There is a better way to levy local property tax

Current local property tax arrangements raise many issues to do with tax equity

There has been the usual annual controversy about the decisions of elected members of local authorities in the greater Dublin area to “reduce” local property tax by 15 per cent below the amount which homeowners in their areas would otherwise be liable to pay. These decisions are frequently opposed by the unelected management who make a case for exacting the statutory maximum amount of LPT. Some commentators imply that councillors are making the wrong decision out of fear for their electoral survival.

I have no problem with financing local government largely by local taxation, including local property taxation. The abolition of domestic rates in the 1970s and the abandonment of land tax in the 1980s left commercial properties as the sole area for annual property taxes. Narrowing the tax base so as to concentrate on income and commercial activity inevitably tended to a state hostile to individual effort (in the form of extremely aggressive marginal rates of income tax of up to 77 per cent at one stage) and heavy commercial property rates and high indirect taxes (given our commitment to low rates of corporation tax).

With house prices reaching eye-watering levels in some parts of Dublin, uniform statutory rate of LPT is clearly a matter which needs examination. Naturally, there is little sympathy in respect of the massive LPT bills which purchasers of trophy homes in the so-called leafy suburbs are apparently able to pay in the context of purchase prices between €3 million and €8 million.

Tax equity

Consider that a former artisan’s dwelling in inner-city Dublin consisting of a very small terraced house with, say, two bedrooms, one living room, one kitchen and a bathroom, can easily cost €500,000. Meanwhile the same sum can purchase a detached Victorian residence standing in its own grounds with five bedrooms, extensive gardens, loose boxes, etc, situated, say, 70 miles from Dublin. Given this comparison, you can query the equity of demanding more from the Dublin resident than from his or her fellow citizen residing outside the Pale.


We talk about the 15-minute city, and it seems that we have finally copped on to the absurdity of spending hours daily commuting from dormitory suburbs to our city centres. However, increasing the population densities of city centres does not fully address many of the tax-equity issues involved in the current LPT arrangement.

Going back to the contrasting examples mentioned above, the terraced former artisan’s dwelling may be the home of a young couple paying a mortgage of €400,000, while the gentleman’s residence on the edge of the Pale may be the mortgage-free home of a married wealthy professional couple with adult children earning very significant incomes.

If you ask whether these households should contribute the same amount to the cost of local services , a question arises as to whether the costs of local government services are being fairly shared across the community. This, in turn, raises fairness as between those who can choose to live outside cities and work from home online and those who can’t do so, such as those who must work in offices, retail, factories, hospitals and schools, etc.

Part five of the planning Act which enables local authorities to acquire up to 20 per cent of new developments produces remarkable results, such as the acquisition of two-bedroomed apartments as social housing for prices in excess of €500,000.

Value categories

There is a better way, I think, of achieving equity. Instead of calculating liability for LPT on the basis of the market value of homes, it should be possible to devise a scheme whereby, in each local-authority area, the homes are classified, say, in 10 value categories, A to J, from the best to the most basic types of residence, and the owners or occupiers are charged LPT by category so as to pay for a specific fraction of their local authority’s annual budget.

Dublin city has an annual budget approaching €1 billion. Whether this represents value for money is hardly ever examined since, apart from the statutory discretion vested in councillors to vary the LPT charge by up to 15 per cent, elected members have little or no control over the size of the budget, and voters in local elections are effectively disenfranchised as to the total amount of expenditure by their local authority. There was a time when ratepayer candidates were elected to Dublin Corporation and other urban authorities with a mandate to keep rates under control. But this issue simply doesn’t arise any more in the context of local elections.

Another issue which arises in rural Ireland is as to whether it is fair that the proprietor of a small coffee shop or similar person must pay commercial rates while farmers with huge cattle sheds and built infrastructure contribute nothing. Is this fair?

Sometimes there is a call for a citizens’ assembly to deal with issues such as climate change. It would be interesting to convene a citizens’ assembly to discuss local government and LPT.