FOUR out of every five euro of property-tax revenue will be ringfenced for the area where it is collected in a move that will benefit Dublin and other cities, the Irish Independent has learned.
The Government has decided that a bigger chunk of the property tax collected will stay local, with 80pc ringfenced in this way instead of the previously proposed figure of 65pc.
The remaining 20pc will go into a central pot for funding local authorities right across the country.
According to one government source, this means that "the local authorities in Dublin will be flush with money. The urban centres will get a bounce out of the property tax".
The decision comes after complaints from several Dublin-based government backbenchers that their constituents would be paying too much property tax to subsidise council services in other parts of the country.
Initially, there was no formal provision in the legislation for the money to stay local.
The U-turn is aimed at countering complaints in Dublin that homeowners who are paying more in property tax – because house values are higher in the capital – are also subsidising rural areas.
Councils in the urban areas will not be penalised for getting more funding from the property tax.
The allocations to local authorities from central government's general-purpose grants in 2014 will not be changed as a result of the decision.
The Cabinet yesterday agreed how the money from the property tax will be allocated from next year.
In two years' time, councils will have the power to vary the property tax in their area by up to 15pc, depending upon the amount of funding that they require.
The Government has come under fire from its own backbenchers based in Dublin for the way that the property tax is structured.
Dublin TDs have complained that the property tax discriminates against those living in the capital.
City homeowners will cough up almost half of the property tax take in 2014, despite accounting for just over one-third of the number of households in the country.
Although it is called the "local" property tax, the legislation contained no guarantee that money paid by homeowners will be spent locally.
The Thornhill Report into the setting up of the property tax recommended that 65pc of the revenue raised should stay local and the rest should then go into a central pot.
Following a backbench furore, Taoiseach Enda Kenny gave the first official commitment in January that 65pc of property tax revenue would be ringfenced for the areas it is collected in.
The Government has also dismissed complaints about Dublin-based homeowners paying too much property tax to subsidise council services in other parts of the country, arguing that the tax is fair.