Dubliners 'could face huge increases in property tax'

Poor foresight in legislation will mean that Dublin residents will face huge increases in property taxes once the freeze on increases is lifted after 2016, a senior Fine Gael TD has warned.

Dublin South TD Olivia Mitchell said last night the increase in property values in the capital – over 25 per cent this year – means the value of homes will have risen dramatically by the time the next valuation occurs in October 2016.

She said that it would mean that Dublin households would end up paying hundreds of euro more each year, based on a valuation of their house alone, which was “unsatisfactory”.

She said Minister for Finance Michael Noonan’s reply to a parliamentary question she submitted shows local authorities will not have the flexibility to respond to this situation.

All four Dublin county councils have voted to cut property tax by 15 per cent next year.

In her submission, Ms Mitchell had asked whether or not the discretionary powers councillors have to raise or lower the property tax by 15 per cent could be repeated in future years.

Rate variation

In his reply, Mr Noonan noted the 15 per cent variation was on the basic rate of local property tax that was applied. The maximum a council could vary from the rate set out by the Revenue Commissioners was 15 per cent in any year. The time period for the variation is one year. If a council wants that deduction to be maintained, it must make a new resolution to that effect each year.

Ms Mitchell said last night she was disappointed to learn that the flexibility to vary the rate was so limited.

An opponent of the property tax model from the start, she said the higher property taxes that would ensue would result in a lot of additional revenue for councils. This would give them no incentive to be more efficient in the way they conducted their affairs.

“Funding of local government is dictated by the vagaries of the property market which is unsatisfactory,” she said. “If they continue to rise there will be no drive for efficiencies.”

In his reply, Mr Noonan said that while a local authority is restricted to a single year each time it passes the required resolution to change the basic rate of local property tax, it may, if it so wishes, “pass a resolution each year to increase or decrease the basic rate within the permitted maximum of 15 per cent”.

There was speculation that there would be changes in the budget to tackle the issue and pre-empt the big hikes in local property tax that households in the capital will pay from 2017. However, no such measures were included in the final document that was published on Tuesday.