Now that the deadline for filing our property tax returns has almost passed – you have until 5.30pm on Wednesday – we can all get back to moaning about the housing crisis and the State’s inability to get things done.
The lack of any connection in the minds of most people between their property tax and the services provided by local authorities is both deliberate and unfortunate. Local politicians seem to be allergic to the property tax and only ever use their discretion – to increase it or decrease it each year within set limits – to keep it as low as possible.
You could ascribe this to some sort of national pathology linked to hundreds of years of oppression, land wars, rack renting and all the rest but the bottom line is politicians don’t like imposing taxes and nobody likes paying them.
Anyway, the conversations with neighbours are concluded, the trawls of the property price register and estate agent websites are complete. Most of us have come up with an estimate for the value of our house that we can – more or less – stand over.
The question of how truthful we are when it comes to valuing our houses for the tax man is an interesting one. A cursory analysis of the last time we had to do so – in 2021 – indicates that we are probably more honest than we give ourselves credit for.
Something in the region of 60,000 residential properties were sold in 2021, according to the Residential Property Price Register. Just over 43,000 of them had sale prices of less than €350,000. That is roughly 72 per cent.
Three-quarters of us told Revenue that year that our house was worth less than €350,000, which is pretty good. For the record, 2 per cent of homeowners equates to roughly 1,500 tax payers. You know who you are!
[ Local property tax: How does it work and what happens if you miss the deadline?Opens in new window ]
It is a little harder to establish the level of fibbing or otherwise in Dublin – the most important market. Of the 17,000 properties sold in the capital in 2021, significantly less than half, 44 per cent, sold for under €350,000.
The percentage of people in the Dublin region who valued their house at less than €350,000 ranged from 14 per cent in Dún Laoghaire-Rathdown to 54 per cent in the South Dublin County Council area.
Dublin city and Fingal were 51 per cent and 50 per cent respectively.
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It is a reasonable assumption that the discrepancies between the local property tax (LPT) valuations and the sales price data is due to higher prices in Dún Laoghaire-Rathdown. Nothing to see here then.
Well, it is possible to throw some shade on what appears on the face of it to be a model of taxpayer compliance. The median – middle – sale price of a house in Dublin in 2021 was €506,000, which implies half of houses sold for this amount or more. This does not easily reconcile with the idea that almost half of houses are worth less than €350,000.
Nationally, the median price was €280,000 which chimes a little better with the Residential Property Price Register and the Revenue’s LPT bands. As things stand, there is not much enthusiasm for reconciling the median price in Dublin with the 2021 valuations. Sleeping dogs and all that.
[ The Irish Times view on the local property tax: still a modest charge for mostOpens in new window ]
If – as the Government appears to do – you accept that there is widespread compliance with the LPT regime, the interesting question is why we don’t charge a higher rate.
We are pretty much middle of the pack when it comes to property taxes in the European Union (but the apples and oranges rule applies). On the face of it, there is scope for a meaningful increase in relative terms and no evidence – again if you take the official figures at face value – that rates are anywhere near levels that would drive widespread noncompliance or evasion.
If anything, policy is headed in the other direction with the bands and rates introduced for the next four years aimed at ensuring very modest increases from most homeowners, despite a 25 per cent increase in house prices since the last valuation period.
It’s a politically astute move in the short term but hardly prudent for an economy dependent on tax revenues from a small number of large corporations, whose commitment to Ireland has never looked so uncertain.
The lessons of the financial crash, which saw the property tax mandated by the International Monetary Fund that led the Irish bailout have not been heeded.
The narrowness of the tax base was, and is, the economy’s Achilles’ heel.
The decision to effectively freeze the property tax for most of us in real terms is also symptomatic of the lack of joined-up thinking that bedevils housing policy.
The latest Government housing plan, which is due to go to Cabinet on Wednesday, is understood to contain a commitment to build 12,000 social homes and 15,000 affordable housing units for the foreseeable future.
All of this social and affordable housing will require management services provided by local authorities – such as the Housing Assistance Payment – as well as new public amenities, roads, emergency services and the rest. All meant to be funded from the local property tax.
Local politicians seem to be allergic to it and only ever use their discretion to keep it as low as possible
