is understood that Mr Varadkar’s preference could be included in the legislation that could pass the Oireachtas before the summer, though this would be subject to Coalition agreement.

Meanwhile, people who buy new-build homes will not escape the LPT net like those who did so from 2013 until the reforms announced on Wednesday by the Minister for Finance, Paschal Donohoe.

New homes bought between 2022 and November 2025 will pay LPT calculated on a retrospective valuation of what it would have been worth if it had existed in November 2021.

One hundred thousand homes built over the last eight years are now finally becoming liable for the tax, though the majority of homes that have already paid the tax will not face higher bills.

Properties will be revalued in November to update the existing 2013 records of what the homes were valued at, while valuations will be updated every four years from now on, Mr Donohoe said.

The rate of the tax has been cut and the property value bands widened “to make the changes affordable”, he said, adding that the majority of homeowners would see a decrease or no change in their bills.

The changes, which will see the homes affected by an increase paying on average €90 more annually, will increase the annual yield raised by the LPT rise from €480 million to about €560 million.

Homeowners will continue to self-declare their home’s value as of November 1st, 2021, though Mr Donohoe said the majority currently make an honest judgment.

Inaccurate self-declarations

The Revenue Commissioners will continue to follow up and challenge inaccurate declarations: “There are risks with any tax that is self-declared,” he told journalists.

From 2023-2024 onwards, local authorities will retain 100 per cent of the LPT collected in their areas, in a bid to deal with Dublin complaints that revenue collected there is spent elsewhere.

Currently, 80 per cent of the revenue raised is retained in each council’s area, but the remaining 20 per cent is placed in a central government fund and dispersed elsewhere.

No local authority will be worse off from the change, said the Minister, adding that the exchequer would make up the €40 million to €60 million shortfall that this would cause.

The new regime will see exemptions for pyrite-damaged homes phased out, with Mr Donohoe saying that “significant sums” of up to €166 million have been spent on repairs since 2014.

Temporary exemptions will remain for the owners of pyrite- and mica-damaged homes in Donegal and Mayo that are eligible for the defective concrete blocks grant scheme.

Meanwhile, the Minister is seeking to accelerate the passage of the legislation before the Oireachtas’s summer recess by bypassing the pre-legislative scrutiny due on legislation.