The Government has moved to ensure that the revaluation of residential properties due later this year will not result in a significant increase in local property tax (LPT) for the vast majority of homeowners.
Through a combination of increased bands and new rates, the Minister for Finance Paschal Donohoe has seen to it that voters will not be penalised for the significant increase in the value of their homes since the last self-valuation in 2021.
House prices – depending on how they are measured – are up around a third nationally since then, which would have resulted in significant LPT increases for most householders. The Minister predicts the bills will now rise by between €5 and €25 for the majority. Local authorities have discretion to adjust down the rate by 15 per cent – or increase it by 25 per cent. The latter is a change and it will be interesting to see if any local authorities move in that direction, to raise addiitonal funds for their own spending.
Donohoe has justified his approach on the rather nebulous grounds of wanting “to ensure that what we are asking people to pay can be more affordable”. It is at heart a political rather than a fiscal decision. Property taxes are unpopular. They have no real political support, and they have been abolished and brought back several times. Increasing the burden would be a political gift to the opposition.
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The current iteration of the property tax was introduced in 2013 as a condition of the ¤67 billion bailout of the Irish government. The reform was intended to broaden the tax base and prevent a repeat of the collapse in tax revenue following the 2008 banking crisis.
The decision to hold rates unchanged means that revenues will also remain steady at around €577 million, around half a per cent of the €107 billion in taxes collected last year.
The Minister may yet come to rue his decision not to avail of the opportunity to increase the LPT as the resilience of the billions collected in corporation tax look increasing uncertain as events unfold in Washington.
