Property tax yield in Dublin may lead to cuts in council grants

Central government grants to Dublin councils for housing and other areas are likely to be cut and redirected elsewhere in the State because of the higher property tax return in the capital.

The Government has committed to allowing 80 per cent of the tax stay within the local authority area in which it is collected, but senior Coalition sources say this will lead to a “windfall” for the four Dublin councils.

Since it is regarded as politically impossible to reduce the 80 per cent retention rate in Dublin, with the remaining 20 per cent going into a national pot, officials in the Department of the Environment and Department of Public Expenditure and Reform have been discussing how to divert funding to rural councils by other means.

Some options being examined include reducing capital grants to the Dublin councils from the exchequer, which go towards areas such as housing, libraries, leisure centres and other one-off items.

While the level of cuts to capital grants is not yet known, sources said it is likely to be “tens of millions”.

While councils in Dublin city, Fingal, South Dublin and Dún Laoghaire-Rathdown are the most obvious local authorities with a high property tax yield, others are not being ruled out for capital grant reductions.

Last year when property tax was levied only for six months, Dublin city collected €39.7 million, Fingal took in €18.4 million, South Dublin €15.3 million and Dún Laoghaire-Rathdown County Council €25.9 million. In contrast, Leitrim and Longford county councils collected €1.1 million each.

Discretionary spending “Dublin is the one area where there is going to be a big windfall,” said a Coalition source

. “There are a number of things feeding into this process to make sure councils outside the county do not lose out and the levels provided under the Local Government Fund remain around the same.”

The fund is a central pot split among councils for discretionary spending on day-to-day activities but is effectively being replaced by revenue raised via property tax.

Local authorities have the power to vary the tax up or down by 15 per cent and have until September 30th to tell the Revenue Commissioners the rate that will be apply for 2015.

The deadline has given the search for an urban-rural rebalancing an added urgency.