The Cabinet has agreed that owners of new homes built since 2013 will now have to pay Local Property Tax.
It follows a decision taken at a meeting to finalise the new €3.5 billion Economic Recovery Plan.
Taoiseach Micheál Martin, alongside Tánaiste Leo Varadkar and Green Party leader Eamon Ryan announced the Government’s plan, which lays out a road map for the economy as it emerges from the impact of Covid-19.
Another change to have been agreed by the Government will see about 33% of people who already pay property tax having their tax bill increased by around €100 every year.
It is estimated that around 3% of home owners will see a bigger increase.
Around 60% of property owners will see no increase.
Mr Martin said the majority of people will not be paying more property tax.
Speaking on RTÉ’s Six One, he said the objective of the plan, to be announced by Minister for Finance Paschal Donohoe tomorrow, will be fair and affordable.
He said that to continue putting off any recalibration of the tax would be more difficult when inflationary pressures were considered.
Tánaiste Leo Varadkar said Local Property Tax is used to fund local services such as social housing and estate maintenance.
“We’re going to do exactly what we said we would do in the Programme for Government. The 100,000 or so people who have been paying nothing because they bought a new house after 2013 will now have to pay something. I think that’s only fair, I think most people would agree with that,” he said.
“For people who’ve been paying up until now, we’re going to increase the bands and lower the rate and what that means is 60% of people will pay the same or less, 40% will pay more but in most cases that’s about €90 extra per year.”
He told RTÉ’s Prime Time that 100% of that money will stay in that community and that county.
Mr Varadkar said there would still be an equalisation fund for less well of counties but that would come from exchequer funding.
He said there are deferral options if people are unable to pay due to certain circumstances but “this is a tax on property” and a “tax on assets”.
“We have to be honest about this, we have borrowed 36 thousand million euro since the pandemic began. I stand over this, it was the right thing to do, we had to do it. It can’t go on forever,” he added.
Responding to a question on Sinn Féin’s opposition to the property tax, he said parties promising more spending and abolishing taxes at the same time were “charlatans”.
Sinn Féin’s housing spokesperson Eoin Ó Broin said the property tax should be abolished, rather than expanded to include new homes built since 2013.
He said the property tax was not progressive and there was a more equitable way to approach things.
Mr Ó Broin also called for a radical rethink by the Government on its housing strategy, saying the recent homelessness figures suggest that the lifting of the ban on rent increases is already indicating a negative impact.
Speaking on RTÉ’s News at One, Minister Donohoe said all homes will be reevaluated in November this year as part of changes to local property tax.
He said: “We are in a situation where the local property tax base has been broadly unchanged since 2013 and homes that were built since that point have not been paying local property tax.
“What we will do is we will have a new revaluation point in November of this year, so all homes will be valued at the same point in time.”
Mr Donohoe said the revaluation will be calculated “in such a way that recognises the affordability challenges that many families face at the moment”.
He said that local property tax changes will raise approximately €560 million compared to the current €480-490 million being raised.
“Most of that additional yield will be generated by new homes paying local property tax,” he added.
In other measures, the Pandemic Unemployment Payment (PUP) will continue at its current level until September, when gradual reductions will begin.
Mr Donohoe said that the PUP was brought in at the height of the public health emergency and is being extended to February, albeit at a lower rate, and by the time it is phased out, it will have been in effect for nearly two years.
He said “as things begin to change, we have to look at how we can begin to get our country back to work and how very carefully and gradually we can phase out and change programmes like this”.
The 9% VAT rate for the tourism sector will also remain until September 2022 as part of the plan.
The Government has said it will extend the main financial supports for firms hit hard by the pandemic, including wage subsidies, grants, tax debt warehousing and a commercial rates waiver.
The wage subsidy scheme, which is supporting some 300,000 jobs, will be extended until the end of the year and be available to any business whose turnover is down 30% or more compared with 2019.
Mr Donohoe added that the wage subsidy scheme’s extension would allow employers to hire people which will, in turn, lessen the numbers who are reliant on the PUP.
He said with the Employment Wage Subsidy Scheme, the extension of which he said is worth around €2.4 billion, they will be looking at some measures to allow employers to make a bigger contribution to that scheme in the final quarter of 2021.
New grants will also be available to firms whose turnover is still down by 75% on 2019 levels from September, it added.
A new additional business support scheme – the Business Resumption Support Scheme (BRSS) – will also be introduced for businesses with reduced turnover as a result of public health restrictions to be implemented in September 2021.
The Government also detailed today how it will spend its €915m portion of the EU’s €750 billion fund to help member states recover from the pandemic.
The money will be focused on the country’s green transition, including a low-cost loan scheme to retrofit homes and in retraining 100,000 people by 2025.
The Central Bank has estimated this many people could lose their jobs permanently due to the pandemic.