Voter backlash prompts Government rethink on property tax

Homeowners will be spared massive increases in their local property tax (LPT) bills after 2019 under plans being devised by the Government.

Allowing each local authority to set a different rate of LPT to avoid large increases in bills for homeowners is the preferred choice to avoid a voter backlash.

Finance Minister Paschal Donohoe has announced a review of the property tax to conclude in time for October’s budget to determine the system of charging post 2019.

Because rates are currently based on the market value of the property, homeowners are facing massive rises in property tax given the sharp rise in house prices, if the policy is not changed.

The LPT will raise €462m this year despite 62,000 households deferring payment due to an inability to pay.

Politically, such a move is not considered tenable and a report compiled by the Oireachtas Parliamentary Budget Office, suggests amending the rates at local level is the way to go.

The report, outlines four options including doing nothing, but said such a policy “could damage the legitimacy of the LPT with the public”.

The second option is to extend the freeze on 2013 levels but warns that this would give rise to inequalities as properties that were of similar value in 2013 have changed since.

It also expressed concern that “a further freeze would give rise to the expectation that any future revaluations would also be postponed”.

The report also warned that “precedent suggests that if the taxable value diverges significantly from the market value that constitutional issues could arise”.

The third option is to undergo a process of re-evaluation of properties and adjust the rate at a national level to maintain the overall amount of money raised.

“Average payments would be similar but properties that have increased [particularly in Dublin and other urban areas] will see increases in their LPT charge,” the report said.

The fourth option, argues for a re-evaluation of homes but allows local authorities to ensure the amount of money raised is maintained.

“The 2015 Thornhill Review of the LPT recommended that this approach be adopted,” the report states.

Fianna Fáil finance spokesman and Michael McGrath told the Irish Examiner dramatic increases in bills have to be avoided.

“The priority has to be to avoid the dramatic increase in LPT bills that households will face if the current system is not reformed,” he said.

“The changes to the LPT regime need to bring about greater certainty for households and local authorities and avoid further wild fluctuations in the future. This will have to be dealt with by Budget 2019 so that people can plan for the future with a degree of certainty.”

At the Oireachtas Budget oversight committee, finance officials appeared to rule out moving to a site- valuation tax model.

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