Property tax increases will be delayed until 2021 and will be “modest” after a decision by the government to defer decisions on the levy. The Government’s preference is that there be no increases for four in five owners if property tax bands are widened for a majority of homeowners.
However, the decision to put off reforms to the tax, with local and European elections looming, has been deemed an election stunt by opposition parties. Finance Minister Paschal Donohoe was forced to defend deferring changes, releasing a report which outlined several scenarios if rates or bands are changed and how that impacts on the yield.
Rates were frozen in 2013 and a further decision was taken in 2016 to keep them at the same levels until November this year. The Cabinet this week agreed to further postpone any decision until next year.
Mr Donohoe’s department’s review recommends exemptions from the tax be kept to a minimum and deferrals for low-income households continue. It recommends ending “equalisation” contributions from local authorities, which forces them to put 20% of the tax collected into a central fund. Furthermore, local authorities should be allowed to raise rates by a maximum 15%, the review said.
Scenario five in the report, Mr Donohoe’s preferred option, suggests that 82% of properties have no increases while the rest would see rises of between €51 and €200. Most properties subject to increases would move up one band. Under this scenario, over 360,000 owners out of 2 million would see tax rises.
But Mr Donohoe said he wanted to consult with the Oireachtas budget oversight committee. The new valuation date for homes will now be deferred from November 1, 2019 to November 1, 2020.
Under the preferred option, the annual exchequer intake from the tax would rise from €482m to €547m. This would include an extra €27m from previously exempt properties and €22m from homes moving valuation bands.
The review concluded that, while properties prices have risen by 80% since a low in 2013, four in five properties would see no increases with wider band changes.
Mr Donohoe said the property tax was here to stay:
"By doing this, I want to achieve the following priorities. I want to protect the yield, I want people to know where they stand on this in the future, I want to integrate new properties into the LPT base, I want to maintain this base, being broad with a small number of exemptions and I want to uphold the progressivity of the tax.”
Critics said it was a decision taken for “political reasons” in advance of May’s elections. Furthermore, deferred potential income threshold changes would result in thousands of low-income families still having to pay the tax, argued Fianna Fail’s Michael McGrath.
Mr Donohoe said if the revaluation of rates had gone ahead this year, two thirds of households would have seen increases of more than €200. Any increases now, he added, should be “modest and affordable and of course fair”.