LOCAL PROPERTY TAX IN DUBLIN
WILL IT SURVIVE THE NEXT DECADE?
A recent article in the Irish Times sugggests that the Local Property Tax may, unless a legislative U turn
is performed soon, wither away due to lack of public confidence in the fairness with which it is applied.
When the Local Property Tax was introduced, payment exemptions were provided to those
people who purchased new residential properties
Proposed changes to legislation which will probably be passed before Christmas 2015 aims to extend
this exemption from it's current end date of October 2016 to October 2019.
In effect, residential property purchases during the period 2013 to October 2019 will allow their owners the freedom to avoid the payment of property tax until 2020.
This possibly well intentioned attempt to help revive a now growing Irish construction industry may have the result of imposing a property tax of say € 450 per year on a family who bought their house in 2007, whilst their next door neighbours, whose house is the same valuation band, can avoid paying any property tax until the year 2020, at the earliest.
If this situation becomes widespread, especially in the Dublin area where NAMA is currently planning to fund 20,000 new homes, it may well result in legal challenges to the property tax legislation based on the perceived unfairness of the imposition of the tax on some people but not on others. Even without legal action, it may result in the loss of public confidence in the property tax as a fair method of widening the tax base.
It may increase the default rate, as happened with the rates system of years ago and is now occuring to an extent not yet fully known, in relation to the current water charge controversy.
Another fact is the postponement of property tax revaluation until 2019, as announced in the recent budget. Although this measure may have been put in place to avoid punitive increases in property tax due to a rapid increase in house values over the last three years, especially in the Dublin area, in effect it only defers a sudden and inevitable large increase in the take from the property tax if local authority services are to be maintained in the decade beginning in 2020.
An alternative method to reduce these problems has been outlined in the recent Thornhill report, which suggests scrapping the new home exemption idea completely and recommends adopting the policy of allowing tax rates to rise over time, rather than in a relatively large hike in a few years time.
The Thornhill report referred to the problems that the local authority rate system of 35 years ago had, and, despite the involvement of the Revenue Commissioners in collecting the Local Property Tax, (in some cases directly from income payments), without a general public acceptance of it, this tax may be rejected on an increasingly broader scale over the next decade.