The Risk for Business if Local Property Tax is Reduced
Jul 2, 2014
Following the economic downturn, getting Ireland’s finances back onto a sustainable footing was always going to be challenging. Government had to make difficult choices between tax increases and cost containment and it was clear that this would have an impact on everyone.
The introduction of the Local Property Tax (LPT) and forthcoming water charges will affect almost every household in the country. While business recognises the impact this has had on disposable income, we have supported the introduction of the LPT as a necessary broadening of the tax base for the long term, reducing the dependence of Councils on business rates and other charges as their primary source of income, which they have been for many years.
What concerns us now is that decisions by Councillors, taking advantage of a provision allowing some discretion in the local rate, to reduce the Local Property Tax by up to 15% will lead to Local Authorities being underfunded. We believe that this will either lead to a reduction in the services Local Authorities are able to provide, or a corresponding increase in business rates.
To introduce such a cut before having full knowledge of their Local Authority’s annual budget would be reckless and could lead to unintended consequences: would it lead to reductions in spending; would essential services need to be cut; would the local business community have to make up the shortfall through increased commercial rates? We fully recognise that prior to the recent elections many candidates promised to vote for such a reduction and that they therefore have a legitimate mandate to do so. However, we would ask them to consider the consequences of reductions in the Local Property Tax before casting their vote.
But we also seem to have a disjointed process embedded here and it partially relates back to a heated debate last autumn, when many people realised that their 2014 LPT would actually be payable before the end of 2013. This year we understand that the Revenue Commissioner need Councils to notify them of any revised Local Property Tax rate before the end of September, presumably to feed the same deadlines for collection as last year. This requirement forces Councils to act without full knowledge of their annual budget, which is usually finalised in December. So this is a permanent inconsistency which merits a proper review.
Regardless of the cause, we believe a cut in the LPT rate will have a significant effect on business. From creating jobs and paying rates to sponsoring sports teams, the business community makes a vital contribution to communities up and down Ireland. To impose any increase in commercial rates would threaten the very fragile position many still find themselves in.
Councillors should consider, and be given time to consider, the consequences including potential job cuts in their local communities if struggling businesses have to make up a shortfall in funding as a result of cuts in the rate of the Local Property Tax in their area.