More than €16.5 million will be "lost" to Dublin city by next year in local property tax (LPT) forgone on new homes, following the decision to postpone the tax review.
An assessment by Dublin City Council’s finance department found that, by the end of last year, losses of more than €7 million had been accumulated through the property tax exemption for new homes, but by 2020 that will have risen to more than €16.5 million due to expected increases in housing construction.
Fine Gael councillor Paddy McCartan said continuing the exemption "undermines the credibility of the tax". Council chief executive Owen Keegan has previously said this "inequity" needs to be addressed.
The rate of property tax paid by homeowners is based on the value of the property in May 2013. Houses and apartments bought from a builder since 2013 are exempt from property tax. The exemption was introduced when the tax came in to effect in July 2013 and was due to last until October 2016.
However, in 2015 then minister for finance Michael Noonan announced the valuation thresholds for LPT would be frozen until October 2019, meaning households paying the tax would not see an increase in their bill until then.
Earlier this month the Government decided to postpone making a decision on the future of the tax until next year, meaning all current taxpayers would continue to pay the same rate and owners of new homes would continue to escape the tax completely.
The council’s figures are based on approximately 15,500 new homes being sold in the city from mid-2013 to 2020, using an average 2013 valuation of €250,000 per home.
While at the standard LPT rate homeowners would owe the council an average of €405 each, the council applies a 15 per cent discount, resulting in an average annual charge of €344.25. Cumulatively that would amount to €11,205,338 this year and €16,558,425 by next year being lost to the council.
Fundamentally unfair
Mr McCartan said it was fundamentally unfair that many hard-pressed homeowners were paying a tax that some of their neighbours were not.
“This exemption was meant to be a relatively short-term measure, but we are at the point now that most people have been paying a tax for six years that others have escaped.
There was nothing to indicate that buyers of new homes were any worse-off than existing homeowners he said.
"Recently built apartments Lansdowne Place in Ballsbridge had prices ranging from €825,000 to €6.5 million. It seems fundamentally unfair that these buyers would't have to pay property tax, while the owners of older properties on Lansdowne Road have substantial bills."
Mr McCartan said some system should be introduced so that owners of new properties pay an average, or even a minimum charge, based on 2013 values.
Minister for Finance Paschal Donohoe had ruled out charging new homeowners before next year.
Previously, in a report on the council’s 2018 budget, Mr Keegan said the exemption “requires prompt attention to remove the inequity among householders and address the loss of funds”.
