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Monday 11 December 2017

We cannot allow LPT to become an unfair 'Dublin tax'

The Local Property Tax (LPT) came into effect in mid-2013. The most remarkable thing about the new tax, basically the reintroduction of local authority rates which had been abolished 1978, was how little resistance there was from homeowners.

The comparison with the introduction of water charges two years later could hardly have been greater.

However, with the memory of the latter debacle still fresh in their minds, Ministers are treading warily on the property tax issue.

When the LPT was first introduced the Government promised that the amount paid by homeowners, which was based on 2013 house prices, would remain unchanged for three years, i.e. until after the next general election.

angry

However, since then house prices have recovered strongly, with average Dublin house prices jumping by a cumulative 39pc between June 2O13 and October 2014.

As the Local Property Tax is calculated as a percentage of a house's value, currently 0.18pc, this means that Dublin homeowners could be hit with hefty increases next year.

A house valued at €300,000 in mid-2013 currently costs €360 in LPT. This could rise to over €500 next year.

The last thing the Government wants is to be confronted by hundreds of thousands of angry homeowners when the country goes to the polls in 12 months time.

In a worst-case scenario fears of steep increases could reverse most homeowners grudging acceptance of the LPT and force the Government back to the drawing board as happened in the case of water charges.

Not surprisingly, Ministers are moving to defuse this electoral timebomb before it blows up in their faces.

They are planning to use next month's spring statement, in which the Government will provide a broad outline of the shape of next October's budget, to announce plans to either leave LPT rates unchanged until 2018 or else break the direct link between property values and LPT.

Although I have no objection to the principle of homeowners paying a tax on their property, I have very serious problems with a tax such as the LPT being based on property values.

With Dublin property prices being much higher than those in most of the rest of the country, such a tax inevitably becomes a 'Dublin Tax' with the owners of modest semi d's in the capital paying more in LPT than the owners of palaces in rural parishes.

With LPT being the reincarnation of domestic rates it is well past time for the Government to go the whole hog and explicitly link the amounts of LPT collected in each area to the budgets of the local authority for that area.

In fact, the Government should go even further and, instead of there being one rate of LPT for the whole country, allow local authorities to set individual LPT rates for their own counties or cities.

This would do two things: Firstly, it would ensure that the LPT would not come to be seen as a 'Dublin Tax'.

Secondly, it would increase the efficiency and accountability of our local authorities - a development that is long overdue.

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Homeowners in a particular country or city would be far less tolerant of waste by local authorities if they knew that it was having a direct impact on the amount of LPT they were forced to pay every year.

So, in an ideal world, the Government would allow each local authority to set its own LPT rate and to use that money to fund most of its activities. This in turn would force local authorities to become more efficient and accountable. Unfortunately we don't live in an ideal world.

As the establishment of Irish Water demonstrated, this Government prefers to buy off protected interest groups even if it means that customers or taxpayers end up paying more. Why should LPT be any different?

So what we are likely to get next month will be a messy compromise as the Government parties seek to offend no-one. That won't work.

By trying to be all things to all men, and women, the likelihood is that the Government will end up being nothing to nobody. And angering homeowners in the process.

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