What could possibly go wrong this time?
It should be simple shouldn't it? A tax charged on just one figure, with just two rates. Yet it took 160 sections of tightly packed law to bring Local Property Tax into force. So what can go wrong? Well, here's ten things for a start.
1 You get asked to pay tax on a tumbledown property or a shed
The details on the Revenue letters come from a variety of sources, none of which match up terribly well and some of which are out of date. It mightn't be on officialdom's records anywhere that the original homeplace fell derelict years ago. Correct the error by writing a letter or making a phone call. Revenue may ask you for some evidence.
2 You get a letter addressed to your late parent
Same reason as for 1. Same suggestion – don't ignore it. Also, don't think that you escape the Local Property Tax because the house you’re living in was never formally conveyed to you. You become liable for a property obviously if you're the owner, but less obviously if you have a right to occupation. Not only that, Revenue can assume that the person who occupies the property, or who is the landlord of the property, is the liable person. It will be up to you to prove otherwise.
3 It’s his (or her) bill, not mine
Maybe. In cases of joint ownership and where no one “volunteers”, Revenue can decide who is to be the liable person. They will be unconcerned as to who actually pays, as long as they get their money. Incidentally, the legislation makes particular provision for others to take care of the affairs of the liable person. Typically within a family situation, a son or daughter can both return and pay the Local Property Tax liability on behalf of a parent.
4 I’m an employee so I can pay the bill with my income tax
Yes you can, but remember that the deduction will be taken from your after-tax income – after the normal PAYE, PRSI and Universal Social Charge has been deducted. Spare a thought as well for your unfortunate employer and your payroll people. They will have to deal with the Local Property Tax separately to the other taxes, but have to make payments and returns and be accountable in just the same way as for PAYE. This is no small additional compliance burden on business. Revenue can in fact oblige Local Property Tax payments to be deducted through payroll if they are not satisfied that they will collect the tax from you otherwise.
5 I'm self-employed. This is just another form and tax bill.
Correct as far as it goes, but don't forget that the Local Property Tax is now very tightly integrated with the general Income Tax System. If for example you file your Return of Income without having filed your Local Property Tax return, you could be liable to a surcharge on your Income Tax liability. Not only that, if you need to have a tax clearance certificate for the kind of work you do, Revenue can refuse you the tax clearance cert if your Local Property Tax isn't up-to-date.
6 I'm in the clear, the Revenue estimate is way too low!
The Revenue estimate that you will receive in March is just that – an estimate. Revenue need a figure to chase if you don't make a return or stump up the tax, and that's the idea behind the estimate. Revenue reserve the right to revise an assessment on you either upwards or downwards as new information comes to light. At the end of the day, this is a self-assessment tax, and the onus is on you as the taxpayer to pay the correct amount. Revenue will have opportunity to examine if you're paying the right amount, especially if you go to sell the property at any stage.
7 I can't afford to pay, so I can get a write-off.
Not really. There are very few exemptions from the Local Property Tax. People on low incomes can get a deferral. This means that the tax doesn't have to be paid immediately, but that's not the same as a write-off, especially as interest will add up at 4% per annum on the unpaid balance. Even in a case of Personal Insolvency or extreme hardship, tax will not be written off, just deferred.
8 I can always appeal
The appeal process is perhaps the weakest link in the Local Property Tax framework. Tax appeals are taken in the first instance to the office of the Appeal Commissioners, a separate body to the Revenue Commissioners. The Local Property Tax system allows people to appeal to the Appeal Commissioners against decisions not only concerning the amount of any Revenue assessment, but also against decisions as to whether they are properly liable in the first place, or decisions to refuse a deferral application. The Appeal Commissioners already deals with appeals for all the other types of taxes. Long overdue for modernisation, the appeals process is now cumbersome, costly and secretive.
9 How are they going to know?
For a long time, Revenue have had huge powers of investigation once people were in the tax net. The emphasis for the Local Property Tax is different – the information powers are mostly about getting people into the net in the first place. The law had already given Revenue the power to ask utility service providers such as the ESB for the details which they have on you. But Revenue can also ask, for example, a tenant who their landlord is. The seller of a property must tell its new owner what valuation was last used for the Property Tax. And the buyer of a property might need to put in a return if they feel that the previous owner had under declared the valuation.
10 Cheaper to get it right
The valuation you arrive at now will persist until 2016, irrespective of what happens in the property market between now and then. You’re deciding on the amount of amount to pay not just for 2013 but for the next three years as well. Having to make a return only once every three years reduces the compliance burden for taxpayers, but it also gives Revenue time to sift and sort through returns from 1.6 million citizens. Don’t draw them down on you.
Brian Keegan is Director of Taxation with Chartered Accountants Ireland.
This article is reproduced by kind permission of the Sunday Business Post.