Minister for Finance Opening Statement - Finance (Local Property Tax and Other Provisions) (Amendment) Bill 2025: Second Stage

I move: “That the Bill be now read a second time.”

The Local Property Tax is due for revaluation on 1 November of this year. I am introducing this Bill to make a number of important changes to the structure of the Local Property Tax so that they can take effect from this date, in line with the commitment given in the Programme for Government.

The Local Property Tax (LPT) was introduced in the Finance (Local Property Tax) Act 2012. The design of LPT was considered in 2012 by an Interdepartmental Group chaired by Dr Don Thornhill. LPT became payable in 2013 and is collected by the Revenue Commissioners. This was the largest extension of self-assessment in the history of the State.

LPT is now a well embedded part of our tax system. It has broadened our tax base, providing a sustainable source of funding to our local authorities. It has yielded approximately €6 billion for local services since its introduction in 2013. This year will mark the second revaluation of LPT since it was introduced. The first revaluation occurred in 2021.

In July 2021, the Finance (Local Property Tax) (Amendment) Act 2021 was enacted and made a number of important changes to LPT. These included a revised method for calculating LPT liabilities, regular revaluations and the bringing of new properties within the LPT charge. It ceased certain exemptions increased income thresholds and decreased the interest rate for deferrals and included a number of administrative and technical reforms.

These changes had a significant impact. More properties were brought into the scope of the tax which broadens the base. The 2021 Act provides for the inclusion of new properties for LPT purposes on 1 November each year. LPT yield increased following the 2021 revaluation. In 2020, there was €480 million collected in LPT. This increased to €521 million in 2023 – an increase of 9 per cent. The Act also provided that the next revaluation would take place on 1 November 2025.

According to the Central Statistics Office, property prices have increased by more than 20 per cent nationally since November 2021. The largest growth in property values has been experienced in Border, Midland and Western regions, with average inflation of 33 per cent recorded. Average property price growth in the Dublin, for all types of residential properties, was 18 per cent.

The Programme for Government commitment in relation to LPT was to “Ensure fairness and stability in Local Property Tax payments and continue to retain revenue collected locally in the same local authority.” Analysis from the Revenue Statistics Branch has shown the expected yield from LPT under 2021 valuations for this year would be €566 million. If revaluation of properties were to proceed in November 2025 without any amendments to the bands or rates, the yield from LPT would increase by 25 per cent. Approximately 70 per cent of properties would move up at least one band.

In light of the Programme for Government commitment, and to avoid a significant increase in LPT liabilities for householders, this Bill proposes to the amend the charging structure for LPT, and to make a number of other important administrative and technical amendments.

Section 7 is the most noteworthy aspect of the Bill, which is the provision to amend the charging structure of LPT. The new approach maintains the number of bands at 20, with all bands being expanded by 20 per cent. Revenue modelling predicts that 96 per cent of homeowners will remain in their existing band. The basic rate of LPT is to be decreased from 0.1029 per cent to 0.0906 per cent, which will apply on properties valued up to €1.26 million. This will result in a small increase in base LPT charges, as the LPT charge is calculated based on the midpoint of the valuation band and midpoints increase as a result of band widening.

The fixed charges for Bands 1 and 2 will be increased: from €90 to €95 for Band 1 and from €225 to €235 for Band 2.

Properties that are valued between €1.26 million and €2.1 million will be charged at 0.0906 per cent on the first €1.26 million, with a subsequent 0.25 per cent on the balance of midpoint value in excess of €1.26 million. Properties in Band 20 will be charged on individual property values as before, which is to say 0.0906 per cent on the first €1.26 million, 0.25 per cent between €1.26 million and €2.1 million and 0.3 per cent on the balance.

The changes that we are making are fair and progressive. LPT charges will increase by 5 or 6 per cent for homes valued under €1.26 million. Homes valued between €1.26 million and €2.1 million will see their base LPT charges increase by 7 to 14 per cent. These increases are modest, but are expected to yield an additional €45 million in revenue, which will provide important funding to provide local services.

Section 10 provides for an increase in the income thresholds for LPT deferrals to be increased to €25,000 for a single person and €40,000 for a couple. It also provides that the income threshold for a partial deferral be increased to €40,000 for a single person and €55,000 for a couple. The 2019 Interdepartmental Review of LPT recommended these income thresholds be reviewed regularly with reference to movements in the Consumer Price Index, wage growth in the economy and changes in fixed income payments by State. These changes are being made considering all of these factors and the high levels of inflation seen in recent years.

Section 8 proposes a change to the Local Adjustment Factor. Local authorities have discretion to adjust the LPT rate collected in their areas up or down by 15 per cent. The Bill as published would allow local authorities to vary the LPT upward by up to 25 per cent from the year 2026 onwards. This will provide local authorities greater flexibility in relation to the LPT yield for their respective areas.

I wish to highlight at this stage that I intend to bring forward an amendment to this section at Committee Stage of this Bill. The Minister for Housing, Local Government and Heritage has indicated to me there would be significant administrative challenges for local authorities if the change in the Local Adjustment Factor (LAF) were to come into effect for 2026.

The amendment I am proposing will defer the introduction of this increase to 25 per cent by one year, so that it will take effect in 2027.

In a revaluation year, local authorities are required to notify Revenue of their LAF by 31 August. As Councillors do not meet in August, this means these decisions must be made by the end of July. Before the LAF meeting, local authorities are required to hold a public consultation of at least 30 days, prepare a report on this consultation and a financial report to elected members a week before the LAF meeting. Given the likelihood of when this Bill may be enacted, there would not be enough time available for local authorities to undertake the public consultation required on the increase to 25 per cent, hold the necessary meetings and notify Revenue with the time now available.

In addition, many local authorities have already made their LAF decision for next under the current provision of a maximum LAF increase of plus 15 per cent.

In light of the time now available, it is now not possible for them to revoke the previous decision made and conclude a new LAF process. It is for these reasons, after consultation with Minister Browne, I intend to seek a deferral of this provision by one year at Committee Stage.

I also wish to highlight a second amendment that I intend to introduce at Committee Stage of a technical nature. This is regarding the partial relief on LPT for a property adapted for use by a person with a disability.

The Finance (Local Property Tax) Act 2012 provides for a reduction of €50,000 in the chargeable value of a property for homes that have been adapted in this manner. The €50,000 figure is equivalent to the difference in LPT valuation bands between 2013 and 2021.

The policy objective of this, is to ensure that disabled homeowners, whose properties have realised an increase in value due to necessary adaptations having been made, are not liable to a higher LPT charge as a result of those necessary adaptations.

When the valuation bands were widened in 2021 to €87,500, the 2021 LPT Act did not introduce a corresponding amendment to the 2012 LPT Act due to a drafting oversight at the time.

When this was identified, my Department requested Revenue to allow a reduction in the chargeable value of €87,500 on an administrative basis, to ensure a reduction of one valuation band for affected taxpayers. This has been the practice since then.

As part this LPT Bill, the valuation bands will be widened to €105,000. This second amendment I am proposing will reduce the chargeable value of a property by this amount for homes that have been adapted in this manner and where the conditions are met.

This will ensure the administrative practice that has been place since 2021 will be put on a legislative footing. It will also ensure that homeowners with a disability who have had their homes adapted to make them more suited to them and whose homes are worth more, as a result of this, can avail of a reduced valuation band and ultimately pay the LPT charge that would be due if they had not had to make necessary adaptions.

Returning to the main provisions of this Bill, Sections 4, 5 and 11 relate to the 6-year exemption from LPT for homes that have been damaged by the use of defective concrete blocks.

This 6-year exemption currently only applies to properties in Donegal and Mayo as provided for the in the Dwellings Damaged by the Use of Defective Concrete Blocks in Construction (Remediation) (Financial Assistance) Regulations 2020. However, this scheme has been extended to Claire, Limerick and Sligo since LPT was last amended in 2021.

These sections will ensure that homes in these additional counties that are eligible for the scheme are also eligible for this 6-year LPT exemption.

Section 9 allows Eircodes to become a mandatory field in LPT returns. This will help in eliminating errors such as written correspondence issuing to the wrong property as a result of identical or similar addresses.

Section 6 proposes to set the duration of the upcoming valuation period to five years, commencing in 2026 and ending in 2030, with future valuation periods also lasting five years. This will help provide certainty to homeowners on their LPT charges, while ensuring that properties continue to be revalued on a frequent basis. The next revaluation will therefore occur on 1 November 2030.

The Bill also contains two sections that relate to other taxation matters.

Finance (No.2) Act 2023 introduced defensive measures in relation to outbound payments of interest, royalties, and distributions (including dividends) to jurisdictions on the EU list of non-cooperative jurisdictions for tax purposes, and no-tax and zero-tax jurisdictions to counter aggressive tax planning.

The passage of this legislation was also listed as one of four tax-related reform milestones in Ireland’s National Recovery and Resilience Plan (NRRP) and was the final to be completed.

My Department subsequently notified the Commission of the implementation of this reform.

During the Commission's preliminary review of the legislation, a potential avoidance issue arose and an amendment was identified that would broaden the criteria whereby entities are considered to be associated and, as such, within scope of the defensive measures.

Section 12 of the Bill provides for a technical amendment which extends the definition of ‘associated entities’ to include entities which are associated by reference to the ownership or control by the same individuals, or individuals connected with those individuals, within the meaning of section 10 TCA 1997.

This update to the legislation will ensure it operates as intended and that future NNRP funding requests won’t be hindered.

Deputies will recall that I introduced a Financial Resolution in April of this year to extend the temporary reduction in VAT on gas and electricity. This measure had been due to expire on 30 April and revert to the original 13.5 per cent VAT rate from 1 May.

The Financial Resolution extended the measure to 31 October this year.

This Bill provides the required legislative basis to underpin the Financial Resolution.

As previously outlined the estimated cost of the extension is €85m.

I will handle all VAT-related issues after that point as part of the normal budget process.

It is important for this Bill to be enacted before the summer recess. This is to ensure Revenue has enough time to implement the necessary IT changes to support the changes this Bill is making. It is also to ensure Revenue has enough time to contact the approximately 1.4 million property owners to advise them of their obligations in respect of evaluation.

In light of the tight timelines for passing this Bill, I wrote to the Chair of the Joint Oireachtas Committee on Finance, Public Expenditure, Public Service Reform and Digitalisation, and the Taoiseach to ask for a waiver of pre-legislative scrutiny for this Bill. I thank the Chair for granting this waiver.

Together with my Government colleagues, I sought to deliver on our programme for Government commitments to ensure fairness and stability in local property tax, LPT, payments.

By asking property owners to pay a small amount more, we project this will deliver an additional €45 million in yield for LPT which will go towards local services. It will give homeowners and local authorities stability and certainty regarding LPT for the next five years.

I thank the Deputies for their attention to this Bill and I look forward to hearing their contributions across the evening.

ENDS