Business Property & Mortgages

Wednesday 17 September 2014

Cabinet is divided over U-turn on property tax

Outrage at breaking of promise to retain 80% of proceeds locally

Published 10/11/2013 | 01:00

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CABINET divisions have emerged over the Government's decision to break its promise to allow local councils to keep property tax receipts raised in their area, it can be revealed.

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The U-turn by the Cabinet has angered a number of Dublin Fine Gael TDs, who are up in arms over the "mistaken" decision to withhold the proceeds of the property tax.

The Sunday Independent has learnt that Environment Minister Phil Hogan was opposed to the move but was overruled by the Economic Management Council, the highly powerful cabinet sub-committee of Taoiseach Enda Kenny, Tanaiste Eamon Gilmore, Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin.

The TDs are already angry that Dublin homeowners are paying significantly more tax than their rural counterparts but the news that the Government is to keep the funds centrally has caused fresh outrage.

Given that some Dublin homeowners will next year be paying in excess of €1,000 in property tax, they have reacted with anger that citizens will be charged double the amount their local councils will receive in funding.

The TDs are irate that Finance Minister Michael Noonan and the Environment Minister Phil Hogan had failed to inform them of the U-turn, which they say "came out of nowhere". The news was only confirmed by way of a reply to a parliamentary question from Dublin South TD Olivia Mitchell.

In a concession to the Dublin TDs during the drafting of the Property Tax legislation, the Government committed that 80 per cent of monies raised in an area would be retained by the local council.

The money is being withheld to fund the establishment of the new Irish Water agency.

Speaking this weekend, Ms Mitchell said: "I want to say how disappointed and indeed annoyed I was to hear the promise of 80 per cent retention of the tax collected by each council is to be postponed."

"I opposed the method of calculation. Dublin households will not only be paying more than anywhere else, but far more than necessary for their services. In no other country is this method of calculating a local tax used," Mitchell added.

To mollify the Dublin citizens, the promise was made that 80 per cent of taxes collected could be kept and spent locally. And further, that from 2015, councils could vary their charge up or down by 15 per cent. Ms Mitchell raised the example of Dun Laoghaire- Rathdown who in a full year will pay an estimated €52m in Local Property Tax, yet they will receive of that, just €27m.

"This does not and will not sit well with citizens already pushed to the pin of their collar, particularly when we know that when properties are next re-valued in 2016, Dublin house values will, if current trends continue, be anything between 30 and 40 per cent higher," Ms Mitchell said.

Echoing the concerns of his colleague, Dublin South East TD Eoghan Murphy blasted the "highly regrettable" decision at a time when "we are supposed to empowering local councils".

"We are trying to give them real power and means to take control, but in one decision we have stopped all that. It shouldn't be at the whim of Government to remove a revenue stream like this," he added.

"There are 34 local authorities in the country and we are asking four of them to pay 40 per cent of all the tax. It behoves us to be honest with them and to keep faith with them," Ms Mitchell told Mr Noonan last week.

Dun Laoghaire TD Mary Mitchell O'Connor said: "I am disappointed that given we had been promised an 80 per cent return of our property tax uptake to our council, it has been reduced. We are paying one of the highest property taxes in the country and it is only fair that services reflect this charge."

News of the unrest within Fine Gael comes as it emerged this weekend that thousands of homeowners who buy their homes this year will escape the charge this year because of sloppy wording in the legislation. The Revenue Commissioners are set to lose €3.6m, which will have to be refunded to homeowners because of the foul-up.

Sunday Independent

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