In the Minister's speech on budget 2023 in September, he announced a vacant homes tax, something for which most of us have been calling for years. It was welcome that he did announce a tax, but it was impossible to understand the rationale for setting it at merely 0.3% of the value of the home. Can he explain to us the rationale for setting it at that level? On what basis did he set the figure?

I thank Deputy Shortall. I am aware that she has been raising this issue for some time. I have little doubt at all that if I wanted to have a look at her budget proposals, they would be freely and publicly available.

The vacant homes tax, VHT, is a new measure announced in budget 2023 that aims to increase the supply of homes for rent or purchase to meet demand. Further detail on this measure is set out in the Finance Bill, which was published on 20 October. As stated in my budget speech, this measure aims to increase the supply of homes for rent or purchase, rather than raise revenue. In developing a new tax, an important consideration is clarity. It is important to ensure that the tax is easy to understand and administer. This is why I chose to set it at a multiple of a property's basic local property tax, LPT, charge as the LPT system is well understood.

The purpose of the VHT is to encourage behavioural change. Accordingly, the rate should be set at a level that will influence property owners' decision-making. A tax charged at three times a property's basic LPT charge represents a considerable financial penalty to those who leave properties vacant and will incentivise property owners to bring such properties back into use.

Let me bring this to life by way of an example for the House. The rate means that, for example, the owner of a vacant residential property valued at €250,000 would face a VHT charge of €625 in addition to the annual LPT charge of €225. The owner of a property valued at €400,000 would face a VHT charge worth €1,215, in addition to his or her annual LPT charge of €405, while the owner of a house valued at €500,000 would face a VHT charge of €1,485 in addition to an annual LPT charge of €495.

The Minister may believe that but I cannot understand why. Did he take advice on the likely impact of a tax set at such a low level? Was any research done on it at all? The other side of this concerns what is happening to property prices. We are aware that in the year to last August, property prices increased by 12.2%. In the context of somebody being able to leave a property vacant for 12 months, with it increasing in value by 12%, how on earth is a tax of 0.3% going to influence what that person will do? There is no incentive. It is a perverse incentive, actually.

There is no incentive whatsoever to sell or to let that property. Could the Minister give us some idea of the supporting evidence on which he worked? This just does not make sense on any level whatsoever. We know that there are 90,000 houses available.

I call the Minister to respond.

It is a serious dereliction of duty for the Minister, and the Government, not to take action to unlock the availability of the property.

I thank the Deputy very much. In deciding what the rate was going to be, I did, of course, consult with my colleagues and my officials on it. My judgment, based on the engagement that I had with them, was that a new charge that is multiples of an existing tax, is a proportionate and sufficient charge for the harm to the common good of homes that could have somebody living in them but do not. This must be seen in combination with other measures that are being brought in, for example, the Croí Cónaithe towns fund, which will provide grants of up to €30,000 for the refurbishment of vacant properties for occupation as a principal private residence. I do not believe this is in any way a dereliction of duty in response to a serious matter. I believe that the multiple charge that is being put forward here will have the desired effect.

The Minister has not really addressed the question I asked. In the context of a situation where somebody can continue to sit on a vacant property, which will increase by, say, 10% to 12%, over a year, how will a tax of 0.3% make any difference? Could he be straight with us? What exactly is his rationale here? Has he based his belief on any evidence whatsoever?

The other point I would make in regard to this tax is that it is flawed. It does not apply the proposed tax to derelict properties. Little or no action is being taken by local authorities because of the way the derelict sites levy operates. A person can allow his or her property to become derelict and he or she will avoid the tax. There is a serious responsibility on the Minister and the Government to unlock the significant number of vacant homes that are available for use in the context of the serious housing crisis. I cannot understand why the Minister will not do the rational thing and unlock them by having a meaningful tax.

I call the Minister to respond.

The Deputy should please allow the Minister to respond.

We called for a punitive tax of 10%, which would be meaningful.

A punitive tax of 10% would mean that the cost to such a property holder would be many thousands of euro. I look forward to hearing the Deputy make the case on Committee Stage of the Finance Bill. Regarding the charge she made about the level of vacant homes in the country, as she will be aware, the recent census indicated that there are 166,752 vacant homes nationwide. This is 7.8% of the housing stock. Many other studies indicate that the appropriate level of vacancy within any kind of functioning housing market is approximately 6%. The idea that there are many tens of thousands of homes available that could be immediately brought back into use is at odds with the figures that are there. To answer the Deputy's question regarding the cost of inflation and how it will impact on the vacant property tax, that will be reflected in the valuation of the property. As Deputy Shortall well knows, as inflation goes up, the property will be revalued accordingly and then the vacant property tax will go up as well.