The Old and the New: A Tale of Two Local Property Taxes in Ireland

Property taxes are common in countries around the world. While Ireland is no exception in its current tax treatment of real property, the background to its local taxes on non-residential and residential properties is unusual in that the former dates back more than 400 years while the latter, at least in its current configuration, has been in existence for less than 10 years. This research paper outlines the rationale, history, features, and administration of commercial rates (the “old”) and the residential Local Property Tax (the “new”). The purpose is to highlight, from a political economy and public policy perspective, improvements in the design and implementation of both taxes. While both taxes have some common features, the Local Property Tax has a number of unusual characteristics, including self assessment and valuation bands. While recognizing country-specific circumstances, the paper draws potential lessons from the Irish experience, identifies future opportunities, and explores challenges for policymakers. The Local Property Tax experience shows the importance of tax administration and the role of the central tax collection agency, and, in terms of design, the principle of simplicity combined with a tailored approach to suit local circumstances. Challenges include the relative tax burdens on non-residential and residential properties, the long-term sustainability of both tax regimes arising from legacy issues, the effects of current global trends and future revaluations, and, finally, the need for frequent property tax reform because of political and taxpayers’ opposition to a highly visible, unpopular, but good local tax.