The Local Property Tax is the best way to tie taxation to the provision of local services, an expert has said.
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There are 31 local authorities in Ireland.
They provide hundreds of services ranging from roads, planning, housing and economic and community development.
One of the many issues they consider is the Local Property Tax (LPT), which each local authority can increase or decrease by up to 15% from the basic rate each year.
Financial analyst Karl Deeter from Irish Mortgage Brokers said local authorities hold big sway when it comes to the LPT.
"Local Property Tax can be changed by local authorities via their councillors who can push for a 'Local Adjustment Factor' to curry favour with voters," he said.
"Then the same people complain about a lack of funding for things the very next day.
"All Dublin local authorities opted for a 15% reduction except Fingal, who opted for a lower reduction of 7.5%."
Composite image shows house building in Dublin in April 2021, and Revenue offices in Galway in April 2019. Image: Sir Anto / Alamy Stock Photo/ Ian Pilbeam / Alamy Stock PhotoMr Deeter said he believes it has become a political issue.
"Property rose in value for years but this wasn't reflected in the tax which stayed stagnant at a 2013 valuation for eight years," he said.
"Then when it should rise some local authorities reduced the rate - this is entirely political and deprives residents, because with less money they then give you less services.
"In 2022 Dublin City alone lost €12m by doing this".
Local Government Fund
Mr Deeter said local authorities do not have direct access to the tax.
"While it's called a 'Local Property Tax', we still have the issue of central Government needing to emasculate local government and control them so it doesn't go directly to the local authority," he said.
"Instead it goes to the 'Local Government Fund' then the local authority has to apply to get their own money from that fund.
"So you often have situations where you think a tax is for something and it isn't.
"For instance, motor tax used to pay for roads - that's not always the case - at one point it was taken for bailout payments.
"Cities pay for rural areas in a big way".
'A policy failure'
Mr Deeter said he believes the funding approach needs to change.
"People who live in rural areas should pay for their locality and people in the city should pay for theirs; in the same way I wouldn't walk into a shop and ask another person to pay for my groceries," he said.
"But because nobody actually gets into this deeply and it isn't well publicised it persists and is a policy failure that won't go away."
Mr Deeter said he believes the LPT is a fair system overall for local services.
"A point that needs to be made is that Local Property Tax is in essence a 'wealth tax' and the best way to tie taxation to the provision of local services as it does in many countries around the world," he said.
"The rate in Ireland is highly affordable; a house worth €600,000 pays only €585 in LPT a year.
"By comparison a house like that anywhere in the US would attract a rate just above 1% which would mean a tax bill of $6,000.
"Equally, in Northern Ireland where home values are lower you would have a Rates bill is on average £1,180 in property tax a year."
Mr Deeter added that while the system is good "we should have lower income tax to balance this".
