Report on Local Property Tax (LPT)

Yesterday the Oireachtas Budget Oversight Committee published their report on the Local Property Tax. The report recommends, by agreement on an all-party basis that the current revaluation process needs to be reviewed in light of the significant increase in Local Property Tax (LPT) liabilities that would arise if there is no change.

The Committee endorses two options originally suggested in the Thornhill Review of 2015:

Option 3 – Revalue and adjust rates nationally to maintain Local Property Tax yield, or
Option 4 – Revalue and adjust rates locally to maintain LPT yield.

Other recommendations include

• that the Inter-Departmental group adopt the suggested approach made by the Parliamentary Budget Office (PBO). The PBO suggests that the first step in the process should be deciding what amount of revenue is to be raised by LPT.

• that the analysis carried out by Department of Finance in 2015 should be updated to ascertain the potential impact of increasing property prices on LPT liabilities.

• that the Department of Finance should request that the Revenue Commissioners and ESRI carry out further analysis on the impact of potential increases in LPT liabilities on people with low incomes to determine if the tax is regressive or progressive in nature and the effect that this may have on the level of deferrals.

• that the Department of Finance provides clarity on the remit, and composition of the Inter-Departmental Working Group. Clarity should also be provided on what they mean by the phrase “maintaining relative stability”, contained in the Department’s press release.

• The Committee on Budgetary Oversight should be provided with the results of the review carried out by the Inter-Departmental working group in advance of Budget 2019.

• In advance of Budget 2019, the Department of Finance should engage with the Committee on Budgetary Oversight in ex-ante scrutiny of any proposed reform of the LPT

• Many people live in managed estates or complexes paying management fees that must also pay local property tax. The Committee recommends that a review of LPT as it relates to residential management companies and privately managed residential complexes, be included in the work of the Inter-Departmental Working Group. The results of this review should be reported to the Committee.

• The Committee notes that at present, approximately 48,000 property owners are exempt from LPT. The majority of these exemptions relate to new and unused properties built since 2013, and therefore, these property owners are being subsidised by other taxpayers. The Committee recommends that the Inter-Departmental Working Group should endorse the cessation of exemptions in relation to new and unused properties. This would make the current system more equitable and also broaden the tax base.