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Sunday 31 August 2014

The counties robbed of property tax cut by Coalition squabble

Kildare, Dublin city and Wicklow to lose windfall

Fionnan Sheahan

Published 03/07/2014 | 02:30

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HOMEOWNERS in 11 counties and cities will be robbed of lower property tax bills under Government plans, the Irish Independent can reveal.

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These councils will raise enough money from the controversial home levy to allow them to reduce the amount of property tax paid by people living there.

But fresh cuts to local authority funding –being planned by the Government – will mean these councils will no longer be able to afford to pass on the reductions.

A confidential government document shows people living in Dublin city, south county Dublin, Kildare, Wicklow, Louth, Meath, Galway city, Kerry, Clare and Cork city and county will lose out under the proposals.

Only Dun Laoghaire and Fingal county councils will still have enough spare cash left – even after their grants are cut – to pass on a property tax reduction to residents.

The other councils on the list will see their property tax windfall eroded by cuts in funding elsewhere.

A planned cut in the property tax for homeowners in these areas, where there will be a property tax surplus, is causing a deepening split in the Coalition. So far the Cabinet has failed to sign off on the plan.

Fine Gael wants councils who benefit from the bigger tax takes to use the extra money to pay for services currently funded by the Exchequer.

But Labour wants to give hard-pressed householders a break by reducing their property tax rates.

Next year, councils will keep 80pc of the property tax collected locally, with the remaining 20pc going into a central pot to be given to poorer councils.

Councils will also have the power to reduce or increase the property tax by up to 15pc to balance their books.

A detailed document from the Department of the Environment for the Coalition's |mini-cabinet, the Economic Management Council (EMC), sets out how much each area will make from the property tax.

The property tax will replace the Department's general purpose grant for councils.

Calculations show 13 councils will have a surplus when they get the 80pc of the property tax, compared to the sum they got this year. The paper then allocates the 20pc central pot to those councils who have a shortfall.

After that, the Department proposes to cut the additional funding the 13 councils got to wipe out their surplus, meaning they will have no spare cash left.

Councils get additional funding from a range of different government departments and agencies to pay for services, including housing, parks, roads, tourism and job creation.

The plans show that Dublin City Council's funding will be cut by €60m, while Cork County Council's goes down by €30m. South Dublin County Council starts out with a €25m surplus, which is cancelled out by cuts to its funding.

By the end of the process set out in the document only two councils still have spare cash.

Dun Laoghaire starts out with a €35m surplus and ends up with just €13m after funding cuts.

Fingal has got just €3m to pass on in a property tax cut.

The allocation of funding to councils was due to be discussed at a meeting of the EMC yesterday afternoon.

But the meeting of the EMC, made up of Taoiseach Enda Kenny, Finance Minister Michael Noonan, Tanaiste Eamon Gilmore and Public Spending Minister Brendan Howlin, was cancelled because the parties could not agree on the cuts.

It is not known when a final decision on the distribution of the funds will be made.

Yet Mr Kenny tried to play down the rift by claiming there was no disagreement.

Talks on the allocation of funding for local authorities are in “stalemate”, with Mr Gilmore refusing to sign off on the Fine Gael proposals.

Labour TDs are warning Fine Gael: “Do not rip off Dublin.”

Mr Kenny denied that the Cabinet is split on the property tax.

Following reports in the Irish Independent, Fianna Fail leader Micheal Martin said there was division among ministers.

Mr Kenny said the property tax was an alternative to increasing income taxes and the details of the funding model were still being worked out.

Mr Kenny said he was sorry to see Mr Martin acting on “the absolute gospel belief” of what he read in newspapers.

But Mr Martin said there was a significant split in the Cabinet.

“Government sources have stated that Fine Gael wants to charge local authorities more and when they get revenue from the property tax in 2015 they will be required to use it to pay for services and other public expenditure that central government will refuse to fund.

“In other words, people in urban areas who are paying higher rates of property tax will have to pay more for services that are devolved from central government,” he said, quoting this newspaper.

Irish Independent

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