Stark warnings about the wisdom of delaying the Local Property Tax review

Finance Minister Paschal Donohoe’s decision to defer valuation by a year, to November 2020, has been branded ‘electioneering’ by the opposition, writes Daniel McConnell

Finance Minister Paschal Donohoe’s deferral of the much-anticipated review of the local property tax (LPT) had barely been announced when the cries of ‘electioneering’ came from the opposition.

Fianna Fáil leader, Micheál Martin, said the decision by Mr Donohoe smacked of party politics. “It is clear they did not want to do anything before the local and European elections and, possibly, a general election. There was an electoral context to that decision.”

Even cabinet ministers, speaking privately, acknowledged the political dimension to the decision. Politically, it was impossible to move ahead, given the instability of the Government and the looming local and European elections, they said.

“In addition to those, we all know there is a high chance of a general election this year, so it was a case of ‘no way, Jose’,” one minister said. It was approved at an extraordinary Cabinet meeting on Tuesday, April 2, when Donohoe brought his memorandum under the arm, to limit the chance of it leaking out. A stickler for rules, Donohoe has been burnt before: a major economic announcement, which was due to go to Cabinet on a Tuesday in 2017, ended up as the lead story in a Sunday newspaper two days before.

But, also, Donohoe realises there is a great deal of sensitivity about the LPT, given this minority Government’s vulnerability to collapse. An expert review group had been considering what to do with the LPT when the current period ended, in November. It produced its report for Donohoe and recommended he press ahead with the change in rates later this year. It set out five scenarios for him, but Donohoe felt unable to pick any of them. The text of Donohoe’s confidential memo is today published here and reveals a number of frailties in what he has decided to do.

“The minister is conscious of the importance of maintaining simplicity in the operation of the LPT, which was considered one of the critical success factors in its introduction. Having considered the matter, the minister has decided to defer the valuation date from November 1, 2019 to November 1, 2020. This should give sufficient time for the Oireachtas Budgetary Oversight Committee (BOC) to consider the review report in the context of the committee’s recommendations in its report of March 21, 2018,” the memo states.

But of most interest in the memorandum are the concerns expressed by Attorney General Seamus Woulfe, who is the Government’s legal adviser. Woulfe sits at Cabinet and is called upon to advise on new policy matters and major government decisions. The memo reveals that Woulfe had a number of explicit concerns about delaying the review of the LPT.

Firstly, Woulfe said, “it is somewhat unclear whether deferral of the valuation date can be done via ministerial order under section 13(3). The starting point, of course, is that prima facie s.l3(3) permits such an order and the presumption of constitutionality applies to the section and the exercise of the power under that provision.

“The real question is whether the absence of ‘principles and policies’ renders the section invalid, having regard to Article 15 of the Constitution. The answer to this appears to me not entirely clear,” he warned.

The power to fix dates, or rates of interest, for example, has been provided for by legislation over the years, with arguably minimal principles and policies, he warned ministers. “On one view, which I am inclined towards, on balance, the power to defer the date could be seen as a narrow area of delegation, on the basis that the outcome might be more easily adjusted within the scope left to the subordinate, in the light of changing circumstances.

“I accept there is an alternative view, which some judges might adopt, that the deferral power is, in fact, a wider delegation, which does require principles and policies in the parent legislation,” he said. On the more substantive point, Woulfe, according to the memo, said: “I appreciate, also, that it is difficult to envisage who would object to 2013 valuation levels being maintained.”

He warned that the Government was leaving itself open to a potential legal challenge, because of the inequality of how the tax is now operating, with up to 80,000 homes built since 2012 exempt from the LPT.

“However, the way that the 2012 Act is constructed is that there is a significant number of properties that attract an exemption from liability, for one reason or another.

“Arguably, this could create an appearance of arbitrariness that could give rise to a challenge from a disgruntled liable person.”

Woulfe argued that “it would be necessary to justify this system of exemptions with clear policy reasons and it is possible that the whole act could come under scrutiny, including the maintenance of the artificially low valuations of properties.”

Ultimately, he said it is a matter for the minister to decide whether to utilise section 13(3) to alter the valuation date, having regard to the points outlined above, in particular the presumption of constitutionality applying to section 13(3), “notwithstanding a degree of risk” about the constitutionality of the deferral.

Mr Donohoe’s memo also reveals that the AG advised, on the permissibility of opposition legislative amendments, to reduce or eliminate tax liabilities.

“In summary, the advice is that an amendment to a bill that reduces tax liabilities can be tabled by the opposition and that an amendment imposing a charge on the public (imposing a tax) cannot be tabled by the opposition.”

The advice notes that the interpretation of the relevant standing order (no. 178) is within the domain and remit of the Ceann Comhairle.

“The advice also notes that there is no authority to suggest that a reduction in tax requires a money message under Article 17.2, since it is not the appropriation of revenue. Also, a financial resolution is not required for such a reduction, since the LPT was previously considered not to be a money bill by the Ceann Comhairle,” the memo states.

So, it is clear that Donohoe, no doubt with the approval of his Taoiseach, Leo Varadkar, and his Cabinet colleagues, deferred the LPT review, despite some stark warnings, about its viability, from their own top legal adviser.

Scenario 1


A central LPT rate (0.114%) applies to all properties such that the total yield following the valuation increases is brought back down to €500m.


Local authorities with greater shares of properties between €100k and €200k to show smaller or decreases.

Properties in these cases move to higher valuation bands but this is cancelled out by reduced rates so the LPT average charge is lessened.


Local authorities with greater shares of properties under €100k in 2013 tend to show larger average increases.

For these homes, the step-up in LPT charge is larger than a movement between higher bands (€50,000 intervals). This impacts more on rural local authorities.

Scenario 2


Each local authority has a yield target equal to its expected yield under current LPT 2018 without a local adjustment factor and the rate in each local authority is adjusted to meet these targets following valuation increases.


Local authorities with greater shares of properties worth between €100k and €200k tend to show smaller increases or decreases.

Properties in these cases move to higher valuation bands but this is cancelled out by reduced rates so the LPT average charge is lessened.


Too complex as it applies a different rate to each local authority area, which combined with potentially31 different local variations (LAF), results in 31 different rates.

Would involve a reduction in LPT liability applying to homes under €100k.

Fixes LPT yields for local authority areas at historical values where the population of homes may have grown significantly leading to a loss of potential yield.

Scenario 3


A different LPT rate (ranging from 0.108% to 0.126%) is applied in each valuation band (increasing by 0.001% in each band), and is set to collectthe overall target of €500m (with no local authority variation or adjustments).


Relatively progressive impact on households, whereby those in the lowest income deciles can be expected to experience the largest increases in their disposable income compared to the highest income deciles (compared to benchmark).


Also still too complex as it applies a different rate to all 20 valuation bands, which in isolation could have potential, but which combined with potentially 31 different local variations (LAF) may result in 620 different rates. Depending on the extent to which local authorities exercise LAF powers, this could be very challenging for Revenue to implement and for property owners to understand.

Scenario 4


As in scenario 3, except that all properties in the first valuation band pay €90 (the current rate for that band), in effect putting a floor.


Generates additional €13m which when included in the €500m target leads to greater reductions for rates other than the first band.

Ensures that no-one pays less than the current band 1 rate of €90.


Applies a different rate to all 20 valuation bands, which in isolation could have potential but which combined with potentially 31 different local variations (LAF) may result in 620 different rates.

Could be very challenging for Revenue to implement.

Scenario 5


All valuation band thresholds are increased by 80%.


Simple to communicate/ administer.

82.1% of properties remain in their corresponding band at the new thresholds.


40% of people in Dublin move up one band — Resulting in €90 increase.

For homes in Band 7 (€630K to €720K) 48% move to the next band paying+ €90. In Band 8 (€720K to €810k) this increases to 58%.

This is deemed as regressive for homes between €100k and €150k where increase is large in proportion to property price and as compared to higher values with increases of just €90

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