Councillors warned over costs of cutting property tax

Councillors are to be warned by county and city managers about the possible knock-on effects of reducing property tax in their areas ahead of making a final decision on the rates to be levied on homes next year.

Guidance documents issued by the Department of the Environment to local councils in recent days also say local authorities should consult the public before varying the tax rates.

Councils have the power to increase or decrease the rate of local property tax by 15 per cent from next year onwards, but they must notify the Revenue Commissioners of their intentions before September 30th. Most councils will be deciding their approach in the coming month.

Senior officials in a number of councils have already outlined to councillors the consequences of varying the rates.

The guidance issued is in tandem with a statutory instrument on the property tax regulations brought into effect this week by Minister for the Environment Phil Hogan.

Council services

The guidelines say “any variation in the local property tax rate will have an impact including on the local authority, on those paying LPT, and on those receiving council services”.

“The effect of a variation on all stakeholders must be considered,” it adds. The county or city manager – now renamed chief executive – must prepare an estimate of the financial effect of varying the rates on the relevant council.

The Department of the Environment says this must consider, at “a minimum”, the potential impact on homeowners who pay the tax, the impact on revenue raised and the impact on service-delivery plans in the local authority area.

Councils must also take into account their financial positions, as well as income and spending, when considering a rate change.

Expenditure levels

“In proposing to increase or decrease the income of the authority, the members must be cognisant of the current levels and types of income, and the level of expenditure that is currently being met, including those elements of expenditure which are strategic, non-discretionary and cannot be reduced in the short term.”