LPT is up for review. When it was introduced 6 years ago, it was set at 0.18% of the value of your property. It didn’t matter whether you had a mortgage on the property – you were going to be charged on the gross value of your home. Given that it took no account for your ability to pay, LPT included an option to defer or delay your payment until your home was sold. But the cost of this deferral was a hefty 4% interest per annum on the LPT charge. 3 years ago, the property values were supposed to be reset to current values. That was pushed back a further 3 years – and that’s why we have a review due now.
SocDem Proposed Changes to LPT
The Social Democrats advocates a major reform of the current LPT. Those who cannot pay can defer, delaying paying the tax until financial circumstances improve or the home is sold. But Revenue charges an interest rate of 4% on these deferred charges – effectively an extra tax on poverty. We want to reduce this interest rate to as close to zero as possible – so why not select the ECB rate, currently set at 0%.
Equalisation of LPT is intended to transfer LPT tax receipts from higher-income Councils like Dun Laoghaire Rathdown to those with lower incomes. “It is a convoluted and obscure system” says Catherine Murphy TD, co-leader of the Social Democrats, “and such confusion is a great way of hiding what is essentially an unfair system”. We want to see more “local” receipts of LPT to stay local.
What about more change?
I am advocating for further major reform of LPT that involves changing it from a tax on your home’s gross value to a charge on your home’s nett value. This would mean that those in negative equity would pay zero. Those who only bought their home in the last 10 years or less would pay very, very little – simply because their home’s value, less their outstanding mortgage, gives a very small nett asset value on which the LPT charge would apply.
This would, in effect, change the LPT from being a tax on your home’s debt to being a tax on your home’s nett wealth.
I also believe that the valuation should be done annually, and not delayed for a 3 year period. Most people have a good idea of what their home is worth, based on sales on homes close to them. Keep it simple, without having to know what valuation date to use.
The effect of these changes
These changes would made LPT more like a proper Wealth Tax, even if it only applies to your property wealth. It would mean that those who have nett property assets would pay a charge on those assets. And if you couldn’t pay due to lack of income, then you could defer payment of the tax until you can.