Cabinet rift threat to planned property tax cut
Families to lose out if bigger councils have funds slashed
Published 02/07/2014 | 02:30
A PLANNED cut in property tax for homeowners in bigger urban areas is causing a deepening split in the Coalition, the Irish Independent has learned.
Fine Gael wants councils who benefit from bigger tax takes to use the extra money to pay for services currently funded by the exchequer.
But Labour is pressing to give hardpressed householders a break by reducing their property tax rates.
Grants to the big local authorities who will rake in the most in property tax will be reduced if Fine Gael gets its way. That means those councils are unlikely to be able to reduce householders' tax bills.
Talks on the allocation of funding for local authorities from the exchequer are now in "stalemate", with Tanaiste Eamon Gilmore refusing to sign off on Fine Gael proposals which would penalise larger councils. "Their whole point in Fine Gael is if the councils have the money, it should go back to the central exchequer, not the householder," a government source said.
From next year, councils have the ability to cut or increase their rate by 15pc if they can manage their budgets.
With councils set to be given 80pc of the revenue collected locally next year, urban areas with larger populations and higher house prices will get a windfall so can afford to cut the property tax.
Homeowners in up to a dozen city and county council areas were expected to get a property tax rate cut next year. A briefing note prepared for the Economic Management Council said that between 12 and 14 councils would have sufficient funds to cut their rate, the Irish Independent has learned.
The locations include the four Dublin councils, Louth, Meath, Kildare and Wicklow, Cork city and Galway city. Based on the "current estimate", these councils will have the "flexibility" of reducing the property tax by up to 15pc, the memo says.
The Coalition has been in talks about the distribution of central government funding to councils next year.
Dublin City Council, for example, gets €76m in funding from a dozen different government departments and agencies to pay for services including housing, parks, roads, tourism, libraries and job creation.
But Labour claims Fine Gael wants to penalise those councils with large property tax proceeds by cutting their other central funding and making them pay for more services.
"They (Fine Gael) are using the excuse of the property tax to reduce other grants. Their whole point is if the councils have it, the money should go back to the central exchequer, not the householder.
"Other funds will be cut, thereby disadvantaging the 12 or more councils who enough money. This is a sleight of hand to cut funding by the back door," a government source said.
Labour is arguing the reason the bigger local authorities have more funding is because the house values are higher so homeowners are paying more property tax.
"The argument on the Fine Gael side is these councils have the cash so their central funding can be cut. There was a meeting a couple of weeks ago, at which it was clear this was the intent on the Blue (Fine Gael) side and Gilmore said no chance," a Coalition source said.
But a Fine Gael source said councils would have to pay their own way.
"We are devolving powers and fiscal responsibilities to local authorities. That means the property tax being used to fund local services. Councils will have to get used to funding those services from those funds."
Last night, a group of four Labour backbenchers from Dublin fired a warning shot to their Coalition partners.
One of the four TDs, Kevin Humphreys from Dublin South-East, said Labour did not agree with councils' funding being cut because of the property tax proceeds.
"Let me put this in simple terms: do not try and rip off Dublin," he said.
Fine Gael junior minister Fergus O'Dowd said funding for councils is "a complex issue that will need much discussion" and the Government was actively considering it.
He confirmed there would be 80pc retention of the tax from 2015, but the Government had to "make sure that it's worked fairly", he said.
"Mr Hogan (Environment Minister Phil Hogan) fully recognises it is absolutely necessary for local authorities to have certainty about their funding," he said.
Mr O'Dowd said there were critically important issues in Dublin in need of funding, such as housing and water supply.
"We are not ripping off anybody. We are looking to ensure there is fair and equitable distribution of funding," he said.