Property Tax – Decisions to be made by Local Authorities in September

Property Tax Comparisson

The issue of increasing or decreasing property tax will be decision that will have to be taken by Councillors this coming September. Essentially this is to comply with a request received from the Revenue Commissioners who have set the 30th September as the final date in which a decision is made.

The excel spreadsheet contained in the above link details the breakdown of the estimated property tax revenue per Council. It is taken from a Sunday Business Post report (15th June) which showed the half year intake. I have increased it to reflect an estimate of a full year. I have added a column showing a scenario where a 15% cut is introduced. Even with the full 15% cut it still represents a healthy additional income for many Councils.

However my worry is that the Department of the Environment, Community and Local Government at the direction of the Minister may seek to impose additional liabilities on Fingal County Council. In other words could Fingal be made pay for additional services that other local authorities will have funded by Central government. I know this is something that all Councils especially those who will see a large increase in income are also concerned about. Councillors will need to know this before any decision is taken at the September meeting.

When compared to other local authorities from these figures it would seem that Fingal is better placed financially than many other councils for example Leitrim gets eight times as much in government funding as it collects in property tax. 20% of the property tax will be shared nationally in a process known as equalization essentially this means that counties with weaker revenue streams can avail of the national funding pot. Council funding has been cut significantly since 2008, it is down 40% since 2008.  The number of staff employed by local authorities has dropped by almost 9,000 since 2008 bringing the current staffing levels to 28,000.

The debate on property tax will also influence a decision on commercial rates, understandably the business community and in particular the small business community want to see a rate cut. With property tax revenue now part of the annual budget this pressure will increase. For 2014 commercial rate income in Fingal was budgeted at €118.26m and that the rate has not increased since 2010. However I think the view held that property tax can now be used as a means to decrease commercial rates is a little wide of the mark. The spreadsheet shows that the estimated income from property tax is €28,986,ooo. So the gap between commercial rates and property tax income is substantial.

However I do take on board the view that a cut in commercial rates could increase employment in the county and that is the number one issue in Dublin and beyond. Also could a cut to commercial rates be limited to small businesses so for example the likes of a multinational making significant profits would still pay the same as now but a small retailer with say four employees would benefit from a cut. The other possibility to consider is to have a temporary rate cut say for either 12 or 24 months. We are told that a commercial rate cut will generate more employment and more new business. Why not put that to the test? If it works then make the cut permanent, if not then the issue could be revisited.

Another cost that Councils across Ireland will need to budget for is lump and pensions for retiring staff. The Haddington Road agreement on public sector pay further reduced salaries over €65,000. Those cuts will be applied to pensions from June 2015 so senior staff working in the Council may look to retire before this date so as to avoid the cut. The liability rests with each local authority.