Why is LPT confined to property owners only?

Spanish Eyes

Surely everyone uses local services. So why do renters not have to pay a contribution?

Just wondered.

Pkiernan

Spanish Eyes wrote: »

Surely everyone uses local services. So why do renters not have to pay a contribution?

Just wondered.

Because that would go against the far left ethos that landlords are evil.

dudara

It can't be recharged explicitly to tenants. Landlords therefore factor it into the cost of rent. So in theory, the renter is paying, just indirectly.

Yourself isit

Because it's a property tax not a habitation tax. France has both.

Spanish Eyes

Rents are very high in London for example, but the tenants have to pay their own Council Tax.

Pkiernan

dudara wrote: »

It can't be recharged explicitly to tenants. Landlords therefore factor it into the cost of rent. So in theory, the renter is paying, just indirectly.

Except you can't factor it in in an RPZ.
Local councils can raise the LPT 15% next year if they want.

Spanish Eyes

Yourself isit wrote: »

Because it's a property tax not a habitation tax. France has both.

Yes, but the Fonciere tax is the property owners tax, the Habitation tax is the renters or occupiers. Pay both if property is not rented. Good move.

Spanish Eyes

Spanish Eyes wrote: »

Rents are very high in London for example, but the tenants have to pay their own Council Tax.

And Dublin is on the verge of overtaking London for property prices. You want to make it more difficult for people to rent homes? The 40% income tax I pay, plus the 23.5% VAT I pay on everything isn't enough?

4ensic15

It is easier for the Revenue to secure the money against the owner and the property. Tenants are transient and may be untraceable when the money is due. The house can't be sold until it is paid so the Revenue always collect when the owner is liable.

Spanish Eyes

There doesn't seem to be a big problem with collecting Council Tax in UK. Renters pay it despite the high rents there.

They get all the services too. Like tenants here do without any cost to them.

Grassey

Spanish Eyes wrote:

They get all the services too. Like tenants here do without any cost to them.

What services do people here get?

Spanish Eyes

Grassey wrote: »

What services do people here get?

Well if you are renting you get rubbish removal (LL pays the management company), parking, grass cutting, landscaping, maintenance of lifts etc. same thing. Renter pays nothing except market rent. Other countries have higher rents, AND a council tax to cover this.

If you own you have to pay for it all yourself.. There is no way that rent will cover that from a renter over a year for example.

I realise that LPT does not cover management fees. But at the same time the owner, not the renter has to pay LPT in addition to management fees.

Being a renter has its advantages so.

Yourself isit

Spanish Eyes wrote: »

Well if you are renting you get rubbish removal (LL pays the management company), parking, grass cutting, landscaping, maintenance of lifts etc. same thing. Renter pays nothing except market rent. Other countries have higher rents, AND a council tax to cover this.

If you own you have to pay for it all yourself.. There is no way that rent will cover that from a renter over a year for example.

I realise that LPT does not cover management fees. But at the same time the owner, not the renter has to pay LPT in addition to management fees.

Being a renter has its advantages so.

What at do you mean other countries have higher rents to cover property tax? The rent you get from anywhere is subject to market conditions.

Marcusm

Deleted User wrote: »

And Dublin is on the verge of overtaking London for property prices. You want to make it more difficult for people to rent homes? The 40% income tax I pay, plus the 23.5% VAT I pay on everything isn't enough?

You're paying 0.5% more VAT than the rest of us!

Donal55

Spanish Eyes wrote: »

Well if you are renting you get rubbish removal (LL pays the management company), parking, grass cutting, landscaping, maintenance of lifts etc. same thing. Renter pays nothing except market rent. Other countries have higher rents, AND a council tax to cover this.

If you own you have to pay for it all yourself.. There is no way that rent will cover that from a renter over a year for example.

I realise that LPT does not cover management fees. But at the same time the owner, not the renter has to pay LPT in addition to management fees.

Being a renter has its advantages so.

You do know that not everyone lives in management run apt complexes??

Marcusm

Marcusm wrote: »

You're paying 0.5% more VAT than the rest of us!

My mistake, but you get the point.

Well if you are renting you get rubbish removal (LL pays the management company), parking, grass cutting, landscaping, maintenance of lifts etc.

All of these things are services provided by the management company, not the council. Only in my current place of rent do I not have to pay for refuse collection. Everywhere else I have lived in Ireland I had to pay for refuse, and in two places I had to cut the grass myself(Pain in the hole).

So, what services does the renter get/consume?

Mrs OBumble

Spanish Eyes wrote: »

Surely everyone uses local services. So why do renters not have to pay a contribution?

Just wondered.

We do. It's called income tax.

Where do you think that local authorities get their money from?

Graham

Mrs OBumble wrote: »

Where do you think that local authorities get their money from?

Commercial rates is the largest contributor isn't it?

E.g. DCC

Sale of goods & services, e.g. rent, parking fees: € 297.90 million
Commercial Rates: € 320.67 million
Government Grants: € 198.86 million
Local Property Tax/GPG: € 23.07 million

Bob24

Yourself isit wrote: »

Because it's a property tax not a habitation tax. France has both.

Exactly what I was going to answer ;-)

It really is a matter of what the spirit of the tax is: taxing property ownership to fluidity the property market or taxing residents to have them directly fund the specific local services they benefit from.

At the end of the day though LPT is just an extra expense for a landlord on top of management fees, maintenance cost, insurance, etc, and like any of these it will get built into the rent which means unless the property is not rented the cost will be passed to a tenant (I can already hear comments saying rents are determined by offer and demand, but realistically the cost structure to run the property also plays a role in pushing up rent prices as a significant increase in running costs will deter landlords and reduce the offer side of the equation).

murphaph

Pkiernan wrote: »

Except you can't factor it in in an RPZ.
Local councils can raise the LPT 15% next year if they want.

Point very well made. In Germany (where I'm also a LL) fees that are beyond the LL's control are not considered rent at all and are handled separately. The LL is restricted in how much he can increase the rent similar to the RPZs in Ireland but if the city council ups bin collection charges or if servicing costs (not repair) for the lift go up that is all passed straight on to the tenant.

whomitconcerns

In London as a tenant i pay over 1600 for council tax per year and over 2k in rent per month. Ireland is still a lot cheaper. Btw the council tax as far as for my requirements only covers waste collection.

Peregrinus

Historically, property taxes were levied (in the form of local government rates) to finance the services provided by local governments, and they were levied on property owners on the basis that the services provided by local governments - roads, sewage, parks, public transport, etc - enhanced the amenity of properties, and so enhanced their value, and so should be paid for by property owners.

Obviously, if the property was let, some of that enhanced amenity would be enjoyed by the occupants, but the view was that this would then be reflected in the rent the landlord could charge for the property, and the iron law of the market would operate to apportion the cost of the property tax between landlord and tenant.

Obviously, this doesn't hold so good in a situation where rents are controlled by law, but if the controlled rent is ultimately related to or set by reference to the market rent the mechanism should operate eventually.

Also obviously, the reasoning doesn't hold so well as responsibility for various services is taken away from local governments, and is no longer funded out of property taxes - e.g. public transport, water.

Still, once the system is up and running there's an inertia against change. Plus, a tax on property and its owner is much easier to enforce/collect than a tax on what might be a transient and largely unregistered (with the state) population of tenants and licensees. So costs of administration are much lower.

In the UK, the Tories did shift from rates levied on property owners to council tax levied on occupiers, but it was hugely painful, it was widely seen as based on ideology rather than sensible policy, and it contributed to their fall from office. If anything, that example would strongly encourage other governments not to attempt the same shift.

The_Conductor

dudara wrote: »

It can't be recharged explicitly to tenants. Landlords therefore factor it into the cost of rent. So in theory, the renter is paying, just indirectly.

I get what you're saying- and I'd agree 100% with you- if it was a deductible cost for landlords- in the same manner its a deductible cost for other business types. Its not though.

Its simple revenue generating exercise- nothing more, nothing less. It has nothing whatsoever to do with whether you live in a property, or not- the property simply has to be 'habitable'. So- someone with a holiday home- effectively pays two tranches of property tax- as a cost of ownership- not as a recognition of the services they are using in either given area.

Calling it the 'local property tax' is a bit of a misnomer- the current government recognise this- and have stated they will allow a higher proportion of funds raised in any local authority area, remain in that local authority area- rather than going into a central kitty for divvying out to whoever is incapable of funding their own LA areas (normally through low population densities).

The mechanism to recognise the much lower cost of supplying services, facilities and amenities in built up areas- is reflected in the manner they can increase or reduce the charge by up to 15%. There is a lot of unhappiness that some LAs are proposing to make a 15% increase (mostly on SW/W/NW seaboard) permanent.

The most honest thing to do- would of course be a separate council/authority residence tax- you could base it on the current systems for charging/collecting council rates- but do this ontop of property tax- i.e. don't abolish property tax- use a hybrid system akin to the French system (referred to by an above poster).

I'd suggest restructuring the property tax- based on a composite of the property size and its value- rather than simply looking at the value- i.e. this would take into account that a mansion in Cavan mightn't buy you a 2 bed apartment in Lucan. Alongside a measure value- i.e. 50:50.

And then use the residence tax as the measure to actually reflect the cost of service delivery in the areas- i.e. it is cheaper to live in many areas- on a lot of different grounds- however, if it costs an improbable amount to provide services in those areas- there should be at least a recognition of this on the part of those who live there- maybe not full cost recovery- but at least a meaningful gesture.

Anyhow- the 15% up or down- and keeping up an increased proportion of the funds collected in any given area- are what we're stuck with- alongside a gradual winding down of the 'Local Government Fund Help Fund' which was used as a slush fund- paid for by local authorities on the eastern seaboard to subsidise those on the western seaboard.

It is foreseen that a vastly higher number of local authorities will bite the bullet and increase their LPT demands by the full 15%- leaving the couple of Dublin LAs and possibly Kildare/Wicklow- to decrease theirs (Louth and a few others made token reductions- just to say they made deductions- however, they're not sustainable).

Its a very interesting topic.

Peregrinus

The_Conductor wrote: »

I get what you're saying- and I'd agree 100% with you- if it was a deductible cost for landlords- in the same manner its a deductible cost for other business types. Its not though.

No, no. It has nothing to do with deductibility.

The theory is that a house that benefits from a paved road to the front door, a water supply, sewage, waste collection, etc, can be rented for a higher rent than a house which doesn't have these things. Therefore, although the landlord pays for the roads, water, etc through the rates/property tax, he recovers some or all of that through a higher rent than he could otherwise get.

Yes, the taxability of the rent versus the non-deductibility of the property taxes distorts that, but that's a problem with the income tax treatment of the rent, not the allocation of the property tax.

Where the theory breaks down, I think, is not in the deductibility or otherwise of the property tax cost; it's in the fact that the local property tax is not received by local authorities and is not used to provide services that enhance the value of properties; it's simply tipped into the Central Fund and treated as general revenue. Back in the day, rates used to go to the local authority.

What keeps the system in place, so, is not this elegant theory about property values. It's the brute fact that a tax on property and property owners is much easier to collect/enforce. And that's not a trivial matter; abandoning one tax in favour of another tax which is more expensive and less efficient is generally a bad policy, resulting in an overall increase in the tax burden. That's quite a hard sell.

The_Conductor

Collectibility is one aspect of the equation- equitibility is the other.
Politicians are copping that the fact that its a method for Dublin tax payers to subsidise spending elsewhere- is inequitable- if you are trying to sell the tax as a 'local property tax'. The 15% allowable deduction is one thing- however, if there is not a commensurate 15% increase- where it is patently obviously needed- it makes a mockery of the whole system. In any event- the government has already highlighted a much lower percentage will be ringfenced for redistribution for 2018- something that people don't seem to be talking about- but something that is going to be massive for local representatives- come the next elections.

If you want to tax payers in Fingal- to subsidise the local library in Tubbercurry in Sligo- be upfront and sell it as such- the current system of obfusciation isn't working- and is an insult to the intelligence of most tax payers.

We 100% definitely need a separate habitation tax. This nonsense about a landlord recouperating LPT through higher rent- is a load of nonsense. Aside from anything else- there isn't a shortage of property in many rural areas- while there is in urban areas- yet its the urban areas that are RPZ'ed not the rural areas- so the areas that need the services- can't afford to pay them, and have little demand of the existing housing stock- allowing up to 22% of available housing stock fall into dereliction in some counties (according to the CSO)- which makes them even less desireable- squaring a vicious circle.

Excuse the spelling on this (above)- I'm going through a VPN to post on boards- and the writing comes up on the screen about a minute after I type it.

In short the current system is based on a series of assumptions that simply don't hold water- and is viewed by an increasing segment of society as inequitable.

Peregrinus

I'm not really disagreeing with you, Conductor. The original rationale for the allocation of property tax may have held water once, but it no longer does. Now it's down to inertia, plus a (non-trivial) efficiency argument. Plus the political argument - the Awful Example of What Happened To Margaret Thatcher.

I take your point about inequity, but possibly this degree of inequity it tolerable/tolerated because Ireland has such low property taxes. If Ireland had property taxes more in line with European or OECD norms then, yeah, there's have to be a more just and justifiable allocation of the cost of them.

Bob24

Regardless of where the money goes, a strong argument for a tax on owning property rather than on residing in the property is that it makes the property market more fluid: because the property costs more money each year it gives an incentive to maximise its use or sell it. In the case of an investor it deters people from holding onto under-utilised property purely for speculation purposes, and for owner occupiers of properties which are too large for their needs it is an incentive to downgrade to something with cheaper property tax and free-up larger houses for families.

Some people will see it as unfair to have to pay a tax on something they own (especially when it is a new tax which the didn't plan for, which is understandable) but in the long run it tends to benefit to everyone except speculators and bankers as it optimises the use of properties and tends to reduce prices (if it is done right, what you pay in tax throughout your period of owning the property can easily be less that what you save on your mortgage).

I think this is how the LPT should be looked at, but it was kind of sold differently by the government when they included the word "local" in the name of the tax.

murphaph

Yeah I think it should be a split system. Here in Brandenburg, Germany (stand alone house in commuter town outside Berlin) we pay a property tax to the local commune (payable by owner) and we pay bin charges separately (payable by occupier).

However....here in Germany if you don't live in one of the big cities then odds on you will pay directly for improvements to the road serving your property. So if it needs resurfacing or new street lights or footpaths, the owners of all adjacent properties will get a bill for their share of the works.

To give you an example...our street was paved and provided with footpaths and street lighting for the first time in 2013 (was a gravel road up until then) just before we bought the site upon which we built our house. The former owners of the site paid €5k as their share. This was part of the reason they wanted to sell our site (and 3 others beside it) because the €20k bill had to be paid.