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Finance (Local Property Tax) Bill 2012: Second Stage (Continued)

Friday, 14 December 2012

Dáil Éireann Debate
Vol. 786 No. 4

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(Speaker Continuing)

[Deputy Olivia Mitchell: Information on Olivia Mitchell Zoom on Olivia Mitchell] To give an example of the injustice of this and the impact of using this method of calculation, the cost per capita of providing services in my local authority area of Dún Laoghaire-Rathdown is exactly the same as the per capita cost of providing services in Donegal but the homeowner in my area will pay somewhere in the order of five times the property tax that the homeowner in Donegal will pay. This is quite simply unconscionable and people will not accept it. I fully understand that there must be a redistribution element to taxes from areas of high economic activity to areas of low economic activity and that is what we use income tax for; it should not be what we use a local property tax for.

  After years of austerity a new property tax is inevitably going to be hugely unpopular and difficult but if it is not at least fair it will be more than just unpopular and difficult; it will be completely unacceptable and impossible to sustain over any length of time. This tax is being sold to us as a local tax which will go back into the council area in which it is collected. When Dubliners realise that this is not in fact the case, we will be lucky to avoid a revolution and I do not blame people for revolting if that is the case. The tax will go into a single pot, the local government fund, to be divided out according to some arcane formula that has absolutely nothing to do with the amount of money collected in an area or the cost of services provided there.

  To put it crudely, lest there be any misunderstanding, Dubliners have to pay too much so that others can pay too little. That is the bottom line and that is why this tax will not fly in Dublin. There are many injustices in this. First, we pay more than those elsewhere; second, we pay more in order to subsidise other councils' services; and third, no allowance is made for those who paid the biggest stamp duty during the Celtic tiger years, that is, those who live in Dublin and other urban centres. From every perspective, this is an anti-urban tax and I cannot see why it cannot be calculated on a council by council basis, or even on a regional basis, just as is done for commercial rates, whereby the councils decide what they need to collect in an area and then strike a rate that will give them that amount, with larger homes subject to a higher rate than smaller homes. That is the way it is done in every other country that has a local charges system. I could even accept, given our current budgetary requirements and the need to raise €500 million, that we might have to pay a little bit more than the cost of local services, particularly in the early years of the tax. However, the underlying means of calculating the tax must be fair.

  As a member of a Government party, despite what I am saying, I am going to support this Bill because I believe I have a better chance of changing it on this side of the House. I also realise that the budgetary arithmetic is done for this year and it is now too late to alter it. In any event, I doubt I would be able to come up with cuts and taxes to the tune of €500 million. However, I am asking the Minister to take what I have said on board and to adjust the means of calculation for next year because a tax that is so fundamentally unfair will produce such a backlash and cause such social unrest in Dublin that it will imperil all of the efforts of the Minister and the measures he has put in place to try to get our public finances back in order. I also believe this tax has the potential to undermine and devalue all of the sacrifices that the people have made over the last five years.

  There have been some suggestions that councils will be allowed to retain 65% of what is collected in their area but there is nothing in the legislation about that so I do not know if it will happen. The legislation does contain a provision that each local authority can vary the tax by 15% and this merely bears out my point. It is only in urban areas of high-priced houses that 65% of what is collected will actually cover the council's costs and give the prospect of later reducing the charge by 15%. To me, this indicates that, at least initially, the property tax overpayment in Dublin will be in the order of 50%, with 35% going to rural councils and then, apparently, we will be so cash-rich that we will be able to give a discount of 15%. It is simply inequitable to ask people to overpay by 50%. I urge the Minister to listen to me in this regard. This is an issue which will not go away and we cannot hope that people will forget about it. They will not forget about it and it will not go away; neither will I.

Deputy Mary Mitchell O'Connor: Information on Mary Mitchell O'Connor Zoom on Mary Mitchell O'Connor Shakespeare wrote "Something is rotten in the State of Denmark" and during the Celtic tiger years there was something very rotten in the State of Ireland. However, this Government is trying to regain control. It is trying to dole out the appropriate medicine and as any patient will tell you, medicine can taste bitter. However, the medicine is working and we are closing the gap on borrowing. We are gaining control over our public finances and beginning to see the light at the end of the tunnel.

A local property tax should have been introduced during the boom but past Governments did not have the courage to do so. As a Deputy for the Dún Laoghaire constituency, I probably represent one of the highest concentrations of very expensive homes in the country. Many of the residents in these houses have the appearance of being asset rich but many are cash poor. I am aware of residents who purchased four bedroom semi-detached houses in the boom for between €1 million and €1.6 million in my constituency. These are not mansions or trophy homes. Indeed, many of these houses are equal to or smaller than semi-detached homes outside the Dublin area. I am also aware of three bedroom semi-detached houses which were sold in my constituency for €650,000 and terraced homes sold for €450,000. The families who purchased these homes are not millionaires. They are struggling, middle-class people. While I agree that a tax must be progressive and in terms of property tax policy measures, the local property tax proposed by Government is best international practice, I also believe that it is very harsh on the people in my constituency who bought modest homes but had to pay trophy home prices. A bigger house is not always indicative of a greater ability to pay. Just because one has a big house does not mean one is less prone to losing one's job, to getting sick or to tragedy. Many are in negative equity or are in mortgage arrears. This proposed tax takes account of people's ability to pay through a series of deferral arrangements but it does not take account of those who paid stamp duty of up to 9% at the top end of the market. Many of those buyers had to borrow the money to pay that stamp duty.

I acknowledge that the proposed system is, without doubt, a more employment-friendly alternative to increases in income tax or other taxes on labour which would stymie job creation. Any action taken by the Government to reduce our spending needs must be employment-proofed and this was the case in budget 2013. However, the Dún Laoghaire constituency is more than paying its way and its constituents had the highest compliance with the household charge, at 85%, while other areas only managed 55% compliance. It is only right that central Government would reward Dún Laoighaire-Rathdown County Council with its just and rightful local authority funding. As an elected representative for Dún Laoghaire, I will support this Bill but I will also lobby the Minister to ensure that Dún Laoghaire gets its fair share of central Government funding. Counties that have not paid their fair share should not get the same rewards. Those who paid the lion's share should be rewarded accordingly. Like an antibiotic, this tax may leave us a bit nauseous in Dún Laoghaire but we want a fair share of the moneys raised to be invested back into our amenities and facilities. It would be galling if other counties did not pay and expected Dún Laoghaire residents to subsidise them.

Deputy Seán Kyne: Information on Seán Kyne Zoom on Seán Kyne It is safe to say that most countries have some form of local property tax or charge and it is an internationally accepted way of funding local service provision. A local property tax is a steady source of income for local authorities. As former members of local authorities, I and many Deputies know that we had very little power in terms of raising local revenue.

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