Finance (Local Property Tax) Bill: Second Stage 14th December 2012

If there were no troika, I would still support the principle of a property tax. I believe there should be a firm and direct link between the service and the payment. We would all get better services if this were the case. I believe that had a property tax been introduced ten years ago we would never have had the property bubble and we might now be better able to afford to pay this tax. We need a stable tax source which does not fluctuate widely with the economic cycle and is not a disincentive to work. I also believe that we should not continue to put the burden of the provision of local services on the business community, as we have been increasingly doing for years.

I mention the above points to emphasise that in terms of what I have to say about this property tax I am coming from the perspective of someone who is supportive of the principle. This tax is a gross injustice to the people of Dublin and, to a lesser extent, people in other urban areas. It is an injustice because the method of calculation is based solely on the value of the property, with no reference to the cost of supply of local services. It is not a local service tax, nor is it a regional tax; it is a national property tax placing a single rate on all properties across the full spectrum of property values throughout the country from Dublin to Kerry and up to Donegal. Inevitably, such a valuation system opens a huge gap between the amount to be paid by those who own a large house and those who do not. However, this is not the gap to which I am objecting. I object to the gap between the amount to be paid on two precisely similar houses in different parts of the country, with, of course, the higher sum being paid by Dublin home owners.

I do not object to a person in Dublin with a big house paying more than a person in Dublin who owns a smaller house. That is reasonable. I do, however, vehemently object to the owner of the small house in Dublin having to carry a multiple of the liability of the owner of a larger house elsewhere, whether it is in Leitrim, Donegal or anywhere else. The valuation method that has been chosen has nothing to do with the cost of local services. People have said to me that those in Dublin have better services than those in rural Ireland. Maybe we do; I do not know. If it is true, we will pay for them. We need only to be told what they are and, together with the business community, we will pay rates and reasonable property tax. That is not what this Bill proposes. It does not propose that we pay only for costs in Dublin but that we also pay towards the cost of services for everybody else. This is because people living outside Dublin in rural Ireland are lucky enough to be able to purchase their homes at a much more favourable, lower price.

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 Laoighaire-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.