Local authorities are to be given the power to increase and reduce the rate of local property tax (LPT) by more than the 15% limit they currently can, Leo Varadkar has said.
Taoiseach Leo Varadkar also said that while poorer local authorities will continue to require to be financially supported, such support will no longer have to come from richer councils, particularly in the Dublin area.
Amid accusations from opposition parties that the Government deferred the LPT review for “naked political reasons”, Mr Varadkar set out his vision of how the tax will work from 2020.
“I think there is a solution,” he said. “The local property tax should be retained locally. The money that people pay in their local authority area should go to the local authority and stay in the local authority.
“We will still need an equalisation fund to ensure that less well-off local authorities do not lose out, but that does not need to be funded from the local property tax, LPT.
Mr Varadkar said he favours giving more freedom to local authorities to set the rate of LPT in their area.
“I think we can trust local government and councillors to have more autonomy when it comes to the LPT and allow them to vary it by a greater percentage. That is what I would suggest as part of the solution,” he said.
He was speaking after the Irish Examiner revealed that the Attorney General had expressed serious concerns about the Government’s decision to delay a review of the LPT.
In the April 2 confidential Cabinet memo, Séamus Woulfe warned ministers explicitly that the Government is leaving itself open to a potential legal challenge because up to 80,000 homes built since 2012 are exempt from LPT. Mr Woulfe also raised the possibility that a deferral is not consistent with the Constitution.
The Government is “treating the public like children” and deferred the review of the LPT for naked electoral reasons, Fianna Fáil said.
Fianna Fáil’s housing spokesman Darragh O’Brien said it was clear that ministers ignored those concerns for electoral reasons.
“Everyone wants fair and affordable LPT, the Government has been kicking this around since 2015,” he said.
“They are treating people like children on this and that is not correct. If you look at what the Attorney General advised, he raised some quite serious issues about how this tax would be viewed constitutionally and how it would be seen as arbitrary given the large number of homes now exempt.
“This deferral, even the constitutionality was questioned by the AG, is simply being done for electoral reasons, not for fiscal prudence.”
Mr O’Brien pointed to a warning by Mr Woulfe about the potential loss of income of a quarter of a billion euro a year.
In response, junior public expenditure minister Patrick O’Donovan said it was reasonable for his boss, Paschal Donohoe, to take his time to get the right solution. He said suggestions that the Government is foregoing €250m a year is not correct as to collect that amount in tax would result in hikes to bills of €100 to €300 a year.
“Paschal Donohoe has made it clear that any increases would be modest, fair, and affordable,” said Mr O’Donovan. “If no policy change was made and there was a revaluation, about 85% of people would see an LPT hike of up to €300.
“He is reflecting the fact we need some policy change. He wants the overall yield to be maintained at about €500.”