Let's stop pretending this is a local property tax

Cork Inndependent, 7 November 2013

 

Really, it was depressingly predictable and we should not have been in the least bit surprised. After all, we have been here before. I refer to the recent announcement by Minister for Finance, Michael Noonan TD, under Section 57 of the Finance (Local Property Tax) Act 2012 that - ‘Receipts from the Local Property Tax received in 2013 will remain in the Exchequer to meet the many expenditure obligations by the State.’ None of the money, zero per cent will be coming back to local government so let’s stop pretending that this is a local property tax. It is anything but. It is a tax which is being collected centrally and being kept by central government. Where exactly is the local in that? It was Benjamin Franklin who famously said, ‘Certainty? In this world nothing is certain but death and taxes’. He might usefully have added, ‘In Ireland nothing is certain but death, taxes and centralisation.’

Irish local government suffers from all known forms of centralisation – functional centralisation whereby local councils are given a very narrow range of powers; administrative centralisation whereby most activities of local councils still have to be approved by Dublin; and financial centralisation whereby central government continues to tightly grip the purse strings. Alexis de Tocqueville was right when he wrote, ‘Every central government worships uniformity: uniformity relieves it from inquiry into an infinity of details.’

The story of the Irish property tax has an eerily familiar feel to it. We just need to think back to the disgraceful political auction that was the 1977 General Election. Fianna Fáil swept to power with a landslide majority, partly on the back of a promise to ‘abolish’ domestic rates. The promise from government was that it would pay directly to the local authorities the amount of money they would otherwise have collected through domestic rates. The ‘slight’ problem was that government could not afford to keep the promise (even if the political will existed to do so) as it was broke. Initially, government paid the local authorities a support grant in lieu of the domestic rate monies but in 1983 legislation removed responsibility from the minister to meet the full amount of the money lost. Local councils began to receive less and less money, a situation from which they have never recovered. The domestic rates abolition has interfered with the local democratic process, curtailed local accountability, weakened local discretion, reduced the amount of money available to local authorities and made local government more dependent on central government.

Since then we have had a bewildering myriad of reports on the topic of local government financing all of which broadly reached the same conclusion – for local government to prosper, autonomous locally based sources of funding were required. If local government is to have any meaning (and central government is hell bent on making it meaningless) then there has to be a link between local revenue raising and local expenditure. In 2008, the OECD looked at local government financing in Ireland, as part of an overall review of public service, and concluded, ‘Ireland has limited local financial autonomy which, in turn, strengthens the input-focus of national policies.’ This is a polite way of saying that Ireland is too centralised.

The Council of Europe went further in its recent report on local democracy in Ireland, stating, ‘The scale of real local taxes and the freedom to set their rates appear to be very limited. During the economic crisis, the financial resources of local governments have decreased, but the volume of their responsibilities has remained the same. Local governments have the formal freedom to adopt budgets but such freedom is severely limited in practice.’

In theory a local property tax (if it was genuinely a local tax) could offer councils some financial independence and this may evolve over time. However, as mentioned at the start, the first signs are not encouraging with central government greedily keeping all of the 2013 monies for itself. Even if we move to a situation where property tax income is returned to local councils, who will decide on how the money is distributed? The answer is central government. The current method of distributing money from the Local Government Fund to councils is a more closely guarded secret than the Coca Cola recipe. The Council of Europe tried to find out but could only conclude, ‘the mechanism is not transparent.’

Minister Phil Hogan’s current plans are designed to remove the local from local government and I am amazed that the local business community in Cork’s towns are are not up in arms about the prospect of paying higher commercial rates once town councils are abolished. Ultimately it all boils down to two things – power and money. C. Wright Mills noted that, ‘Prestige is the shadow of money and power.’ Local government institutions will have no prestige, no status and no legitimacy with the public unless they have power and money. I won’t be holding my breath.