One-third of homeowners face an increase in their property tax bills of about €90 as part of a new reform of the system due to be unveiled by the Government on Wednesday.
The Cabinet has agreed to cut the rate at which the tax is charged and to broaden the bands in a move that will see the bills of more than 50 per cent of households remain the same.
Despite this, 33 per cent of homeowners will see an increase in their yearly charge when they move one band up, and 3 per cent will move up two or more bands.
Some 11 per cent of homes should see a decrease in their property tax bills, it is understood.
One issue highlighted by a 2019 Department of Finance study was that reform could hit the lowest-value households, those currently valued at less than €100,000 and almost all in rural areas.
It is believed a restructuring of the tax bands related to lower-cost properties will be introduced to avoid this hit to the lowest-price homes. For most houses valued up to €1 million, the rate is likely to be applied at just over 0.1 per cent – this is below the current rate of 0.18 per cent. A restructuring of the bands will ensure that the cost remains the same for the majority. A higher rate will continue to apply for houses over €1 million.
Homes built after 2013 will also face inclusion in the local property tax.
Under the existing terms of the tax, it is levied on property valuations from 2013. However, homes that were not built at that time do not have a liability as they do not have a valuation dating from then.
The change would address the issue of about 100,000 homes not being eligible for the tax.
The main increase in revenue will come from the inclusion of homes currently excluded. This will increase the annual yield from €480 million now to about €560 million.
The Minister for Finance, Paschal Donohoe, said on Tuesday that from November of this year all homes would be revalued, but it would be done in such a way that recognised the affordability challenges facing many families.
Despite the fact that many properties would have significantly increased in value since 2013, Mr Donohoe said most people would not face an increase any more than a single band width, which would be an increase of €90 per year. This would be because of changes in the calculation of band widths, he added.
At a press conference, Mr Donohoe was asked if he was retaining the system whereby the tax was based on the value of the house. He said that “the structure of the LPT will be progressive. The more [the house] is worth the more tax you will pay.
“We will be maintaining that progressivity.”
Asked if it would discriminate against homeowners in Dublin, where values of property have increased hugely since 2013, he signalled that the planned changes to the bands would address this.
It is still likely, however, that properties in areas such as Dublin will be most affected.
Cabinet was also told there will be a change to the system that redistributes some of the property tax outside the local authority limits.
Currently, 80 per cent of the monies raised are retained in the area, with 20 per cent sent to local authorities. From 2023 it is understood that 100 per cent will be retained in the local authority, with central government making up any shortfall.
Cabinet sources admitted there is concern amongst rural Ministers that the change could result in a backlash, with the Government likely to come under pressure to clarify how it would compensate for any losses in the equalisation fund.
People Before Profit's Richard Boyd Barrett has called the new proposals an "unjust punishment of homeowners". Sinn Féin also reiterated calls for the tax to be scrapped. The full details of the new property tax system will be unveiled by Mr Donohoe on Wednesday morning, after which the changes are likely to face renewed Opposition anger.
Speaking to RTÉ Six One News on Tuesday, Sinn Féin leader Mary Lou McDonald said: "We have never accepted that a tax on the family home is fair and it is certainly not affordable for many people for whom their home, their two-up, two-down, their semi-d, is the one asset that they have that they have worked their whole lives to pay for.
“They could be in possession of this asset and still be on a very low income and none of that is factored in. When those from Government try to portray this as a progressive tax, as a wealth tax, it is a tax on the family home and it is wrong. The only assessment of it should be the assessment to abolish it.”
The Taoiseach, Micheál Martin, said any “recalibration” of the scheme “will be fair and will be affordable”.