THE controversial Residential Property Tax (RPT) is likely to be abolished next year in a move linked to a major overhaul of local government funding. It is understood that the abolition will not result in the imposition of any additional tax and that the loss in revenue will be absorbed by the Exchequer.
The abolition of the tax, which raises about £12 million annually, has not been discussed at Cabinet, but will be considered in the context of the forthcoming debate on the January Budget. It is expected to follow the unveiling of far reaching plans by the Minister for the Environment, Mr Howlin, on how local government should be funded.
Sources in Labour and Democratic Left yesterday emphatically denied newspaper reports that they were vetoing Fine Gael plans to abolish the RPT. The tax has become an emotive political issue for the Government and there is a common belief among the Coalition partners that radical action will have to be taken because of the difficulty it could cause in the next general election campaign.
Both Fianna Fail and the Progressive Democrats have indicated that they are prepared to tackle the property tax issue if they get into office, saying that the levy is inequitable and essentially anti urban.
All the parties take the view that the tax cannot be phased out in a piecemeal fashion, as this would lead to residents refusing to pay in the knowledge that the levy was going to be abolished in the near future.
The Government parties also take the view that the tax cannot be altered in isolation and believe that change must be tied into household service charges, including water charges, which raise £70 million annually for the State's local authorities, but are strongly opposed by Democratic Left.
Mr Howlin is currently preparing a major review of the future of local government, a component of which will be funding. It is understood that his plans, which also involve reorganisation of administration, are to be published before Christmas.
The KPMG report on local government funding, published earlier this year, set out a number of options, including a new form of property tax, but it is understood that this tax is not considered viable.
There is no administrative link between service charges and property tax, but it would prove politically impossible to seriously amend the RPT, which is levied on the basis of household income and the value of the family home, while ignoring water charges, which are imposed irrespective of income.
Almost since its inception the property tax has caused difficulties for the main political parties, who have faced intense opposition in constituencies where house values have risen dramatically over a short period. The political fall out from the tax is now judged to be a handicap which could cost the Government parties dear in middle class urban votes.
Last week, the Institute of Auctioneers and Valuers in Ireland advised those preparing property tax returns not to be concerned about the substantial increases in Dublin house prices between April and June this year. The IAVI pointed out that the property valuation date for RPT purposes was April 5th. It called on the Government to abolish "this totally ill conceived and inequitably regressive tax".
The RPT applies to property worth more than £101,000 and is payable where the combined income of a household exceeds £30,100. The tax is levied at 1 1/2 per cent and payment for the year falls due on October 1st next.
Those who argue against the tax cite the fact that only six households in Co Leitrim paid the levy last year, compared to 14,325 households in Dublin. Official figures show that Dublin householders paid £7.3 million - 77 per cent of the RPT take - in 1995.
