This week households must value their homes for the local property tax (LPT), with some increase in bills in prospect for next year. In most cases the additional payment will be relatively modest. Households in some areas will see a somewhat larger rise due to decisions by their local councils to increase charges to give them more cash to provide services.
The LPT raises modest revenue, less than 0.5 per cent of all taxes collected by the State. Since its introduction following the financial crisis, decisions by successive administrations have ensured that the burden on most households has remained modest – and the main Opposition party, Sinn Féin, has called for the abolition of the tax.
LPT will raise just over €600 million next year. This is a useful contributor to local government finances – when an exchequer top-up for councils with low LPT bases is counted in, they are estimated to receive almost €770 million. However, the original concept of a tax that would increase along with property prices has been abandoned. As a result, the LPT has become less valuable as a revenue raiser, while income and corporation tax become increasingly important.
This is part of a gradual narrowing of the tax base, leaving Ireland increasingly exposed to payments from a small number of big companies and a limited number of high income earners. The reforms introduced after the financial crisis widened the tax base somewhat, but successive governments have chosen to partly reserve this.
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Ireland taxes residential property lightly, largely due to significant exemptions from capital taxes on the family home. In this context, a bit more could usefully have been collected from the LPT as part of the latest reform programme.
The State will need more tax in the years ahead due to an ageing population and climate change. Soaring corporate tax has only postponed the debate on where this money will come from. And history shows that when Irish governments do need extra revenue, they find it easier to load more of the burden on income, rather that spread it to newer taxes such as the LPT.
