The government faces increasing pressure to detail its property tax plans with the number of households seeking a deferral from paying the charge doubling this year.
New figures published by Revenue show about 62,000 claims for deferral of Local Property Tax (LPT) were made up to the end of June. There were only 30,600 homeowners seeking a deferral in the same period last year and a total of 48,000 claims in 2016.
The majority, about 59,800 cases, involve households claiming they are below the income threshold for paying LPT. Deferral arrangements are available for individuals who have an inability to pay and where certain specified conditions are met.
Michael McGrath, the Fianna Fáil finance spokesman, said the figures were further evidence that many families were still struggling despite the economic recovery. “It provides an indication that income levels in many households remain under pressure,” Mr McGrath said.
Homeowners are obliged to pay LPT annually. The charge is based on the valuation of properties in 2013 when the tax was first introduced at a rate of 0.18 per cent. The system was due to be revalued in 2015 but the last government froze prices until 2019.
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There are now fears that the tax could more than triple in the future revaluation for homeowners in areas where property prices have increased. This has led to calls for a reform of the system and a change in how it is calculated away from house prices, which can be cyclical.
“Properties will move up two or three bands on the LPT scale, which will not be affordable for many families,” Mr McGrath said. “The government needs to provide early clarity on what impact the scheduled revaluation of properties in 2019 will have on homeowners.”
Don Thornhill, the government’s adviser on property tax, warned that new measures must be put in place before the property tax freeze ends in 2019 to avoid households being hit with rises of “40, 50 or even 60 per cent”.
Leo Varadkar said that local authorities should be given more flexibility to vary charges. Currently they can increase or lower the charge by 15 per cent. “I think it would make sense to have a solution in place for 2019 that would allow local authorities to not take the windfall,” the taoiseach said last month. The government has yet to detail its exact plans.
Under existing standard LPT rates the owner of a house valued at €250,000 in 2013 pays €405 tax per annum. If it rose in value to €360,000 by 2019, the LPT would be €675.
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Any attempt to freeze property tax would face criticism from the European Commission. In its latest assessment of the economy released in May, the commission said the government should consider increasing the tax. The commission said that a gradual increase would prevent large tax bills falling due when properties are revalued in 2019.
The number of homeowners seeking exemptions from paying LPT has also increased this year, with about 48,000 claims in the first six months compared with 44,200 during the same period last year and 47,000 for all of 2016.
The income threshold for a full deferral is €15,000 for a single household and €25,000 for couples. The limit for a partial deferral — 50 per cent of the LPT — is €25,000 for a single household and €35,000 for a couple.
Revenue has stressed that a decision to grant deferral is not an exemption and the full amount of the LPT remains payable, plus interest of 4 per cent per annum. The deferred tax remains a charge on the property in the event of non-payment and is repaid to Revenue when the property is sold or transferred to another person. A total of 220,800 households have been issued with warnings by Revenue this year over non-payment of LPT. More than 880 cases were referred to sheriffs or solicitors, with 578 of these escalated to full debt collection or enforcement action. This time last year, 700 cases were referred to debt collectors, with 454 subject to enforcement measures.