Finance Minister Brian Lenihan has decided not to proceed with the implementation of a property tax in December's Budget, according to reports this morning.
A tax on property was one of the key proposals from the Commission on Taxation last year but the proposal has met with opposition from within the Fianna Fáil party as well as from coalition partners the Greens, who objected to a flat rate tax.
The Department of Finance is said to have favoured the introduction of a tax over Stamp Duty as a stable way of generating money for the Exchequer.
However according to the Irish Times it has now been taken off the agenda.
Government TDs feel the tax coming in a Budget just months before a General Election would be politically unacceptable and the Greens feel a flat rate tax would be unfair.
But €3bn will have to be found in December's Budget meaning income tax hikes may now have to be considered instead.
Fianna Fáil TD Timmy Dooley is among those who opposed the property tax.
He said it would have been unfair on people who have already paid a lot of money for their home.
"Very significant Stamp Duty has been paid by the owners," Deputy Dooley said.
"If you look at where the market is at the moment in terms of negative equity and the turmoil within the residential property sector, where somebody who wants to divest themselves of their property or trade down is not going to be in a position to do it purely because there is no movement in the market… I think the introduction of a property tax now would really put the cat among the pigeons."
His colleague Chris Andrews said planned water charges may be shelved too as the background work for metering is not complete yet.
"If you are going to bring in any tax you have to do your level best to make sure it's fair," Deputy Andrews said.
"Metering is the fairest way of doing that and that work has to be done. Clearly it hasn't been completed yet."