Up to 80% of property tax will be used locally

Up to 80% of property tax collected from households within specific local authorities will remain in a locality and not be used for facilities elsewhere, the Government has agreed.

The move means urban families and households who this week received demands for the new levy will be happy that the large amounts they pay will be ringfenced for local services.

The Government had said that only 65% of funds collected in localities would remain there, in line with an expert report on the proposed tax, and that remaining amounts go back into the central fund and be spent in other areas.

However, Environment Minister Phil Hogan confirmed last night that it had been agreed in principle that 80% of taxes would be retained within local authority areas where properties were based. The remaining 20% of will go into a central fund to be used by local authorities on a “needs basis”, his office said.

Urban Fine Gael backbenchers had applied pressure on the Government in recent weeks to keep more levy amounts in areas for services. Dublin South East TD Eoghan Murphy was also preparing an amendment to address the concerns. Last night he welcomed the Cabinet agreement.

“People might now be more in agreement to pay this being happy that most of the money is spent locally on services they see every day.”

He and other party TDs though still want local authorities to be given the right to alter rates by 15% next year, as opposed to in 2015 as planned. Such a move would give coalition candidates more haggling room going into the local elections, he suggested.

Revenue began sending out letters this week to 1.6m households for demands of the property tax.

The letter includes a “notice of estimate of local property tax [LPT]” but householders have to calculate the amount they have to pay themselves.

The property tax can be collected at source via salary or social welfare payments.

However, the tax has been met with confusion after an online guide to property values was this week criticised for being too complex. Others said the methodology used to estimate the tax was also not entirely accurate.

The online guide provides the property’s value according to the average price in the area and the age of the house. However, the estimate fails to take into account the size of the home, how many bedrooms it has or if there have been extensions and improvements to the house.

The estimate also does not consider the changeable nature of property prices and is also set for three years.