An empirical investigation into the effects of a change in the basis of the ad valorem residential property tax in Northern Ireland

It is argued within this paper that domestic rates, which represent an important and significant source of local government revenue for district councils in Northern Ireland, should be reformed. There are currently issues pertaining to the present system which adversely affect both fairness and equity. The rating system for both domestic and non‐domestic property has its origins in the early nineteenth century, when the basis of assessment was centred on hypothetical rental values. It is a contention of this paper that the use of annual rental values for domestic property taxation is no longer tenable owing principally to the lack of open market rental evidence and the transparency of the system. Given the absence of regular revaluations, significant disparities and inequities are now inherent in the rating system which can only be addressed by undertaking a further revaluation based on capital values. This paper examines, at both the macro and micro levels, the impact of the assessment lag on effective tax rates and the effect of a change in the basis of the tax.