FIN 00363?20 Page 1 of7 Local PrOperty Tax update REF FIN 00363?20 AUTHOR: Anne-Marie Walsh (FINANCE) TO: Minister OWNER: Anne?Marie Walsh (FINANCE) STATUS: Completed REVIEWERS: John Hogan (FINANCE), Elizabeth Hughes (FINANCE) PURPOSE: For Information DECISION BY: Tax Division Final comment Thanks a timely update. - Its untenable to continue to allow a growing number of homes outside LPT base. Please let me know of AG advice on same. One way or other, the Min for Fin must legislate for'this matter In 2020. May be no harm to get legislation done now for a later revaluation date. - A Government with a majority must deal with this matter, I hope that I can. PD 09/06/20 (refer attached) Action required To note the current position in relation to Local Property Tax and (ii) the further deferral of the deduction date (from 21 March) to 21 July 2020 for property owners who opted to pay their LPT for 2020 by Annual Debit payment method. Executive summary In a December 2019 submission (01170?19) we set out a number of options regarding next steps towards implementation of the 2019 LPT Review as follows: 1. Progress with amending LPT primary legislation. This would have involved choosing a preferred scenario for calculating LPT liabilities and bringing draft heads of a Bill to Government early in 2020. Legislation would need to have been enacted in the early part of2020 to enable Revenue to make the necessary preparations in time. 2. Defer revaluation for a further year to 1 November 2021, by further Ministerial FIN 00363-20 Page 2 of? Order 3. Do nothing in the absence of a policy change, LPT liabilities would be based on November 2020 valuations and the current LPT rate and bands would apply. You have stated publicly that it would be necessary to bring forward amending legislation to give effect to changes to the LPT and that such amending legislation would need to be in place at an early point in 2020 so that the Revenue Commissioners would have time to put the necessary administrative and technical arrangements in place to cater for a revaluation of residential properties in time for the 2021 LPT year. You also indicated that such amending legislation would be a matter for the incoming Government. The purpose of this submission is to provide you with an update on the current position with LPT and inform you of the further extension by revenue of the deduction date for annual debit payment method to 21 July 2020. Comments Helena Quane (FINANCE) 10/06/2020 08:20 Thanks a timely update. - its untenable to continue to allow a growing number of homes outside LPT base. Please let me know of AG advice on same. One way or other, the Min for Fin must legislate for this matter in 2020. May be no harm to get legislation done now for a later revaluation date. A Government with a majority must deal with this matter, hope that i can. PD 09/06/20 (refer attached) Detailed information Background Submission FN 01170-19: LPT Next Steps towards implementation of the 2019 LPT Review of December 2019 noted your engagement with the BOC during summer 2019 in relation to the LPT Review Report and the Committee's subsequent Scrutiny Report on the Review of September 2019. The recommendations of the 2019 inter-Departmental Review and the BOC Scrutiny Report are summarised at appendices 1 and 2 respectively. There is no consensus emerging as to the preferred way toward for the reform of the tax. FIN 00363-20 Page 3 of7 You have indicated publicly your belief that LPT reform needs to be based on band widening combined with LPT rate changes. That approach would be similar to scenario 5 of the 2019 Review which involves 80% increases in all of the valuation band thresholds. Under that scenario the midpoint of each band would increase correspondingly and the rate would reduce to leave the liability in each band unchanged. Amending Legislation timing Having considered the Review Report you decided to defer the valuation date from 1 November 2019 to 1 November 2020 by Ministerial Order. in view of the approaching valuation date of 1 November 2020 this matter will need to be a first-order item for decision by the incoming Government. if no action is taken LPT liabilities would be based on 1 November 2020 valuations and the current LPT rate and bands would apply. The 2019 Review estimated that the annual LPT yield at rebased November 2019 values and the central rate (0.18 per cent) would be ?729 million. Not included in the ?729 million is an estimated ?42 million yield from properties completed since 2013 and previously outside the LPT charge. The actual LPT yield in 2019 was ?473.4 million. ideally amending LPT legislation would have been enacted in the early part of 2020 to enable Revenue to make the necessary preparations in good time. However the absence of an agreement on Government formation following the general election has delayed decision making in relation to the future of the LPT. This of course is problematic visa 1/13 the timeframe for introduction of amending legislation. Moreover, the emergency has introduced significant volatility into the residential prOperty market such that there are uncertainties as to whether 1 November 2020 is an appropriate point at which to determine property values given the expected sparsity of property transactions over a possibly extended period. This is likely to make it difficult to establish reliable market values. The most recent CSO release on the (14 May) notes that for the month of March the number of transactions recorded fell to 3,038, a decline of 23 per cent on the same month last year. Relative to March 2019, the number of transactions for first time buyers fell by 11 per cent to 870. A number of private bodies are predicting significant instability in the residential market e.g. KBC Group reportedly sees house prices in lreland falling by 12 per cent this year with an expected rally of 8 per cent in 2021. An alternative more pessimistic scenario according to KBC could see home valuations plunging by 20 per cent this year and a further 5 per cent in 2021. That scenario echoes one by Sherry Fitzgerald earlier in May, which considered there was a strong possibility that overall sales in 2020 will be down by a minimum of 25 per cent in the full calendar year. MyHome /Davy?s April assessment was that lea/[V the Irish housing market is headed fora period of ?liquid/'04 Where any measured price movements Wi/l be volatile. Any act/v/zj/ may be biased FIN 00363 -20 Page 4 of 7 towards cash buyers and sellers prepared to offer discounts to ensure transactions close. It is possible that transactions could bounce back in 03 if the restrictions are relaxed but almost certainly not suf?cient to make up for the disruption early in the year". in a May 2020 research report CBRE states that the lack of transactional activity will pose challenges from a pricing perspective. The BPFI expects to see the first effects of Covid-19 on the mortgage market coming through in April's mortgage approvals figures, which will be published at the end of May. Taken together the above?mentioned factors raise considerable questions as to the appropriateness and feasibility of proceeding with a revaluation of properties for LPT purposes on 1 November 2020. _hese exemptions have a fixed statutory end date of 31 December 2019. Until the necessary amending legislation is in place these particular exemptions are being applied in respect of 2020 liabilities by Revenue on an administrative basis. The two exemptions concerned involve - properties purchased by first-time buyers' in the period between 1 January 2013 and 31 December 2013 for use as their sole or main residence, and - exempted properties constituting the unsold trading stock of builders/developers in May 2013, or such properties sold by them (while remaining unused) in the period 1 January 2013 to 31 October 2019. An la FIN 00363?20 Page 5 of7 Change of date for payment of LPT 9 related measure) For property owners who opted to pay their LPT for 2020 by Annual Debit instruction or Single Debit Authority payment, the deduction date was changed by Revenue from 21 March 2020 to 21 May 2020 as part of their response to the pandemic. This was done under Revenue?s tax management powers. Revenue have announced that, given the continuing situation regarding the deduction date for these property owners has been further extended to 21 July 2020. Property owners who have opted to make a payment in this way do not need to advise Revenue or take any action. in line with general forbearance measures, Revenue has not initiated any debt collection action against LPT non?payers since the COVID-19 crisis began. Conclusion and next steps: The unavoidable delays in decision making in relation to the future of the LPT, have been amplified by the 9 pandemic and the likely impact on residential property values. An urgent decision will be required in the coming weeks as to treatment of LPT for 2021. We will provide a further update once we have received the advice of the Attorney General We can then set out the options available at that point. Related submissions 01170-19: LPT - Next steps towards implementation of the 2019 LPT Review 00637-20: Local Property Tax Next steps in light of commitments, AGO's advices and Revenue views User details FIN 003 63-20 INVOLVED: Kevin Nolan (FINANCE) Anne-Marie Walsh (FINANCE) John Hogan (FINANCE) Sec Gens Office Derek Moran (FINANCE) Ministers Office Action log ACTION Create Add involved user Submit for review Submit for review Submission sent Submit for review Submission sent Complete Submission sent Paschal (Finance) DESCRIPTION Submi ission FIN 00363? 20 to Minister created. Submission shared with Kevin Nolan (FINANCE). Submission sent for review to John Hogan (FINANCE). Submission sent for review to Secretary General. Submission sent by email to Kevin Nolan (FINANCE). Submission sent for review to Minister. Submission sent by email to Rosemary Kearney (FINANCE). Submission completed by Helena Quane (FINANCE) Submission sent by email to Nolan (FINANCE). Page 6 of 7 READ RECEIPT: Anne-Marie Walsh (FINANCE) Kevin Nolan (FINANCE) John Hogan (FINANCE) Margaret Fitzgerald (FINANCE) Elizabeth Hughes (FINANCE) Deborah Sweeney (Finance) Rosemary Kearney (FINANCE) Edward Brophy (Finance) Mary Ryan (FINANCE) Helena Quane (FINANCE) USER DATE Anne Marie Walsh 20/05/2020 (FINANCE) 16: 44 Anne- Marie Walsh 20/05/2020 (FINANCE) 17:51 Anne-Marie Walsh 21/05/2020 (FINANCE) 11:13 John Hogan 22/05/2020 (FINANCE) 15:21 Kevin Nolan 22/05/2020 (FINANCE) 15: 38 Elizabeth Hughes 22/05/2020 (FINANCE) 15. 56 Rosemary Kearney 22/05/2020 (FINANCE) 17. 52 Helena Quane 10/06/2020 (FINANCE) 08. 20 Kevin Nolan 17/07/2020 (FINANCE) 10:09 FIN 00363?20 Page 7 of7 Appendix 1 Summary Recommendations of the report of the 2019 Inter?Departmental Review of the'LPT Revaluation - The Review Group recommends that ideally revaluation should take place as planned on 1 November 2019 if Government is satis?ed it provides modest and affordable adjustments. The Group consider that further delays in revaluation may present risks to the long term sustainability of the tax. . The Review Group recommends that valuations should be reviewed every four years. This provides a balance between timely capture of changes in the property market and reducing compliance and administration costs. It would facilitate the regular addition of new properties into the LPT charge. Timing of LAF Noti?cation . The Review Group agreed that the Local Adjustment Factor (LAP) notification date to the Revenue Commissioners should occur in mid?October except in the year that property valuations fall due for revaluation. In that instance the LAF noti?cation date would be 31 August at the latest, to facilitate Revenue?s processing of the required noti?cation procedure. Scenarios . The Review Group agreed that a no policy change scenario should be presented along with five alternative methods of calculation. No policy change means that the current central rate would apply to the market value of all residential properties on 1 November 2019. This would produce an estimated yield of ?729 million. - The Review Group recommended that a target annual yield should be identi?ed in advance for purposes of scenario analysis. This provides a consistent means of evaluating the suggested scenarios for a broad range of taxpayers. For the purpose of the review, the Review Group targeted a broad yield of ?500 million, a modest increase on the 2018 yield 0f?482m and recent years. . On this basis, the Review Group considered five different approaches to the calculation of the LPT liabilities in respect of the 20 existing valuation bands. 0 Scenario 1 is based on a central LPT rate for all properties and produces a yield of ?500 million. The rate is 0.114 per cent for all valuation bands and all local authorities. 0 Scenario 2 is based on targeting individual local authority yields equal to the expected current yield for 2018 without the Local Adjustment Factor (LAF). The rate in each local authority is adjusted to meet these targets following estimated valuation increases. In Scenario 2, the LPT rates vary between 0.085 per cent and 0.144 per cent. 0 Scenario 3 has been modelled on the basis of a different LPT rate for each valuation band (increasing with each band) and again set to collect the overall target of ?500 million (with no LAF). In Scenario 3, the LPT rate ranges ?om 0.108 per cent in band 1, and increases in increments of 0.001 per cent to 0.126 per cent in band 19. 0 Scenario 4 is a variation of scenario 3 with one adjustment. Based on Scenario 3, and with the same target of ?500 million, it maintains the ?rst valuation band at a liability of ?90. The rationale for the floor of ?90 is that there are minimum costs incurred by local authorities for the services which they supply to each household. This floor generates an additional ?13 million, and impacts by reducing rates for bands other than the first band. 0 Scenario 5 increases all of the valuation band thresholds by 80%. The midpoint of each band increases correspondingly and the rate is reduced to leave the liability in each band unchanged. - As all of the scenarios involve ?winners? (reduced liability) and ?losers? (increased liability) which may be different in each scenario, the Review Group considered therefore that it must be a matter for Government as to which, if any, of the options provides for moderate and affordable adjustments. This may impact on the revaluation date. . The Review Group recommends that the LPT rate applied to all properties exceeding ?l million in market value should remain at 0.25 per cent with one exception. Scenario 5 is based on broader bands up to ?1.8 million and if this scenario is chosen, then the Review Group recommend that the 0.25 per cent rate should apply to properties above the 61.8 million valuation. Equalisation and Local Retention The Review Group recommends a That the equalisation contribution from local authorities, equivalent to 20 per cent of their LPT yield, be discontinued and that all local authorities retain 100 per cent of the LPT that is collected in their own local authority area. While this will help to strengthen transparency and accountability it is acknowledged that it may result in an additional cost to the Exchequer in the absence of other changes. . The Review Group recommends that to the greatest extent possible the local retention change should be Exchequer neutral with baseline shortfalls being offset by a rebalancing of programme funding (including self-funding or other compensating mechanisms). DPER and would need to work bilaterally on options to mitigate the impact on the Exchequer of the proposed 100% retention in the context of the Estimates process. The Review Group recommends that the LAF be amended to permit upward only adjustments to a maximum of 15 per cent. Exemptions The Review Group recommends: That all of the exemptions should be reviewed regularly and kept to a minimum in order to keep the base broad and minimise the impact on those paying the tax. That exempted properties constituting the unsold trading stock of builders/developers in May 2013, or such properties sold by them (while remaining unused) in the period 1 January 2013 to 31 October 2019, should be liable for LPT from 1 November 2019. That exempted properties purchased by buyers? in the period between 1 January 2013 and 31 December 2013 for use as their sole or main residence should be liable for LPT from 1 November 2019. That all new residential properties built between valuation dates should be retrospectively valued as if they had existed on the preceding valuation date. Deferrals The Review Group recommends: That most deferrals, such as the deferral option for those taxpayers with lower incomes, should be maintained and some thresholds should be increased. That the income thresholds for LPT deferrals be reviewed regularly by reference to movements in the CPI, (ii) wage growth in the economy, and changes in ?xed income payments by the State. From the next valuation date, the Review Group recommends that the deferral thresholds be increased to ?18,000 for a single owner and ?30,000 for a couple That, as the number of LPT liable persons qualifying for the mortgage interest deferral would reduce overtime as the mortgages involved matured, and that the LPT revenue deferred would taper, accordingly the deferral option on the current basis should be retained. That relief for owner?occupiers aged over 80 years with a long-term illness who are living alone (as recommended by Thornhill (2015)), would be more appropriately Other considered in the context of the social welfare code rather than through further tax reliefs. Such individuals may also be able to bene?t from other reliefs including the ability to defer their LPT liability based on the income thresholds. That the interest rate which applies to LPT deferrals should be retained at 4 per cent. On balance, the Review Group does not support deductibility of LPT for landlords. The Review Group does not recommend the deductibility of management fees in the calculation of LPT. The Review Group consider some of the recommendations are mutually reinforcing and should be considered and sequenced together. For example the proposed thresholds increases should be done at the same time as the revaluation as they are related in terms of economic growth, wage growth and in?ation. Appendix 2 BOC Scrutiny report on the 2019 LPT Review The Committee?s recommendations can be summarised under the following headings. Revaluation - The Committee recommends that, due to the distributional impact and simplicity, either Option 1 or Option 2, as set out in the Review Group Report, should be pursued. [These correspond to Scenarios 1 and 2 of the 2019 Review]. The Committee recommends that all new residential properties built between valuation dates should be retrospectively valued as if they had existed on the preceding valuation date. Exemptions - The Committee endorses the recommendations made by the Review group to remove the exemptions currently in place for: . unsold trading stock of builders/developers in May 2013 or properties sold by them between 1 January 2013 and October 2019 - properties purchased by ?first-time buyers? in the period between 1 January 2013 and 31 October 2013 The Committee also endorses the recommendation to regularly review all exemptions and to keep the range of exemptions to a minimum. This will help to maintain a broad revenue base and reduce inequalities. Deferrals The Committee welcomes the recommendation made by the Review Group that; ?the income threshold for deferrals be reviewed regularly by reference to movements in the the CPI, (ii) wage growth in the economy and changes in ?xed income payments by the State?. - The Committee recommends that the deferral income threshold should be increased from ?15,000 to ?18,000 for a single person, and from ?25, 000 to ?30,000 for a couple, in line with the recommendations set out in the LPT Review Group Report. William Dunne (FINANCE) From: Brennan, Philip Sent: Thursday 16 July 2020 22:39 To: John Hogan (FINANCE) Cc: Anne-Marie Walsh (FINANCE) Cody, Niall (Chairman) O'Reilly, Sharonne Kennedy, Jean Looney, Anne Subject: FW: LPT John, Apologies for the delay in getting back to you on this matter. Set out below are our replies to the various questions raised in your note, which have been agreed with the Board. I want to emphasise, however, that, following an LPT Project Group meeting here this morning, our IT development and testing side have said that very early decisions would be required if development and testing was to be carried out in time to allow for the October issue of returns and estimates. Certainty would be required by August to allow for development to be carried out during August. The decision timeline will dictate what can be delivered so that, to bring in the exempt properties only, IT development could be carried out during the second half of August with testing in September. Regards, Philip Full revaluation Revenue would not be able to deliver full revaluation for 2021 in the time remaining. A further postponement of the 1 November 2020 valuation date will be required. This will require legislation. The implementation of any revised regime involving a different method for calculating liabilities would require a longer timescale than just revaluation so cannot be delivered for 2021 at this stage. Excluded post-2013 properties It would be possible to start charging (for 2021) those properties that have been completed since May 2013 and that are currently outside of the LPT net. They could be retrospectively valued at their 'hypothetical' 2013 value which would be preferable to an interim flat rate pending a full revaluation in 2021. However, this is subject to early decisions on what's to happen and enabling legislation. Exempt properties It would be possible to start charging (for 2021) those properties that have been exempted by section 8 ('first-time buyers') and sections 6 and 9 (builder's unsold trading stock at May 2013). These would also be retrospectively valued at their 2013 value but, unlike the new properties, for the most part the exempt properties have already declared their 2013 value. However, this is subject to early decisions on what's to happen and enabling legislation. In the absence of full revaluation in 2020, Revenue could continue to apply existing exemptions in 2021 on an administrative basis on the understanding that the required enabling legislation (or full revaluation) will be enacted as soon as practicable. Early decisions 1 Working backwards from the current return filing date of7 November 2020, returns (including Revenue estimates of liability) would have to be issued to property owners during October. Initial analysis indicates that, as development and testing of IT systems would have to be carried out before October, it would need to start in August. A shorter timescale would be required to start charging the exempt properties but not the new properties due to the lower number of properties involved and IT development could start in the latter half of August. This means that a decision on what, if anything, is to happen will be required in the next few weeks. The decision timeline will effectively dictate what can be delivered. Revenue will work on providing a more specific timeline for IT development and testing over the next week. Legislation To allow for the issue of returns (including Revenue estimates of liability) during October, enabling legislation would have to be enacted by end September. From: iohn Hogan (FINANCE) Sent: Thursday 25 June 2020 15:58 To: Brennan, Philip Subject: LPT Philip, As per our discussion yesterday, the draft references a commitment to ?bring forward legislation for the Local Property Tax on the basis of fairness and that most homeowners will face no increase" and further commits to ?also bring new homes, which are currently exempt from the LPT, into the taxation system.? As you know we also received some recent advice from the A60 which has been shared with you. From our side, we have put together some questions for discussion with yourselves which themselves may need a conversation on where to next. Have look at the attached and we can talk in due course. John Please note that Revenue cannot guarantee that any personal and sensitive data, sent in plain text via standard email, is fully secure. Customers who choose to use this channel are deemed to have accepted any risk involved. The alternative communication methods offered by Revenue include standard post and the option to use our MyEnquiries service which is available within myAccount and ROS. You can register for either myAccount or ROS on the Revenue website. Tabhair faoi deara nach f?idir leis na Coimisin?iri Ioncaim rathaiocht a thabhairt go bhfuil aon sonrai pearsanta agus iogair a gcuirtear isteach i ngnath?th?acs tri r? phost caighde?nach go huile is go hiomlan slan. Meastar go nglacann custaim?iri a usaideann an cain?al seo le haon riosca bainteach. I measc na modhanna cumarsaide eile ata ag na Coimisin?iri na post caighde?nach agus an rogha ar seirbhis (criptithe) M'Fhiosruithe a usaid, ta si ar fail laistigh de MoCh?rsai agus ROS. Is f?idir leat claru le haghaidh ceachtar MoChursai no ROS ar shuiomh greasain na gCoimisin?iri. Please note that Revenue cannot guarantee that any personal and sensitive data, sent in plain text via standard email, is fully secure. Customers who choose to use this channel are deemed to have accepted any risk involved. The alternative communication methods offered by Revenue include standard post and the option to use our MyEnquiries service which is available within myAccount and ROS. You can register for either myAccount or ROS on the Revenue website. Tabhair faoi deara nach feidir leis na Coimisin?iri Ioncaim rathaiocht a thabhairt go 'rtear isteach i ngnath?th?acs tri r? bhfuil aon sonrai pearsanta agus iogair a gcui phost caighdeanach go huile is go hiomlan sl?n. Meastar go nglacann custaim?iri a usaideann an cain?al seo le haon riosca bainteach. I measc na modhanna cumarsaide eile ata ag na Coimisin?iri na post caighdeanach agus an rogha ar seirbhis (criptithe) M'Fhiosruithe a us?id, ta si ar fail laistigh de MoCh?rsai agus ROS. Is feidir leat clar? le haghaidh ceachtar MoChursai no ROS ar shuiomh greasain na gCoimisin?iri. 2 An Roinn Airgeadais Department of Finance June 2020 Mr. Philip Brennan Assistant Secretary Of?ce of the Revenue Commissioners Dublin Castle Dublin 2 D02 HW86 Re. Draft Programme for Government commitments concerning LPT Dear Philip 1 refer to the recent publication of the draft Programme for Government by Fine Gael, Fianna Fail and the Green Party and the forthcoming valuation date for LPT of 1 November 2020. The draft includes a commitment to ?bring forward [e gislation for the Local Property Tax on the basis of fairness and that most homeowners will face no increase? and further commits to ?also bring new homes, which are currently exempt from the LPT, into the taxation system.? I am enclosing a copy of advices received from the Office of the Attorney General in relation to policy options for the LPT in the context of the 19 pandemic. These have already been shared with your Of?ce. We have also shared a recent update submitted to the Minister and his feedback in which he indicated that LPT legislation should be progressed this year. Ideally amending LPT legislation would have been enacted in the early part of 2020 to enable Revenue to make the necessary preparations in good time. However the absence of an agreement on Government formation following the general election has delayed decision making in relation to the future of the LPT which is problematic vis a vis the timeframe for introduction of amending legislation and the administration required for revaluation. In light of the draft commitments on LPT and the advices I would be grateful if you and your colleagues would outline Revenue?s ability to implement, in the second of half of this year, certain re-valuation and policy options by addressing the questions attached. This would greatly assist the ability of the Department to offer appropriate policy advice and preparation to an incoming government, and to plan in relation to this area. In light of the circumstances and timeframe for progressing this matter, your earliest response would be appreciated. We are happy to meet remotely if you wish to discuss and Tithe an Rialtais, Sr?id Mhuirfean Uacht, Baile Atha Ciiath 2, 902 R583. eire Government Buildings, Upper Merrion Street, Dublin 2, 002 R583, lreiand 1 676 7571 fLoCall: 1390 66 1010 \Ammu (10V l9 if you or your colleagues require clari?cation on any of the foregoing please contact Anne Marie Walsh and her team. Yours sincerely John Hogan Assistant Secretary Questions concerning LPT administration: Full Revaluation If no legislative amendments are made, 2020 is a revaluation year in line with the current legislative provisions. 1. Would Revenue be in in a position to proceed administratively with a full revaluation in November 2020, as per existing legislation,? Would Revenue be in a position to administratively implement a revaluation in November 2020, in which liabilities would be calculated differently (similar to one of the Scenarios of the 2019 Report) if legislation providing for such were to be enacted imminently? What is the latest date by which such legislation must be enacted if'Revenue were in a position to meet question 2? If the answer to question 2 or 3 would vary depending on the scenario followed, what would be the respective dates for each scenario? Assuming revaluation would be possible, could Revenue make the necessary preparations for a revaluation in parallel with the progression of legislation through the Houses (as was the case with the 2012 Bill)? Excluded post-20] 3 Properties 6. If implementation along the lines of questions 1 to 3 is not achievable would Revenue be in a position to value and charge, for the next LPT year(2021), those residential properties which, having been built since 2013, are currently excluded from liability if legislation were enacted providing for their retrospective revaluation? As question 6, but if legislation provided for a flat charge (at a given band) for all such properties? If yes to either questions 6 or 7, what is the latest date, in each case, such legislation would need to be enacted? Exemptions: 9. Is Revenue in a position to value and charge Section 8 exempted properties for the next LPT year at their 2013 values given these properties were sold in 2013? 10. Is Revenue in a position to value and charge Section 9 exempted properties for the next LPT year on the basis of a retrospective revaluation? 11. If retrospective valuation of Section 9 properties would not be possible, would Revenue in a position to charge Section 9 exempted properties for the next LPT year on the basis of a flat charge (at a given band) for all such properties (if legislation provided for this)? 12? Is Revenue in a position to continue applying Section 8 and 9 exemptions on an administrative basis for 2021 pending full revaluation and amending legislation? Local Property Tax Next steps in light oi PIC: commitments, advices and Revenue views Ref FIN 0063720 Author: Kevin Nolan (FINANCE) To: Minister Owner: John Hogan (FINANCE) Status: Review Reviewers: Anne-Marie Walsh (FINANCE) Purpose: For Decision Decision by: Division/office: Tax Division Seen and approved: Date signed: Comment Action required To consider recommendations for next steps in relation to LPT in light of Programme for Government commitments, AGO's advices and the views of Revenue in relation to the feasibility of possible options. Executive su mmary This submission sets out advices in reiation to certain LPT policy options and the views of Revenue on the feasibility of options. It is not feasible to pursue fuil revaluation for 2021 in the time remaining, therefore the valuation date must be postponed. This wiil require legisiation in the form of a further Ministeriai Order or an amending Bill. Based on the advices received, a two phased approach is recommended to implement the commitments on LPT. - Phase 1 would involve amending legislation to be enacted before end September 2020 which would Defer the valuation date from 1 November 2020 to 1 November 2021 (ii) Bring prOperties currently exempt under sections 8 and 9(?first time buyers? and unsold builders? trading stock) within the charge Bring properties currently outside the LPT into charge (iv) End the ?Ghost estates? exemption Phase 2 wouid involve a separate Bill to be passed in early 2021, to provide for a revised mechanism for calculating LPT liabilities. This will involve significant work similar to that undertaken by the 2019 LPT Review in respect of scenario analysis. An early decision is necessary in relation to any changes envisaged for the reminder of 2020 such as bringing excluded and exempt properties into the net. This is to allow Revenue to quickly commence the necessary administrative and technical preparations for impiementation of any changes. Your agreement to the approach outlined is sought Comments There are no comments. Detailed information Submission FIN 00363-20: ?Locai Property Tax - update? outlined the position in May regarding LPT in particular the need for early decisions by an incoming government in relation to the future direction of the tax. This was in the context of the unprecedented economic, political and residential property market conditions prevailing. We aiso outlined questions we had posed to the Attorney Generai?s Office in reiation to certain policy options we felt warranted consideration in the exceptionai circumstances. AGO's legal advice - summary Legai advice was sought in relation to the following questions - summary, the advices of the A605 are: The full version of the advices is attached. Programme for Government The includes the following commitments in relation to LPT 0. To bring forward legislation for the LPT on the basis of fairness and that most homeowners will face no increase. b. To bring new homes, which are currently exempt from the LPT, into the taxation system, and that c. All money collected locally will be retained within the county. This is to be done on the basis that that those counties with a lower LPT base are adjusted via an annual national equalisation fund paid from the Exchequer. Consideration To bring forward legislation for the LPT on the basis of fairness and that most homeowners will face no increase. a. It is clear that allowing the valuation of properties to proceed on 1 November 2020 without some change to the method of calculating liabilities would result in significantly higher LPT bills for many property owners. You will recall that the 2019 LPT Review analysed five different scenarios for calculating LPT liabilities which are outlined at Appendix A - Summary of the Recommendations of the 2019 Review of the LPT - under the heading ?Scenarios'. None of the scenarios fulfilled the requirement for maintenance of relative stability in LPT liabilities for all taxpayers against a background of significant, but geographically uneven increases, in residential property price levels. Therefore the requirement "that most homeowners will face no increases? will present a significant challenge given the experience with scenario analysis for the 2019 LPT Review. The current volume of transactions in the residential market is low, and some commentators consider that the market is iikely to be characterised by volatility over the short to medium term. The outlook for the residential property sales market in 2020 is uncertain due to the effects of Covid?19. The most recent CSO release on the Residential Property Price index (RPPI, 15 July) notes that residential property prices increased by 0.3% nationally in the year to May continuing a gradual slowdown over the last year. (This compares with an increase of 0.7% in the year to April and an increase of 2.6% in the twelve months to May 2019). The economic effects of the COVID 19 pandemic on employment and incomes may continue to impact the volume of transactions and property prices over the coming months and over the course of the year. In terms of supply, before the onset of Covid-19 the number of house completions forecast for the year 2020 was in the range of 24,000 to 26,000 units?l, an increase from the 21,240 completions recorded by the C50 in 2019. However, as a resuit of the Covid?19 restrictions ali non-essential construction ceased for a seven week period between March and May. Upon reopening, the sector had to adapt to new safety measures with the Construction Industry Federation noting that new social distancing requirements could delay the delivery of new houses by up to 10 weeks. El, Unpublished data from the Department of Housing, Local Government and Heritage show that housing commencements and registrations have declined by 46 per cent and 54 per cent respectively in 02 2020 compared to Q2 2019. The Central Bank?s recent Quarterly Bulletin included analysis which estimated that housing completions could drop to between 11,000 and 15,000 units this year depending on the Covid-19 scenarioiil Revaluation for 2021? Crucially, Revenue's view is that on a practical level it will not be able to deliver full revaluation for 2021 in the time now remaining. Revenue therefore supports a further postponement of the 1 November 2020 valuation date. This will require legislation in the form of either another ministerial order under section 13, or an amending Bill. Revenue also considers that the implementation of any revised regime involving a different method for calculating LPT liabilities would require a longer timescale than for a straightforward revaluation and so it cannot be delivered for 2021 at this stage either. Therefore, it would be appropriate to postpone the valuation date of 1 November 2020 to 1 November 2021 in view of Revenues advice that revaluations of all LPT properties is not feasible at this late stage and the volatility in the residential property market as a result of the pandemic. lfthe valuation date is not postponed, the current legislation means that by default, revaluation will take place on 1 November, and on the basis of the current LPT rate and bands many taxpayers wouid experience significant increases in their LPT liabilities. b. To bring new homes, which are currently exempt from the LPT, into the taxation system There are two categories of properties under this heading. The first category comprises those properties that are exempt from LPT under sections 8 and 9 of the 2012 Act (purchased between 1 January 2013 and 31 December 2013 and unsold trading stock of builders/developers) referred to below as ?exempt properties'. The second category are properties built or rendered habitable since 1 May 2013 which do not come within the ambit of LPT 'excluded properties?. It is clear from AGO's advices The exempt cohort amounts to around 23,000 properties based on the number of these exemptions at the end of 2019. Based on returns filed by the owners of such exempt properties, Revenue estimates these properties could yield about ?65 million per annum. Based on Stamp Duty records and other information, Revenue estimates the cohort of properties built since 1 May 2013 that are not encompassed by the LPT legislation may number approximately 80,000. At 2013 average property price levels, Revenue estimates there could be an additional approximately ?25 million in LPT yield from these properties per annum. Revenue's view is that it would be possible to start charging those properties that have been completed since May 2013 and that are currently outside of the LPT in respect of 2021. Property owners could be asked, under LPT self-assessment (with Revenue guidance), to retrospectively value at their 'hypothetical' 2013 value, which,? would be preferable to an interim flat rate pending a full revaluation in 202i. However, Revenue emphasise that this is subject to early decisions on what is to happen and the enactment of enablina leaislation. Revenue state that it would be necessary for it to commence the associated iT developments in August 2020. Revenue also consider that it would be possible to start charging (for 2021) those properties that have been exempted by section 8 of the LPT Act (purchased between 1 January 2013 and 31 December 201 3) and sections 9 (builder?s unsold trading stock at May 2013). These would also be retrospectively valued at their 2013 value but, unlike the new properties, for the most part the exempt properties have already deciared their 2013 value. However, this again would be subject to early decisions on what is to happen and the enactment of enabling legislation. However, Revenue further advise that in the absence of full revaluation in 2020, they could continue to apply existing exemptions in 2021 on an administrative basis on the understanding that the required enabling iegislation (or full revaluation) will be enacted as soon as practicable. Importance of early decisions Working backwards from the current return filing date of 7 November 2020, notices (including Revenue estimates of liability) would have to be issued to property owners currently exempt or outside the LPT net during October. initial analysis indicates that, as development and testing of IT systems would have to be carried out before October, work would need to start in August. A shorter timescaie would be required to start charging the exempt properties but not the new properties due to the lower number of properties involved and IT development could start in the latter haltc of August. This means that a decision on what, if anything, is to happen is required very soon. The decision timeline will effectively dictate what can be delivered. Revenue have indicated that they will work on providing a more specific timeline for IT development and testing. To allow for the issue of notices to the owners of properties currently exempt or outside the LPT net (including Revenue estimates of liability) during October, enabling legislation would have to be enacted by end September. Therefore if it is desired to bring new homes, which are currently excluded or exempt from the LPT, into the taxation system, then an early decision is required so that the administrative and legislative requirements are met in time. Revenue can commence their IT development and prepare for notices to issue to property owners and an amending LPT Bill can be prepared and enacted by end?September. c) All money collected locally will be retained Within the county. This is to be done on the basis that that those counties with a lower LPT base are adjusted via an annual national equalisation fund paid from the Exchequer. The commitment reflects the recommendation of the 2019 LPT Review that the equalisation contribution from local authorities, equivalent to 20 per cent of their LPT yield, be discontinued and that ail local authorities retain 100 per cent of their LPT that is collected in their own local authority area. The 2019 Review noted that while this would heip to strengthen transparency and accountability it may result in an additional cost to the Exchequer in the absence of other changes. LPT allocations to local authorities are decided annually in accordance with Government decisions sponsored by the Minister for Housing, Local Government and Heritage. Legislation is not therefore required to give effect to them. The Minister for Housing, Local Government 8t Heritage submitted a Memorandum for Information of the Government for its meeting on 20 July 2020, asking the Government to note that local authorities in 2021 will use the same mechanism as heretofore involving for retention of 80% of LPT. LPT allocations to instance the local Recommendation ue views on the feasibility of options, our view is (Local Property Tax) Act 2012 in two phases. fore end September 2020 which would: Having regard to the legai advices received and Reven that it would be prudent to proceed to amend the Finance Phase 1 would involve amending legislation to be enacted be Defer the valuation date from 1 November 2020 to 1 November 2021 (ii) Bring properties currently exempt under sections and 8 and 9 and unsold builders' trading stock at May 2013) within the charge to LPT Bring properties currently outside the LPT into charge Phase 2 would invoive a separate amendment Biil to be passed in early 2021. This Bill would include the revised mechanism for calculating LPT liabilities. Consideration of this aspect wiil involve significant work similar to that undertaken by the 2019 LPT Review in respect of scenario analysis. Conclusion if you agree with the above approach we will Request Revenue to commence preparations for bringing excluded and exempt homes into the LPT charge; and (ii) Prepare a Memorandum for Government seeking approval to draft a Bill to give effect to the phase 1 proposals to defer the valuation date from 1 November 2020 to 1 November 2021 and bring properties currently excluded and exempt under sections 8 and 9 within the charge to LPT. The Memorandum for Government would set out the proposed two phased approach to amending the LPT regime. Housing Market Monitor Q1 2020. Available at: 111 Banking and Payments Federation of irela webpdf [2:1 committee on covid-19 response/ZOZO?OS- 1916[ Lil Mm; William Dunne (FINANCE) From: Paschal (Finance) Sent: 05 August 2020 14:24 To: John Hogan (FINANCE) Cc: Derek Moran Edward Brophy (Finance) Deborah Sweeney (Finance) Subject: RE: Local Property Tax aug 20 sub John Thank you for sending this through, and for the work that has already occurred. These are my observations, and i would welcome thoughts from team on this important topic. 1. was not sitting for long enough to deai with this topic. And, We need to postpone revaluation again. The Dai with the health crisis of c19. So, i think the even within department, we were absolutely preoccupie analysis within the document on this topic is right. My judgment is that we have also ran out of time on widening the property base. This is not a finance bill so will require Dail and Seanad passage. Given the sensitivity of this topic i wiil probably need to handle the legislation on this matter myself. The draft document notes that the legislation needs to be passed by the end of September. The Dail is back on the That would mean 2nd stage that week, and then moving to committee and report stage the following week, and then right in the Seanad. All across the same period we are trying to do a budget. And the gain for this would be e315 million. My further perspective is that we would be doing all of this while still not clear on the further re?design of LPT. So this would inevitably raise issues of what (new) tax payers would be paying next year. So, this feels a lot. My alternativesuggestion would be a memo for information in early September, noting where we stand with LPT and setting a deadline for completion and passage of bill of ql 2021. in this bill I would propose a revaluation and base widening, i would do everything in one move. Feed back welcome on this tricky topic, Paschal William Dunne (FINANCE) On 7 Aug 2020, at 16:21, Edward Brophy (Finance) wrote: Folks, Just to add to the Minister?s points, I think we will only have one shot at this and unlike last time a deferral of revaluations will be expected in the Autumn. As such, best to postpone any wider moves to Spring 2021. Regards Ed William Dunne (FINANCE) From: Deborah Sweeney (Finance) Sent: Tuesday 11 August 2020 18:45 To: Edward Brophy (Finance) Cc: Paschal (Finance) %gan (FINANCE) Derek Moran Subject: Re: Local Property Tax aug 20 su I agree that the timeline is very tight to deal with this issue. Also the timing with respect to widening the property tax base is not great to say the least. Deferral is best option. Deb Sent from my iPhone FIN 00637-20 Page 1 of 13 Local Property Tax Next steps in light of commitments, advices and Revenue views REF 00637~20 AUTHOR: Kevin Nolan (FINANCE) TO: Minister OWNER: Kevin Nolan (FINANCE) STATUS: Completed REVIEWERS: Anne-Marie Walsh (FINANCE), Kevin Nolan Hogan (FINANCE), Margaret Fitzgerald (FINANCE) PURPOSE: For Decision DECISION BY: Tax Division Final comment Will do option 8. Please can a one pager be prepared on this - which will I will then use with party leaders. I aim to take to cabinet week after next. PD 03/09/20 (refer attached.) Action required To indicate your preferred option for next steps in relation to LPT in light of Programme for Government commitments, advices and the views of Revenue. Executive summary This submission sets out advices on LPT policy options and the views of Revenue on feasibility. It is not feasible to pursue full revaluation for 2021 in the time remaining; the valuation date must be postponed. This requires legislation, either a Ministerial Order or an amending Bill. Two options seem to arise for consideration. Option A would involve a two phased approach. - Phase 1 would involve legislation to be enacted before end Sept. 2020 to Defer valuation date from 1 Nov. 2020 to 1 Nov. 2021 (ii) End "first time buyers" and unsold builders? trading stock exemptions . . . .H 1 nqmn/onon FIN 00637?20 Page 2 of 13 Bring properties currently outside the LPT into charge - Phase 2 involves a separate Bill in early 2021, to include a revised mechanism for calculating LPT liabilities. Option involves deferring the valuation date from 1 Nov. 2020 to Nov. 2021 by Order, followed by a comprehensive LPT amendment Bill in early 2021.This Bill would include a new method of calculating LPT liabilities. An earlv decision is needed in relation to any changes envisaged for the remainder of 2020 to allow Revenue to immediately commence the administrative and technical preparations for implementation of any changes. Option A involves a very short timeframe in a busy period where Budget/Finance Bill preparations will be the focus of your and the Department's time and attention while Option would allow time for consideration of issues arising. Comments John Hogan (FINANCE) - 20/08/202015i32 As discussed Kevin Nolan (FINANCE) 20/08/2020 16:15 Amended as discussed. Elizabeth Hughes (FINANCE) 02/09/2020 12:44 As requested Helena Quane (FINANCE) 03/09/2020 11:29 Will do option B. Please can a one pager be prepared on this which will i will then use with party leaders. I aim to take to cabinet week after next. PD 03/09/20 (refer attached.) Detailed information Submission 00363-20: ?Local Property Tax - update" outlined the position in May regarding LPT in particular the need for early decisions by an incoming government in relation to the future direction of the tax. This was in the context of the unprecedented economic, political and residential property market conditions prevailing. We also outlined questions we had posed to the Attorney General?s Office in relation to certain policy options we felt warranted consideration in the exceptional circumstances. 03/09/2020 FIN 00637-20 Page 3 of 13 AGO's legal advice summary Legal advice was sought in relation to the fellowing questions - In summary, the advices of the A605 are: lf?l nQ/DO/ann FIN 00637~20 Page 4 of 13 The full version of the advices is attached. Programme for Government The includes the following commitments in relation to LPT - a. To bring forward legislation for the LPT on the basis of fairness and that most homeowners will face no increase. b. To bring new homes, which are currently exempt from the LPT, into the taxation system, and that c. All money collected locally will be retained within the county. This is to be done on the basis that that those counties with a lower LPT base are adjusted via an annual national equalisation fund paid from the Exchequer. Consideration a. To bring forward legislation for the LPT on the basis of fairness and that most homeowners will face no increase. It is clear that allowing the valuation of properties to proceed on 1 November 2020 without some change to the method of calculating liabilities would result in significantly higher LPT bills for many property owners. You will recall that the 2019 LPT Review analysed five different scenarios for calculating LPT liabilities which are outlined at Appendix A - Summary of the Recommendations of the 2019 Review of the LPT - under the heading 'Scenarios?. None of the scenarios fulfilled the requirement for maintenance of relative stability in LPT liabilities for all taxpayers against a background of significant, but geographically uneven increases, in 03/09/2020 FIN 00637-20 Page 5 of 13 residential property price levels. Therefore the requirement ?that most homeowners will face no increases" will present a significant challenge given the experience with scenario analysis for the 2019 LPT Review. CSO data on residential property prices continues to demonstrate significant geographical variance within and across local authority areas.[1] The current volume of transactions in the residential market is low, and some commentators consider that the market is likely to be characterised by volatility over the short to medium term. The outlook for the residential property sales market in 2020 is uncertain due to the effects of Covid~19. The most recent CSO release on the Residential Property Price index 15July) notes that residential property prices increased by 0.3% nationally in the year to May continuing a gradual slowdown over the last year. (This compares with an increase of 0.7% in the year to April and an increase of 2.6% in the twelve months to May 2019). The economic effects of the COVID 19 pandemic on employment and incomes may continue to impact the volume of transactions and property prices over the coming months and over the course of the year. in terms of supply, before the onset of Covid-19 the number of house completions forecast for the year 2020 was in the range of 24,000 to 26,000 units an increase from the 21,240 completions recorded by the C50 in 2019. However, as a result of the Covidei9 restrictions all non-essential construction ceased for a seven week period between March and May. Upon reopening, the sector had to adapt to new safety measures with the Construction industry Federation noting that new social distancing requirements could delay the delivery of new houses by up to 10 weeks. Unpublished data from the Department of Housing, Local Government and Heritage show that housing commencements and registrations have declined by 46 per cent and 54 per cent respectively in Q2 2020 compared to QZ 2019. The Central Bank's recent Quarterly Bulletin included analysis which estimated that housing completions could drop to between 11,000 and 15,000 units this year depending on the Covid-19 scenario.[4] Revaluation for 2021? Crucially, Revenue's view is that on a practical level it will not be able to deliver full revaluation for 2021 in the time now remaining. Revenue therefore supports a further postponement of the 1 November 2020 valuation date. This will require legislation in the form of either another ministerial order under section 13, or an amending LPT Bill. Revenue also considers that the implementation of any revised I I . In I . ?iln?lqnan FIN 00637?20 Page 6 of 13 regime involving a different method for calculating LPT liabilities would require a longer timescale than for a straightforward revaluation and so it cannot be delivered for 2021 at this stage either. Therefore, it would be appropriate to postpone the valuation date of 1 November 2020 to 1 November 2021 in view of Revenue?s advice that revaluations of all LPT properties is not feasible at this late stage and the volatility in the residential property market as a result of the pandemic. if the valuation date is not postponed, the current legislation means that by default, revaluation will take place on 1 November, and on the basis of the current LPT rate and bands many taxpayers would experience significant increases in their LPT liabilities. b. To bring new homes, which are currently exempt from the LPT, into the taxation system There are two categories of properties under this heading. The first category comprises those prOperties that are exempt from LPT under sections 8 and 9 of the 2012 Act (purchased between 1 January 2013 and 31 December 2013 and unsold trading stock of builders/developers) - referred to below as 'exempt properties?. The second category are properties built or rendered habitable since 1 May 2013 which do not come within the ambit of LPT 'excluded properties'. . The exempt cohort amounts to around 23,000 properties based on the number of these exemptions at the end of 2019. Based on returns filed by the owners of such exempt properties, Revenue estimates these properties could yield about ?65 million per annum. Based on Stamp Duty records and other information, Revenue estimates the cohort of properties built since 1 May 2013 that are not encompassed by the LPT legislation may number approximately 80,000. At 2013 average property price levels, Revenue estimates there could be an additional approximately ?25 million in LPT yield from these properties per annum. Revenue?s view is that it would be possible to start charging those properties that have been completed since May 2013 and that are currently outside of the LPT in respect of 2021. Property owners could be asked, under LPT self-assessment (with Revenue guidance), to retrospectively value at their ?hypothetical? 2013 value, which, would be preferable to an interim flat rate pending a full revaluation in 2021. However, Revenue emphasise that this is subject to earl01/00/9070 FIN 00637?20 Page 7 of 13 decisions on what is to happen and the enactment of enabling legislation by end September. Moreover, Revenue state that it would be necessary for it to commence the associated IT developments immediately. Revenue also consider that it would be possible to start charging (for 2021) those properties that have been exempted by section 8 of the LPT Act (purchased between 1 January 2013 and 31 December 2013) and sections 9 (builder?s unsold trading stock at May 2013). These would also be retrospectively valued at their 2013 value but, unlike the new properties, for the most part the exempt properties have already declared their 2013 value. However, this again would be subject to early decisions on what is to happen and the enactment of enabling legislation by end September. However, Revenue further advise that in the absence of full revaluation in 2020, they could continue to apply existing exemptions in 2021 on an administrative basis on the understanding that the required enabling legislation (or full revaluation) will be enacted as soon as practicable. Importance of early decisions Working backwards from the current return filing date of 7 November 2020, notices (including Revenue estimates of liability) would have to be issued to property owners currently exempt or outside the LPT net during October. Initial analysis indicates that, as development and testing of IT systems would have to be carried out before October, work would need to start immediately (ideally by the end of this month (August)). A shorter timescale would be required to start charging the exempt properties but not the new properties due to the lower number of properties involved and IT development could start in the latter half of August. This means that a decision on what, if anything, is to happen is required very soon. The decision timeline will effectively dictate what can be delivered. To allow for the issue of notices to the owners of properties currently exempt or outside the LPT net (including Revenue estimates of liability) during October, enabling legislation would have to be enacted by end September2-1-42? mama/anon FFN 00637?20 Page 8 01?13 Therefore if it is desired to bring new homes, which are currently excluded or exempt from the LPT, into the taxation system for 2021, then an early decision is required so that the administrative and legislative requirements are met in time. c. All money collected locally will be retained within the county. This is to be done on the basis that that those counties with a lower LPT base are adjusted via an annual national equalisation fund paid from the Exchequer. The commitment reflects the recommendation of the 2019 LPT Review that the equalisation contribution from local authorities, equivalent to 20 per cent of their LPT yield, be discontinued and that all local authorities retain 100 per cent of their LPT that is collected in their own local authority area. The 2019 Review noted that while this would help to strengthen transparency and accountability it may result in an additional cost to the Exchequer in the absence of other changes. LPT allocations to local authorities are decided annually in accordance with Government decisions sponsored by the Minister for Housing, Local Government and Heritage. Legislation is not therefore required to give effect to them. The Minister for Housing, Local Government Heritage submitted a Memorandum for Information of the Government for its meeting on ZOJuly 2020, asking the Government to note that LPT allocations to local authorities in 2021 will use the same mechanism as heretofore involving for instance the local retention of 80% of LPT. Consideration of Options As outlined above there are three aspects/issues to address: (1) Deferring the valuation date from 1 November 2020 to 1 November 2021; (2) Bringing exempted and excluded properties into the LPT charge; and (3) Full revaluation of all properties with a revised mechanism for calculating LPT liabilities. Having regard to the legal advices received and Revenue views on the feasibility of options, there would appear to be two options for implementing the commitments on LPT. 9.9m Option A would involve proceeding to amend the Finance (Local Property Tax) Act 2012 in two phases. Phase 1 would involve amending legislation to be enacted before end September 2020 which would: Defer the valuation date from 1 November 2020 to 1 November 2021; (ii) Bring properties currently exempt under sections and 8 and 9 and unsold 03/09/2020 FIN 00637-20 Page 9 of 13 builders' trading stock at May 2013) within the charge to Bring properties currently outside the LPT into charge; Phase 2 would involve a separate amendment Bill to be passed in early 2021. This Bill would include the revised mechanism for calculating LPT liabilities. Consideration of this aspect will be involve considerable work. Implementation of Option A: If this is your preferred option, we would Request Revenue to immediately commence preparations for bringing excluded and exempt homes into the LPT charge; and (ii) Prepare a Memorandum for Government seeking approval to draft a Bill to give effect to the phase 1 proposals to defer the valuation date from 1 November 2020 to 1 November 2021 and bring properties currently excluded and exempt under sections 8 and 9 within the charge to LPT. The Memorandum for Government would set out the proposed two phased approach to amending the LPT regime. Inn/anon I . In I . Ir" FIN 00637?20 Page 10 of 13 Even with the earlier recommencement of the new Da?ii term on 2 September as opposed to the previously scheduled recommencement on 15 September, the time frame within which to progress an LPT Bill under this option is extremely short and would fall within a period when the focus of our attention will be on Budget and Finance Bill preparations. Preparation of Budget 2021 is likely to be particularly challenging given the unprecedented impact of the ongoing pandemic. Also, progressing a limited LPT Bill would inevitably open the debate about the nature of the revised basis for LPT liabilities before work on that difficult issue had been completed. QM Option would involve your making a ministerial order under section 13 of the LPT Act to defer the valuation date from 1 November 2020 to November 2021. A ministerial order would be followed by an LPT amendment Bi to be enacted in early 2021. in addition to providing for items (ii) to (iv) under option A above in relation to widening the base of the tax, this Bill would provide a revised method of calculating LPT liabilities. Thus Option would provide the time and space within which to consider the challenging question of what the basis for calculating LPT liabilities should be into the future. Implementation of Option B: if Option is your preferred option, we would request the Office of the Parliamentary Counsel to prepare the necessary Order under section 13 of the LPT Act to defer the valuation date to 1 November 2021, and (ii) Finalise a Memorandum for the information of the Government and associated press release in relation to the deferral of the valuation date to 1 November 2021 and the proposed preparation of a comprehensive LPT amendment Bill for enactment in early 202?. Conclusion The unavoidable delays in decision making in relation to the future of the LPT, have been amplified by the pandemic and the likely impact on residential property values. Having received advice from the Attorney General and Revenue, it is clearly not feasible to FIN 00637-20 Page ll of 13 pursue full revaluation for 2021 in the time remaining, therefore the valuation date must be postponed and legislation will be required in the coming weeks. Two options have been outlined for your consideration: Option A - an amending Bill to defer the valuation date and bring exempt and excluded properties into the charge of LPT, to be followed by a second Bill in early 2021 for provide for redesign of the Tax and full revaluation. Option a Ministerial Order to defer the valuation date, to be followed by an amending Bill in early 2021 for provide for redesign of the Tax, widening the base to bring exempt and excluded prooerties into scope, and full revaluation. An indication of your preferred option is hereby sought. Officials are available to discuss Banking and Payments Federation of lreland Housing Market Monitor Q1 2020. Available at: Related submissions FIN 00363-20: Local Property Tax update User details n4 Inh l?n?n FIN 00637-20 INVOLVED: Action log ACTION Create Submit for review Submission sent Submit for review Submission sent Submission sent Reve rt Submit for review Submit for review Submission sent Submit for review Kevin Nolan (FINANCE) Anne?Marie Walsh (FINANCE) John Hogan (FINANCE) Sec Gens Office Derek Moran (FINANCE) Ministers Office Paschal (Finance) Page 12 of 13 READ RECEIPT: Kevin Nolan (FINANCE) Anne?Marie Walsh (FINANCE) John Hogan (FINANCE) Elizabeth Hughes (FINANCE) Margaret Fitzgerald (FINANCE) Helena Quane (FINANCE) Mary Ryan (FINANCE) DESCRIPTION Submission FIN 00637-20 to Minister created. Submission sent for review to Anne- Marie Walsh (FINANCE). Submission sent by email to Kevin Nolan (FINANCE). Submission sent for review toJohn Hogan (FINANCE). Submission sent by email to Kevin Nolan (FINANCE). Submission sent by emaii toJohn Hogan (FINANCE). Submission reverted to Kevin Nolan (FINANCE) byJohn Hogan (FINANCE). Submission sent for review to Anne- Marie Walsh (FINANCE). Submission sent for review toJohn Hogan (FINANCE). Submission sent by email to Kevin Nolan (FINANCE). Submission sent for review to Secretary General. USER DATE Kevin Nolan 24/07/2020 (FINANCE) 12:23 Kevin Nolan 24/07/2020 (FINANCE) 15:37 Kevin Nolan 24/07/2020 (FINANCE) 15:37 Anne?Marie 27/07/2020 Walsh (FINANCE) 09:51 Kevin Nolan 27/07/2020 (FINANCE) 09:54 Kevin Nolan 20/08/2020 (FINANCE) 14:40 John Hogan 20/08/2020 (FINANCE) 15:32 Kevin Nolan 20/08/2020 (FINANCE) 16:15 Anne-Marie 20/08/2020 Walsh (FINANCE) 17:34 Kevin Nolan 20/08/2020 (FINANCE) 17:36 John Hogan 02/09/2020 (FINANCE) 12:42 In I no Inn [40?3? FIN 0063 7-20 Page 13 ofl3 Revert Submit for review Submit for review Submission sent Submission sent Complete Submission reverted tojohn Hogan (FINANCE) by Elizabeth Hughes (HNANCB. Submission sent for review to Secretary General. Submission sent for review to Minister. Submission sent by email to Helena Quane (FINANCE). Submission sent by email to Kevin Nolan (FINANCE), William Dunne (Finance). Submission completed by Helena Quane (FINANCE). Elizabeth Hughes 02/09/2020 (FINANCE) John Hogan (FINANCE) Margaret Fitzgerald (FINANCE) Helena Quane (FINANCE) Kevin Nolan (HNANCB Helena Quane (FINANCE) 12:44 02/09/2020 12:45 02/09/2020 12:54 02/09/2020 13:05 02/09/2020 17:37 03/09/2020 I 1:29 hf! l?n 18 Appendix A Summary of the Recommendations of the 2019 Review of the LPT Revaluation The Review Group recommends that ideally revaluation should take place as planned on 1 November 2019 if Government is satisfied it provides modest and affordable adjustments. The Group consider that further delays in revaluation may present risks to the long term sustainability of the tax. The Review Group recommends that valuations should be reviewed every four years. This provides a balance between timely capture of changes in the property market and reducing compliance and administration costs. It would facilitate the regular addition of new properties into the LPT charge. Timing of LAF Noti?cation The Review Group agreed that the Local Adjustment Factor (LAP) noti?cation date to the Revenue Commissioners should occur in mid-October except in the year that property valuations fall due for revaluation. In that instance the LAF noti?cation date would be 31 August at the latest, to facilitate Revenue?s processing of the required noti?cation procedure. Scenarios The Review Group agreed that a no policy change scenario should be presented along with ?ve alternative methods of calculation. No policy change means that the current central rate would apply to the market value of all residential properties on 1 November 2019. This would produce an estimated yield of ?729 million. The Review Group recommended that a target annual yield should be identi?ed in advance for purposes of scenario analysis. This provides a consistent means of evaluating the suggested scenarios for a broad range of taxpayers. For the purpose of the review, the Review Group targeted a broad yield of ?500 million, a modest increase on the 2018 yield of ?482m and recent years. On this basis, the Review Group considered ?ve different approaches to the calculation of the LPT liabilities in respect of the 20 existing valuation bands. 0 Scenario 1 is based on a central LPT rate for all properties and produces a yield of ?500 million. The rate is 0.114 per cent for all valuation bands and all local authorities. 0 Scenario 2 is based on targeting individual local authority yields equal to the expected current yield for 2018 without the Local Adjustment Factor (LAP). The rate in each local authority is adjusted to meet these targets following estimated valuation increases. In Scenario 2, the LPT rates vary between 0.085 per cent and 0.144 per cent. 0 Scenario 3 has been modelled on the basis of a different LPT rate for each valuation band (increasing with each band) and again set to collect the overall target of ?500 million (with no LAP). In Scenario 3, the LPT rate ranges from 0.108 per cent in band 1, and increases in increments of 0.001 per cent to 0.126 per cent in band 19. 0 Scenario 4 is a variation of scenario 3 with one adjustment. Based on Scenario 3, and with the same target of ?500 million, it maintains the first valuation band at a liability of ?90. The rationale for the ?oor of ?90 is that there are minimum costs incurred by local authorities for the services which they supply to each household. This ?oor generates an additional ?13 million, and impacts by reducing rates for bands other than the first band. 0 Scenario 5 increases all of the valuation band thresholds by 80%. The midpoint of each band increases correspondingly and the rate is reduced to leave the liability in each band unchanged. 0 As all of the scenarios involve ?winners? (reduced liability) and ?losers? (increased liability) which may be different in each scenario, the Review Group considered therefore that it must be a matter for Government as to which, if any, of the options provides for moderate and affordable adjustments. This may impact on the revaluation date. . The Review Group recommends that the LPT rate applied to all properties exceeding 6 lmillion in market value should remain at 0.25 per cent with one exception. Scenario 5 is based on broader bands up to 61.8 million and if this scenario is chosen, then the Review Group recommend that the 0.25 per cent rate should apply to properties above the ?1.8 million valuation. Equalisation and Local Retention The Review Group recommends . That the equalisation contribution from local authorities, equivalent to 20 per cent of their LPT yield, be discontinued and that all local authorities retain 100 per cent of the LPT that is collected in their own local authority area. While this will help to strengthen transparency and accountability it is acknowledged that it may result in an additional cost to the Exchequer in the absence of other changes. 0 The Review Group recommends that to the greatest extent possible the local retention change should be Exchequer neutral with baseline shortfalls being offset by a rebalancing of programme funding (including self-funding or other compensating mechanisms). DPER and would need to work bilaterally on options to mitigate the impact on the Exchequer of the proposed 100% retention in the context of the Estimates process. The Review Group recommends that the LAF be amended to permit upward only adjustments to a maximum of 15 per cent. Exemptions The Review Group recommends: That all of the exemptions should be reviewed regularly and kept to a minimum in order to keep the base broad and minimise the impact on those paying the tax. That exempted properties constituting the unsold trading stock of builders/developers in May 2013, or such properties sold by them (while remaining unused) in the period 1 January 2013 to 31 October 2019, should be liable for LPT from 1 November 2019. That exempted properties purchased by ??rst-time buyers? in the period between 1 January 2013 and 31 December 2013 for use as their sole or main residence should be liable for LPT from 1 November 2019. That all new residential properties built between valuation dates should be retrospectively valued as if they had existed on the preceding valuation date. Deferrals The Review Group recommends: That most deferrals, such as the deferral option for those taxpayers with lower incomes, should be maintained and some thresholds should be increased. That the income thresholds for LPT deferrals be reviewed regularly by reference to movements in the CPI, (ii) wage growth in the economy, and changes in ?xed income payments by the State. From the next valuation date, the Review Group recommends that the deferral thresholds be increased to ?18,000 for a single owner and ?30,000 for a couple That, as the number of LPT liable persons qualifying for the mortgage interest deferral would reduce overtime as the mortgages involved matured, and that the LPT revenue deferred would taper, accordingly the deferral option on the current basis should be retained. That relief for ownepoceupiers aged over 80 years with a longsterm illness who are living alone (as recommended by Thornhill (2015)), would be more appropriately considered in the context of the social welfare code rather than through further tax reliefs. Such individuals may also be able to bene?t from other reliefs including the ability to defer their LPT liability based on the income thresholds. Other That the interest rate which applies to LPT deferrals should be retained at 4 per cent. On balance, the Review Group does not support deductibility of LPT for landlords. The Review Group does not recommend the deductibility of management fees in the calculation of LPT. The Review Group consider some of the recommendations are mutually reinforcing and should be considered and sequenced together. or example the proposed thresholds increases should be done at the same time as the revaluation as they are related in terms of economic growth, wage growth and in?ation. Local Property Tax - Next Steps Commitment To bring forward legislation for the LPT on the basis of fairness and that most homeowners will face no increase. To bring new homes, which are currently exempt from the LPT, into the taxation system, and that All money collected locally will be retained within the county. This is to be done on the basis that that those counties with a lower LPT base are adjusted via an annual national equalisation fund paid from the Exchequer. The Report of the Interdepartmental Review Group (April 2019) had not found it possible to deliver on the maintenance of the relative stability objective for all taxpayers against a background of significant, but geographically uneven, increases in residential property prices levels. The valuation date was deferred from 15t November 2019 to 1? November 2020 to allow time for further consultation including with the Budgetary Oversight Committee. ideally amending LPT legislation would have been enacted in the early part of 2020 to enable Revenue to make the necessary preparations in good time. However, the protracted nature of the Government formation process following the General Election on 8 February has delayed decision making in relation to the future of the LPT. Moreover, the emergency has introduced significant volatility into the residential property market creating uncertainties as to whether 1 November 2020 is an appropriate point at which to determine property values. Crucially, on a practical level it is not feasible to pursue full revaluation for 2021 in the time remaining; therefore the valuation date must be postponed until 1 November 2021. This will require legislation, a Ministerial Order to defer the date followed by an amending Bill to provide for full revaluation to be enacted early next year. In relation to homes currently not in the system, there are two categories of properties under this heading. The first category comprises those properties that are exempt from LPT under sections 8 and 9 of the 2012 Act (purchased between 1 January 2013 and 31 December 2013 and unsold trading stock of builders/developers) - 'exempt properties'. The second category are properties built or rendered habitable since 1 May 2013 which do not come within the ambit of LPT 'excluded prOperties'. . The exempt cohort amounts to around 23,000 properties based on the number of these exemptions at the end of 2019. Based on returns filed by the owners ofsuch exempt properties, Revenue estimates these properties could yield about ?65 million per annum. Based on Stamp Duty records and other information, Revenue estimates the cohort of properties built since 1 May 2013 that are not encompassed by the LPT legislation may number approximately 80,000. At 2013 average property price levels, Revenue estimates there could be an additional approximately ?25 million in LPT yield from these properties per annum. 0 Therefore, in order to progress this issue, it is proposed to introduce a Ministeriai Order to defer the valuation date, to be foilowed by an amending Bill in early 2021 for provide for redesign of the Tax, widening the base to bring exempt and excluded properties into scope, and full revaluation. This would provide the time and space within which to consider the challenging question of what the basis for calculating LPT liabilities shouid be into the future. As well an opportunity to consider fully further issues arising from recommendations ofthe 2019 LPT Review and policy issues raised by Government partners, etc. - immediate next steps would then involve: Preparation and signature the necessary Order under section 13 ofthe LPT Act to defer the valuation date to 1 November 2021, and (ii) Bringing a Memorandum for the information ofthe Government in relation to the deferrai ofthe valuation date to 1 November 2021 and the proposed preparation of a comprehensive LPT amendment Bill for enactment in early 2021. FIN 0075 8-20 Page I of 3 Local Property Tax Memo for Information of Government REF FIN 00758-20 AUTHOR: Anne-Marie Walsh (FINANCE) TO: Minister OWNER: Anne-Marie Walsh (FINANCE) STATUS: Completed REVIEWERS: John Hogan (FINANCE), Margaret Fitzgerald (FINANCE) PURPOSE: For Decision DECISION BY: Tax Division Final comment This is agreed. Please circulate to Taoiseach and offices of Tanaiste and Min. Ryan. This, when agreed eCabinet agenda until late Monday. (Refer attached) [Memorandum forwarded to Nick Reddy, Eamonn McCormack and Michaela Sullivan for the information of Taoiseach, Ta?naiste and Minister Ryan on 11.09.2020. M.R. 14.09.2020] Action required To approve the attached Memo for the Information of the Government noting your intention to defer the next valuation date for LPT to ist November 2021 by Order and (ii) bring forward an amending Bill early in 2021. Executive summary In a recent submission (00637?20) you agreed to defer the next valuation date for LPT to 1st November 2021 by Order and (ii) bring forward an amending Bill early in 2021. The attached draft Memo for Information of Government asks the Government to note your intention to defer the next valuation date for Local Property Tax (LPT) liabilities from 1St November 2020 to 1St November 2021 by Order under section 13(3) of the Finance (Local Property Tax) Act 2012 as amended, and (ii) bring forward legislative proposals for amendment of the Finance (Local Property Tax) Act 2012 early in 2021 in order to implement the Programme for Government commitments in relation to LPT. 09/ 1 0/2020 IN 00758-20 Page 2 of 3 The Memo also outlines the background and evolution of the tax, the 2015 and 2019 reviews, the commitments and the challenges associated wr?th revaluation this year. A short summary note outlining next steps in relation to LPT is attached as requested. A draft press release is also attached. The necessary Order deferring the valuation date to 1st November 2021 will be prepared and submitted for your signature without delay. Your approval to submit the attached Memo to Government is hereby sought. Comments Mary Ryan (FINANCE) - 14/09/2020 12:56 This is agreed. Please circulate to Taoiseach and offices of Tanaiste and Min. Ryan. This, when agreed eCabinet agenda until late Monday. (Refer attached) [Memorandum forwarded to Nick Reddy, Eamonn McCormack and Michaela Sullivan for the information of Taoiseach, T?naiste and Minister Ryan on 11.09.2020. M.R. 14.09.2020] Detailed information Related submissions FIN 00637-20: Local Property Tax Next steps in light of commitments, advices and Revenue views User details INVOLVED: Kevin Nolan (FINANCE) READ RECEIPT: Anne?Marie Walsh William Dunne (Finance) (FINANCE) Anne-Marie Walsh John Hogan (FINANCE) (FINANCE) Margaret Fitzgerald John Hogan (FINANCE) (FINANCE) Sec Gens Office Helena Quane (FINANCE) Derek Moran (FINANCE) Mary Ryan (FINANCE) Ministers Office Kevin Nolan (FINANCE) Paschal (Finance) Elizabeth Hughes (FINANCE) .. 09/10/2020 FIN 00758?20 Action log ACTION Create Add involved user Submit for review Submit for review Submit for review Submission sent Submission sent Complete DESCRIPTION Submission FIN 00758?20 to Minister created. Submission shared with Kevin Nolan (FINANCE), William Dunne (Finance). Submission sent for review toJohn Hogan (FINANCE). Submission sent for review to Secretary General. Submission sent for review to Minister. Submission sent by email to Helena Quane (FINANCE). Submission sent by email to Mary Ryan (FINANCE). Submission completed by Mary Ryan (FINANCE). USER Anne-Marie Walsh (FINANCE) Anne?Marie Walsh (FINANCE) Anne?Marie Walsh (FINANCE) John Hogan (FINANCE) Margaret Fitzgerald (FINANCE) Helena Quane (FINANCE) Mary Ryan (FINANCE) Mary Ryan (FINANCE) Page 3 of 3 DATE 04/09/2020 16:52 04/09/2020 16:53 04/09/2020 17:28 04/09/2020 17:53 04/09/2020 17:57 07/09/2020 08:44 08/09/2020 14:41 14/09/2020 12:56 AA I1 11 lnn?n Page 1 of 10 Page 2 of 10 Page 3 of?lO Page 4 of 10 Page 5 of 10 Appendix A Summary Recommendations of the report of the 2019 Inter?Departmental Review of the LPT Revaluation The Review Group recommends that ideally revaluation should take place as planned on 1 November 2019 if Government is satis?ed it provides modest and affordable adjustments. The Group consider that further delays in revaluation may present risks to the long term sustainability of the tax. The Review Group recommends that valuations should be reviewed every four years. This provides a balance between timely capture of changes in the property market and reducing compliance and administration costs. It would facilitate the regular addition of new properties into the LPT charge. Timing of LAF Noti?cation The Review Group agreed that the Local Adjustment Factor (LAF) noti?cation date to the Revenue Commissioners should occur in mid-October except in the year that property valuations fall due for revaluation. In that instance the LAF notification date would be 31 August at the latest, to facilitate Revenue?s processing of the required noti?cation procedure. Scenarios The Review Group agreed that a no policy change scenario should be presented along with ?ve alternative methods of calculation. No policy change means that the current central rate would apply to the market value of all residential properties on 1 November 2019. This would produce an estimated yield of ?729 million. The Review Group recommended that a target annual yield should be identi?ed in advance for purposes of scenario analysis. This provides a consistent means of evaluating the suggested scenarios for a broad range of taxpayers. For the purpose of the review, the Review Group targeted a broad yield of ?5 00 million, a modest increase on the 201 8 yield of ?482m and recent years. On this basis, the Review Group considered ?ve different approaches to the calculation of the LPT liabilities in respect of the 20 existing valuation bands. Page 6 of 10 0 Scenario 1 is based on a central LPT rate for all properties and produces a yield of ?500 million. The rate is 0.114 per cent for all valuation bands and all local authorities. 0 Scenario 2 is based on targeting individual local authority yields equal to the expected current yield for 2018 without the Local Adjustment Factor (LAF). The rate in each local authority is adjusted to meet these targets following estimated valuation increases. In Scenario 2, the LPT rates vary between 0.085 per cent and 0.144 per cent. 0 Scenario 3 has been modelled on the basis of a different LPT rate for each valuation band (increasing with each band) and again set to collect the overall target of ?500 million (with no LAP). In Scenario 3, the LPT rate ranges from 0.108 per cent in band 1, and increases in increments of 0.001 per cent to 0.126 per cent in band 19. 0 Scenario 4 is a variation of scenario 3 with one adjustment. Based on Scenario 3, and with the same target of ?500 million, it maintains the first valuation band at a liability of ?90. The rationale for the ?oor of ?90 is that there are minimum costs incurred by local authorities for the services which they supply to each household. This floor generates an additional ?13 million, and impacts by reducing rates for bands other than the ?rst band. 0 Scenario 5 increases all of the valuation band thresholds by 80%. The midpoint of each band increases correspondingly and the rate is reduced to leave the liability in each band unchanged. 0 As all of the scenarios involve ?winners? (reduced liability) and ?losers? (increased liability) which may be different in each scenario, the Review Group considered therefore that it must be a matter for Government as to which, if any, of the options provides for moderate and affordable adjustments. This may impact on the revaluation date. 0 The Review Group recommends that the LPT rate applied to all properties exceeding ?l million in market value should remain at 0.25 per cent with one exception. Scenario 5 is based on broader hands up to ?18 million and if this scenario is chosen, then the Review Group recommend that the 0.25 per cent rate should apply to properties above the 61.8 million valuation. Equalisation and Local Retention The Review Group recommends 0 That the equalisation contribution from local authorities, equivalent to 20 per cent of their LPT yield, be discontinued and that all local authorities retain 100 per cent of the LPT that is collected in their own local authority area. While this will help to strengthen Page 7 of 10 transparency and accountability it is acknowledged that it may result in an additional cost to the Exchequer in the absence of other changes. 0 The Review Group recommends that to the greatest extent possible the local retention change should be Exchequer neutral with baseline shortfalls being offset by a rebalancing of programme funding (including self-funding or other compensating mechanisms). DPER and would need to work bilaterally on options to mitigate the impact on the Exchequer of the proposed 100% retention in the context of the Estimates process. - The Review Group recommends that the LAF be amended to permit upward only adjustments to a maximum of 15 per cent. Exemptions The Review Group recommends: That all of the exemptions should be reviewed regularly and kept to a minimum in order to keep the base broad and minimise the impact on those paying the tax. 0 That exempted properties constituting the unsold trading stock of builders/developers in May 2013, or such properties sold by them (while remaining unused) in the period 1 January 2013 to 31 October 2019, should be liable for LPT from 1 November 2019. 0 That exempted properties purchased by ??rst-time buyers? in the period between 1 January 2013 and 31 December 2013 for use as their sole or main residence should be liable for LPT from 1 November 2019. 0 That all new residential properties built between valuation dates should be retrospectively valued as if they had existed on the preceding valuation date. Deferrals The Review Group recommends: - That most deferrals, such as the deferral option for those taxpayers with lower incomes, should be maintained and some thresholds should be increased. 0 That the income thresholds for LPT deferrals be reviewed regularly by reference to movements in the CPI, (ii) wage growth in the economy, and changes in ?xed Page 8 of 10 Other income payments by the State. From the next valuation date, the Review Group recommends that the deferral thresholds be increased to ?18,000 for a single owner and ?30,000 for a couple That, as the number of LPT liable persons qualifying for the mortgage interest deferral would reduce over time as the mortgages involved matured, and that the LPT revenue deferred would taper, accordingly the deferral option on the current basis should be retained. That relief for owner~occupiers aged over 80 years with a long-term illness who are living alone (as recommended by Thornhill (2015)), would be more appropriately considered in the context of the social welfare code rather than through further tax reliefs. Such individuals may also be able to bene?t from other reliefs including the ability to defer their LPT liability based on the income thresholds. That the interest rate which applies to LPT deferrals should be retained at 4 per cent. On balance, the Review Group does not support deductibility of LPT for landlords. The Review Group does not recommend the deductibility of management fees in the calculation of LPT. The Review Group consider some of the recommendations are mutually reinforcing and should be considered and sequenced together. For example the proposed thresholds increases should be done at the same time as the revaluation as they are related in terms of economic growth, wage growth and in?ation. Page 9 of 10 Appendix BOC Scrutiny report on the 2019 LPT Review The Committee?s recommendations can be summarised under the following headings. Revaluation The Committee recommends that, due to the distributional impact and simplicity, either Option 1 or Option 2, as set out in the Review Group Report, should be pursued. [These correspond to Scenarios and 2 of the 2019 Review]. The Committee recommends that all new residential properties built between valuation dates should be retrospectively valued as if they had existed on the preceding valuation date. Exemptions - The Committee endorses the recommendations made by the Review group to remove the exemptions currently in place for: . unsold trading stock of builders/developers in May 2013 or properties sold by them between 1 January 2013 and October 2019 properties purchased by ??rst-time buyers? in the period between 1 January 2013 and 31 October 2013 - The Committee also endorses the recommendation to regularly review all exemptions and to keep the range of exemptions to a minimum. This will help to maintain a broad revenue base and reduce inequalities. Deferrals - The Committee welcomes the recommendation made by the Review Group that; ?the income threshold for deferrals be reviewed regularly by reference to movements in the the CPI, (ii) wage growth in the economy and changes in ?xed income payments by the State?. - The Committee recommends that the deferral income threshold should be increased ?om ?15,000 to ?18,000 for a single person, and from ?25,000 to ?30,000 for a couple, in line with the recommendations set out in the LPT Review Group Report. Page 10 of 10 Local Property Tax Next Steps Commitment To bring forward legislation for the LPT on the basis of fairness and that most homeowners will face no increase. To bring new homes, which are currently exempt from the LPT, into the taxation system, and that All money collected locally will be retained within the county. This is to be done on the basis that that those counties with a lower LPT base are adjusted via an annual national equalisation fund paid from the Exchequer. The Report of the interdepartmental Review Group (April 2019) had not found it possible to deliver on the maintenance of the relative stability objective for all taxpayers against a background of significant, but geographically uneven, increases in residential property prices levels. The valuation date was deferred from 1St November 2019 to 1St November 2020 to allow time for further consultation including with the Budgetary Oversight Committee. ldeally amending LPT legislation would have been enacted in the early part of 2020 to enable Revenue to make the necessary preparations in good time. However, the protracted nature of the Government formation process following the General Election on 8 February has delayed decision making in relation to the future of the LPT. Moreover, the emergency has introduced significant volatility into the residential property market creating uncertainties as to whether 1 November 2020 is an appropriate point at which to determine property values. Crucially, on a practical level it is not feasible to pursue full revaluation for 2021 in the time remaining,- therefore the valuation date must be postponed until 1 November 2021. This will require legislation, a Ministerial Order to defer the date followed by an amending Bill to provide for full revaluation to be enacted early next year. In relation to homes currently not in the LPT system, there are two categories of properties under this heading. The first category comprises those properties that are exempt from LPT under sections 8 and 9 of the 2012 Act (purchased between 1 January 2013 and 31 December 2013 and unsold trading stock of builders/developers) - ?exempt properties'. The second category are properties built or rendered habitable since 1 May 2013 which do not come within the ambit of LPT 'excluded properties'. . The exempt cohort amounts to around 23,000 properties ase on num er of these exemptions at the end of 2019. Based on returns filed by the owners ofsuch exempt properties, Revenue estimates these properties could yield about ?6.5 million per annum. Based on Stamp Duty records and other information, Revenue estimates the cohort of properties built since 1 May 2013 that are not encompassed by the LPT legislation may number approximately 80,000. At 2013 average property price levels, Revenue estimates there could be an additional approximately ?25 million in LPT yield from these properties per annum. Therefore, in order to progress this issue, it is proposed to introduce a Ministerial Order to defer the valuation date, to be followed by an amending Bill in early 2021 for provide for redesign of the Tax, widening the base to bring exempt and excluded properties into scope, and full revaluation. This would provide the time and space within which to consider the challenging question of what the basis for calculating LPT liabilities should be into the future. As well an opportunity to consider fully further issues arising from recommendations ofthe 2019 LPT Review and policy issues raised by Government partners, etc. immediate next steps would then involve: Preparation and signature the necessary Order under section 13 ofthe LPT Act to defer the valuation date to 1 November 2021, and (ii) Bringing a Memorandum for the Information of the Government in relation to the deferral of the valuation date to 1 November 2021 and the proposed preparation of a comprehensive LPT amendment Bill for enactment in early 2021. Draft Press Release Minister for Finance announces deferral of revaluation date for Local Property Tax (LPT) to 1 November 2021 The Minister for Finance, Paschal Donohue TD briefed his government colleagues today on his decision to defer the valuation date for Local Property Tax (LPT) from 1St November 2020 to 15t November 2021. This decision means that taxpayers will not be faced with increased LPT bills for 2021. The deferral of the valuation date will be given effect by a ministerial order under the Finance (Local Property Tax) Act 2012, as amended. The Minister will advance legislative proposals early in 2021 to implement the commitments in the Programme for Government in relation to LPT, which are a. To bring forward legislation for the LPT on the basis of fairness and that most homeowners will face no increase. b. To bring new homes, which are currently exempt from the LPT, into the taxation system, and that c. All money collected locally will be retained within the county. This is to be done on the basis that that those counties with a lower LPT base are adjusted via an annual national equalisation fund paid from the Exchequer. Commenting on the decision Minister Donahue said: ?In taking almost five months to conclude, the process toform a new Government took longer than any of us would have anticipated. Our initial focus and priority has been on dealing with the impact of the 9 pandemic. I am advised that there is insu?icient time for Revenue to introduce significant changes to the LPT regime before the valuation date of 1? November 2020. I am also mindful that the 0 9 pandemic has introduced volatility into the residential property market and I have therefore decided to defer the valuation date from 1 st November 2020 to 1st November 2021. With this new valuation date, there will be no change in LPT liabilities until 2022 at the earliest 1 will be bringing forward proposals for primary legislation to implement the Programme for Government commitments on LPT in early 2021. These proposals will be designed to ensure fairness and that most homeowners will face no increase in their LPT liabilities. They will also bring new homes, which are currently exempt from the LPT or outside of the tax, into the taxation system. I will also seek to promote the other policy objectives that I consider should underpin the tax i.e. protecting the overall LPT yield; maintaining the tax base with a small number of exemptions and upholding the progressivity of the tax. Background Following a review of the LPT in 2015 by Dr Don Thornhill the previous Minister for Finance proposed to Government that the revaluation date for the LPT be postponed ?om November 2016 to November 2019. This meant that home owners continued to have their homes valued for LPT purposes on the basis of their May 2013 declared valuation and so were not faced with signi?cant increases in their LPT in 2017 and 2018 and 2019 as a result of increased property values. Minister Donohue initiated a further review of the LPT which was completed by the Department of Finance in conjunction with the Departments of the Taoiseach, Public Expenditure Reform and Housing, Planning Local Government and the Revenue Commissioners. The ?ndings and recommendations of the 2019 Review are summarised in the attachment. The valuation date was deferred from 1St November 2019 to 15? November 2020 under the Finance (Local Property Tax) Act 2012 (Section 13(3)) Order 2019 No. 166/2019]. Notes for Editors The valuation date is the date on which property owners are required to establish the market value of their properties. These market values form the basis for calculation of property owners? LPT liabilities. Legislative changes in 2015 and 2019 retained the valuation date of 1 May 2013 for an additional four years up to and including the year 2019 and provided for the next valuation date to be November 2020 instead of November 2016. The deferral of the revaluation date to November 2021 means that taxpayers will not see changes in their LPT liabilities for 2021. Attachment Summary of the Recommendations of the 2019 Inter-departmental Review of the LPT Revaluation The Review Group recommends that ideally revaluation should take place as planned on 1 November 2019 if Government is satis?ed it provides modest and affordable adjustments. The Group consider that further delays in revaluation may present risks to the long term sustainability of the tax. The Review Group recommends that valuations should be reviewed every four years. This provides a balance between timely capture of changes in the property market and reducing compliance and administration costs. It would facilitate the regular addition of new properties into the LPT charge. Timing of LAF Notification The Review Group agreed that the Local Adjustment Factor (LAF) noti?cation date to the Revenue Commissioners should occur in mid-October except in the year that property valuations fall due for revaluation. In that instance the LAF noti?cation date would be 31 August at the latest, to facilitate Revenue?s processing of the required notification procedure. Scenarios The Review Group agreed that a no policy change scenario should be presented along with five alternative methods of calculation. No policy change means that the current central rate would apply to the market value of all residential properties on 1 November 2019. This would produce an estimated yield of ?729 million. 7 The Review Group recommended that a target annual yield should be identi?ed in advance for purposes of scenario analysis. This provides a consistent means of evaluating the suggested scenarios for a broad range of taxpayers. For the purpose of the review, the Review Group targeted a yield of broadly ?500 million, a modest increase on the 2018 yield of ?482m and recent years. On this basis, the Review Group considered ?ve different approaches to the calculation of the LPT liabilities in respect of the 20 existing valuation bands. 0 Scenario 1 is based on a central LPT rate for all properties and produces a yield of ?500 million. The rate is 0.114 per cent for all valuation bands and all local authorities, down from the current 0.18 percent. 0 Scenario 2 is based on targeting individual local authority yields equal to the expected current yield for 2018 without the Local Adjustment Factor (LAF). The rate in each local authority is adjusted to meet these targets following estimated valuation increases. In Scenario 2, the LPT rates vary between 0.085 per cent and 0.144 per cent (current rate: 0.18 percent). Scenario 3 has been modelled on the basis of a different LPT rate for each valuation 0 band (increasing with each band) and again set to collect the overall target of ?500 million (with no LAF). In Scenario 3, the LPT rate ranges from 0.108 per cent in band 1, and increases in increments of 0.001 per cent to 0.126 per cent in band 19 (current rate: 0.18 percent). 0 Scenario 4 is a variation of scenario 3 with one adjustment. Based on Scenario 3, and with the same target of?500 million, it maintains the ?rst valuation band at a liability of ?90. The rationale for the floor of ?90 is that there are minimum costs incurred by local authorities for the services which they supply to each household. This floor generates an additional ?13 million, and impacts by reducing rates for bands other than the ?rst band. 0 Scenario 5 increases all of the valuation band thresholds by 80%. It assumes a rate reduction of 80% to 0.10% (current rate: 0.18 percent). All of the scenarios involve ?winners? (reduced liability) and ?losers? (increased liability) which may be different in each scenario. The Review Group considered therefore that it must be a matter for Government as to which, if any, of the options provides for moderate and affordable adjustments. This may impact on the revaluation date. The Review Group recommends that the LPT rate applied to all properties exceeding ?1million in market value should remain at 0.25 per cent with one exception. Scenario 5 is based on broader bands up to (=31 .8 million and if this scenario is chosen, then the Review Group recommend that the 0.25 per cent rate should apply to properties above the ?1.8 million valuation. Equalisation and Local Retention The Review Group recommends 0 That the equalisation contribution from local authorities, equivalent to 20 per cent of their LPT yield, be discontinued and that all local authorities retain 100 per cent of the LPT that is collected in their own local authority area. While this will help to strengthen transparency and accountability it is acknowledged that it may result in an additional cost to the Exchequer in the absence of other changes. 0 The Review Group recommends that to the greatest extent possible the local retention change should be Exchequer neutral with baseline shortfalls being offset by a rebalancing of programme funding (including self-funding or other compensating mechanisms). DPER and would need to work bilaterally on options to mitigate the impact on the Exchequer of the proposed 100% retention in the context of the Estimates process. 0 The Review Group recommends that the LAF be amended to permit upward only adjustments to a maximum of 15 per cent. Exemptions The Review Group recommends: That all of the exemptions should be reviewed regularly and kept to a minimum in order to keep the base broad and minimise the impact on those paying the tax. That exempted properties constituting the unsold trading stock of builders/developers in May 2013, or such properties sold by them (while remaining unused) in the period 1 January 2013 to 31 October 2019, should be liable for LPT from 1 November 2019. That exempted properties purchased by ?first?time buyers? in the period between 1 January 2013 and 31 December 2013 for use as their sole or main residence should be liable for LPT from 1 November 2019. That all new residential properties built between valuation dates should be retrospectively valued as if they had existed on the preceding valuation date. Deferrals The Review Group recommends: That most deferrals, such as the deferral option for those taxpayers with lower incomes, should be maintained and some thresholds should be increased. That the income thresholds for LPT deferrals be reviewed regularly by reference to .movements in the CPI, (ii) wage growth in the economy, and changes in ?xed income payments by the State. From the next valuation date, the Review Group recommends that the deferral thresholds be increased to ?18,000 for a single owner and ?30,000 for a couple That, as the number of LPT liable persons qualifying for the mortgage interest deferral would reduce over time as the mortgages involved matured, and that the LPT revenue deferred would taper, accordingly the deferral option on the current basis should be retained. That relief for owner-occupiers aged over 80 years with a long-term illness who are living alone (as recommended by Thornhill (2015)), would be more appropriately considered in the context of the social welfare code rather than through further tax reliefs. Such individuals may also be able to bene?t from other reliefs including the ability to defer their LPT liability based on the income thresholds. That the interest rate which applies to LPT deferrals should be retained at 4 per cent. Other Issues On balance, the Review Group does not support deductibility of LPT for landlords. The Review Group does not recommend the deductibility of management fees in the calculation of LPT. The Review Group consider some of the recommendations are mutually reinforcing and should be considered and sequenced together. For example the proposed thresholds increases should be done at the same time as the revaluation as they are related in terms of economic growth, wage growth and in?ation. Speaking Points for Government Meeting of 15 September 2019 LPT: Deferral of Revaluation and Next Steps