Farm Money Advice: Local Property Tax could jump more than three-fold after review which starts next month

By Kieran Coughlan

A review of the Local Property Tax (LPT) by the Department of Finance will take place in 2018.

As part of the review process, interested parties will be invited to take part in a consultation to submit their views on the future of the LPT.

The LPT was introduced in 2013, and every dwelling house, whether occupied for private use or as a rented premises, was required to register for the tax, make an assessment of the value of their property and pay the relevant LPT liability each year.

The valuation date was set as May 1, 2013, and property owners have benefited from a freeze on their chosen value since that date.

Absent any change in the LPT legislation arising from the consultation process, the valuations of properties on November 1, 2019, will be the basis for calculating LPT liabilities in 2020 and beyond.

Clearly, there has been a dramatic increase in the value of many properties in Ireland since May, 2013.

The most recent quarterly report from the property website suggests that, on average, house prices have increased by €76,500, since the third quarter of 2013.

Average house prices across the country at the end of 2017 stood at €240,783.

Some properties of course will have jumped up in prices by a much higher factor.

This jump in property prices is causing discomfort at cabinet level in the government, nearly two years since the last election, and with the potential for the government to be dissolved after the conclusion of the third confidence and supply budget in October, 2018, if not sooner!

The risk for the government parties is that they could be facing into an election against a backdrop where the majority of voters will be reeling from a major uplift in their LPT tax.

The upward shift in values can mean a major hit in LPT, with property price increases expected to move the majority of taxpayers by at least one if not two tax bands.

Where a taxpayer had valued their property at €90,000 in 2013, their standard annual LPT payment amounted to €90, before taking account of any local council adjustments (some councils chose to apply either a higher or lower rate than the standard national rate).

If the property is revalued upwards to, say €160,000, in November 2017, then the LPT liability (under current rates) would jump more than three-fold, to €315 per annum.

For more expensive properties the change in valuations may result in an even larger shift of three, four or even more tax bands, bringing a major uplift in the LPT tax liability.

On its introduction, the tax was touted as being a shift of policy towards a sustainable tax base not suffering from the vagaries of boom and recession, in contrast to receipts from stamp duty, for example.

So it’s ironic that as the economy has recovered, and property prices have appreciated, this supposed “sustainable tax base” is itself heavily correlated to the whims of booms and recessions.

Of course, all taxes are a manifestation of political interference of one form or another, and there may be a strong temptation to adjust downwards the potential impact of the changed valuation date, particularly if a general election may awkwardly coincide with a new valuation date for LPT.

The review will start in February, and is expected to conclude in August.

In announcing the review , one of the guiding purposes is to assess the desirability of achieving relative stability, both over the short and longer terms, in LPT payments of liable persons.

This framework would suggest that there will be some downward adjustment to the LPT rates to take account of property price increases.

Meanwhile, if you have not paid your LPT for 2018, it’s not too late to pay by single debit authority, by March 21, 2018.

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