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Get rid of 'unfair' local property tax, says advisory body

NESC calls for site valuation tax to replace existing system

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The Government has been told to ditch the existing property tax system in favour of a new site valuation tax (SVT).

An unpublished National Economic and Social Council (NESC) report insists a site valuation tax is fairer and would promote better land use. The proposal is among a number of recommendations from the State advisory body in a soon-to-be-published report. The council also suggests property tax should be extended to development land, if a site value system is not introduced.

The current property tax system is based on the value of an owner's house, rather than the size of their land. Dublin TDs have regularly argued the current system is unfair on people living in urban areas with high property prices.

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The NESC says a site value tax would apply to developed land, derelict land, vacant land and zoned site but not to agricultural land.

"In contrast to Ireland's existing local property tax (based on self-assessment of the market value of a property), an SVT takes no account of the value of buildings on the land.

"The site value would include the value added to the land by the services and infrastructural support supplied by government or public utilities (water supply, public transport, electricity supply, etc). It represents the purest form of land value capture in that it applies only to the value added to land," it adds.

The NESC says a site value tax would have "less distortionary effects" than other forms of taxation while promoting "improved land use".

"It could, arguably, ensure greater fairness as it would play a role in recovering some of the value added to land by public investment and services," the government advisory group said. "If a site value tax is not introduced, it is worth considering extending the existing local property tax to development land," it added.

The council also noted that in its 2018 Economic Survey of Ireland, the OECD argued for a site value tax.

The NESC has argued for a site value tax system for several years, but is making a fresh push for a radical overhaul of how land and property is taxed as there is a renewed attempt by the Government to address the housing crisis.

The group says despite the focus on housing within Government the "dysfunctional housing system" described in their 2018 report still persists today. It said this "reaffirms the importance of systemic change" Ireland must bring about and that a "fundamental change from the current speculative and highly cyclical system of urban development, land management and housing provision, to a permanently affordable system".

It calls for the Land Development Agency (LDA), local authorities and approved housing bodies to be empowered to urgently address the housing shortage. It says the LDA should have full compulsory purchase order powers to ensure it can secure the land it needs to plan for major housing development.

It also calls for the vacant site levy to be more effectively used to target developers hoarding land banks and suggests the Planning Regulator should train local authorities on enforcing the tax.

Sunday Independent

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