Business Property & Mortgages

Thursday 18 September 2014

Dublin and commuter belt in line for property tax cut

Howlin confirms several councils have ‘surpluses’ to fund reductions

Published 28/07/2014 | 00:36

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Public Expenditure and Reform Minister Brendan Howlin
Public Expenditure and Reform Minister Brendan Howlin

HOMEOWNERS in Dublin are in line for a full 15pc cut in their property tax next year, the Irish Independent has learned.

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In another eight areas around the country, householders can also expect a cut, according to draft calculations for the Government.

A cut of up to 15pc in the rate will be possible in Meath, Kildare, Wicklow, Cork city, Cork County, Galway city, Kerry and Clare.

The proceeds of the property tax will go directly to councils next year, when local authorities will have the power to cut or increase their property tax rates by 15pc. The 12 councils can cut the rate because they will have a surplus of funding in 2015, when the benefits of the property tax are felt locally.

The other 19 councils will have the same amount of money as this year, so won't be able to cut their property tax rate.

Public Spending Minister Brendan Howlin has confirmed to the Irish Independent that a number of local authorities will have enough funds from the property tax to cut the rate for homeowners.

 “Those that generate sufficient surpluses will be able to do it,” he said.

Although he declined to list the individual areas, he did confirm the rate could be cut in up to a dozen areas.

“Yes. Of that order,” he said.

However, the Irish Independent has established the identity of the 12 areas from government sources.

Mr Howlin said some of the councils with a surplus won't have enough to cut by the full 15pc. The minister also said a few councils will have more than enough funds to cut by 15pc, “and still have significant flushness after that”.

Nobody will have to increase the rate in 2015 as the Coalition has ensured no council will be worse off than this year.

The average cost of a Dublin home now stands at €349,000, while the average cost of a home outside the capital is €154,000.

A 15pc reduction on the property tax would mean:

* The property tax on a house worth €150,000-€200,000 would fall from €315 to €268.

* The property tax on a house worth €300,000-€350,000 would reduce from €585 to €497 – a saving of €88.

* The property tax on a house worth €500,000-€550,000 would reduce from €945 to €803 – a saving of €142.

The Government has worked out how much each local authority will receive next year when the property tax goes direct to the local authorities.

The first €4 out of every €5 collected will go straight into the area where it is collected.

The remaining €1 out of every €5 collected will go into a pot to be distributed among the poorer councils.

The exact formula for the distribution of funding is still to be decided.

The final figures will affect which local authorities can cut by the full 15pc without affecting services.

But the four local authorities in Dublin – Dublin City, South Dublin, Fingal and Dun Laoghaire – will be able to cut by 15pc, due to the large population and higher property prices. Indeed, Dun Laoghaire and Fingal county councils will still have several million euro left over.

There was a dispute in the Coalition over the manner in which central funding for councils was being cut as local authorities were benefiting from the property tax.

But these matters have now been resolved and councils will learn in the coming weeks how much money they are in line to get next year.

Mr Howlin said it was appropriate for councils to benefit from the property tax revenues. “What is this about? This is about taking back into the central exchequer the motor tax, which was the main sourcing base for local government fund and replacing it with a true local generated source of funding – the local property tax,” he said

“So it is obviously helping the exchequer at central level by freeing up the motor tax to be deployed centrally and allowing a flexible new source of funding at local level, which I think will bed down over time,” he said.

Mr Howlin said the property tax will give councils more say in how they are funded.

“Local councils have the capacity to spend but not raise money in any real terms, except around the edges.

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