The case for value banding: the recurrent property tax on residential property in Ireland

Purpose This paper aims to investigate the background to the introduction of a recurrent property tax on residential property in Ireland. Within the European Union only two countries did not have a recurrent property tax on residential property, namely, Ireland and Malta. However, as from 2013, Ireland took the important step to re-introduce a residential property tax known as the Local Property Tax (LPT). The implementation of a new recurrent property tax represented a significant reform and challenge for the authorities, particularly in terms of the valuation of properties, where initally some 1.9 million dwellings had to be valued. Design/methodology/approach The paper is based on an extensive review of government led commissions and published reports on the Local Property Tax both prior to and post implementation. In addition, a detailed analytical review of published research has identified the thinking behind government decisions in relation to how the LPT could be implemented within a very short period of time. Findings Preparatory groundwork to introduce a new recurrent property tax took about four years. However, once the signal by the government was given the actual implementation took less than one year. This major tax reform was successful if measured against efficiency of implementation, the use of a simplified valuation methodology and reliance of owners’ declaration of value. Research limitations/implications There were no research limitations encountered. Practical implications The paper highlights a number of key policies that were critical to the successful implementation of the LPT in Ireland. In this regard, two policies were to the fore, namely, the use of simplified valuation structure based on value banding and in adopting self-declared valuations provided by property owners. The LPT has now been in place for some 12 years and has been successful in raising stable and predictable revenue for local government. The implementation strategy adopted by Ireland should be of interest to other countries and/or jurisdictions when reviewing their options for property tax reform. Social implications The paper has outlined the implementation of a property tax that has a reach of some 1.4 million taxpayers. It clearly provides evidence of impact and tax liability. Originality/value The paper has provided some unique insights into the implementation and performance of the LPT. It has also contributed to the literature on the innovative use of value banding. In addition, the paper provides a solid basis upon which other countries/jurisdictions could evaluate this as a potential reform solution.