Elaine Loughlin: Changes to property tax make it fairer for all

The government has re-examined the property tax system to include all homes

In the first-time buyer's world of Ikea furniture, €2,970 would go a long way in sorting beds, sofas, curtains, lights and all the other extra expenses that go with getting on the property ladder.

That figure, €2,970, is the amount people who were lucky enough to bag an average-sized new home have saved since the controversial local property tax was first introduced.

In what was dubbed an unjust loophole, those who bought second-hand homes were penalised with the yearly charge, while people who purchased new houses and apartments built since 2013 got off scot-free as the property tax could not be applied.

Now the Government has said 100,000 more homes will be subject to property tax — the loophole is finally being closed.

But a person who bought an average-priced home of between €250,000 and €300,000 built since 2013 has saved €495 each year, that's seven years of extra money for dishwashers and toasters or maybe even a foreign holiday, which should have been paid in taxes.

No one likes paying taxes, but the Local Property Tax (LPT) was particularly galling for those who were singled out purely because their home didn't come straight out of the box when they bought it.

Changes criticised

While the closing of the loophole has been welcomed, there are other parts of the rejigged tax which have come in for criticism.

The long-awaited review of the LPT, which was first kicked to touch by former Finance Minister Michael Noonan ahead of the 2016 general election, became a pile of dirty laundry in the corner that nobody wanted to tackle.

In 2018, a rift between Fine Gael and Independent Alliance again stalled an updating of the tax. Shane Ross delayed the LPT changes when he demanded that any overhaul would have to include an exemption for pensioners and people with disabilities.

He is not the only one who has argued that those who are asset rich but cash poor should be exempt from paying the annual charge.

Pensioners who may have bought their homes many decades ago in what are now extremely affluent areas find themselves lumped with a tax of well over €1,000 each year. 

Under the new system, those living in homes worth €1.05m will have to fork out €1,190 each year regardless of income and the tax will jump to €2,721 for properties values over €1.6m.

Limited exemptions

But in pressing ahead with the new assessment system, Mr Donohoe strongly argued in favour of keeping the number of exemptions to a minimum as this in turn this keeps the rate people have to pay as low as possible.

Instead of increasing the number of people who may be exempt from the tax, Finance Minister Paschal Donohoe has in fact tightened the criteria. 

The exemption for homes in so-called ghost estates will be allowed to lapse and the temporary exemption for pyrite damaged properties in Limerick and a number of other counties will be phased out.

There will never be a good time to introduce taxes of any kind. In reexamining the LPT system to include all homes at least Mr Donohoe has spread the burden in a fairer manner.