Property tax needs better link to local services - Donohoe

There needs to be a better link between the payment of property taxes, and improved local authority services, Minister for Finance Paschal Donohoe has said.

There would be “modest” increases in how much households would pay, when the property tax undergoes a re-evaluation next year, Mr Donohoe said.

The Local Property Tax (LPT) was introduced in 2013, and is based on the value of a property, broken down into a number of bands.

Taxes paid are currently based on property valuations from mid-2013, but these are due to be re-evaluated based on current property prices in November 2020, leading to fears homeowners may see large hikes in bills.

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Speaking at an Oireachtas committee on Budgetary Oversight, Mr Donohoe said any increases from the re-evaluations would be “affordable” for homeowners.

Officials are also currently considering changes to the LPT system as part of the upcoming re-evaluation.

“It is very challenging to come up with a model where no one faces an increase in their LPT,” Mr Donohoe told the committee.

As part of the changes, taxpayers needed to see a clearer link between taxes paid and better services provided by local authorities, Mr Donohoe said.

“Over time I think we’d be able to do a better job than we’re doing at the moment,” on showing that link, he said.

The property tax was “low” compared to similar taxes in France and the United Kingdom, the Minister said.

Currently local authorities that raise significant amounts under the LPT, such as Dublin councils, transfer some funding to councils with lower yields under an ‘equalisation’ measure.

Local authorities also have the power each year to vary the tax paid by homeowners, by up to 15 per cent either side of a baseline rate.

Fianna Fáil TD Lisa Chambers said some rural councils were "cash strapped," and could not afford to reduce the rates homeowners paid, compared to more financially well off councils.

People “expect to see local services for the tax, and the single biggest complaint is people feel they haven’t seen any increases,” she said.

Speaking at the committee, People Before Profit TD Richard Boyd Barrett called for the entire tax to be abolished.

The tax was unfair as it was based on property prices, something households had “absolutely no control over whatsoever,” he said.

In 2015 then minister for finance Michael Noonan announced the valuation thresholds for LPT would be frozen until October 2019, meaning households paying the tax would not see an increase in their bill until then.

This April the Government decided to postpone making a decision on the future of the tax until late next year.

Mr Donohoe said from looking at property taxes in other countries “the first point of re-evaluation is normally the most challenging.”