Housing Minister Eoghan Murphy intends to prevent massive property tax increases for the majority of households by adding tens of thousands of new homeowners to the scheme, the Sunday Independent can reveal.
The minister’s overhaul of the property tax system will include abolishing exemptions for 60,000 homeowners who have avoided paying the tax since it was introduced more than five years ago.
Revenue raised from the additional households will be used to fund a new system of allocating funds to local authorities based on greatest need.
Mr Murphy plans to dramatically change how centralised property tax income is allocated to local authorities to ensure a fairer distribution of the funding to city and county councils.
However, there were concerns within Government that the new system could result in increased charges for those currently paying property tax.
“Some councils are losing out. The minister is intending to design a scheme whereby no council drops its current level of funding but some will get increases,” a senior government source said.
“He intends to do this without increasing the burden on local property tax payers – instead he will bring homes currently not registered for the tax into the property tax net,” the source said.
The news will be welcomed by hundreds of thousands of homeowners, especially those living in Dublin, who feared massive property tax increases as a result of a more than 70pc average rise in house prices since the introduction of the charge.
However, around 60,000 homeowners now face average annual charges ranging from more than €500 in some parts of Dublin to €130 in Leitrim.
The latest figures show the Government raised €477m from property tax in 2017, and one-third of the total revenue – amounting to €171m – was paid to the four Dublin local authorities.
New homeowners who bought properties in the last five years will receive bills once the property tax freeze ends in 2019.
Any property bought in 2013 is currently exempt from the charge as are all new houses bought from a builder or developer over the past five years.
Houses in ghost estates and unsold properties are not subject to the tax.
Mr Murphy previously told the Sunday Independent he believed property tax should not be calculated based exclusively on the value of a property.
It is unclear how the tax will be calculated once the freeze ends but the minister will ensure those who currently pay the charge will not shoulder any extra costs.
The minister is also understood to consider that the current regime of how property tax funds are allocated to local authorities is unfair and needs to be reviewed.
Mr Murphy intends to introduce new ‘high level indicators’ which will determine how much funding each local authority will receive from the central property tax pot.
The indicators will include the level of existing resources, population, length of coastline, size of land territory and the extent of social deprivation in an area.
Councillors from rural local authorities have complained consistently they are not receiving a fair share of the revenue raised from the charge.
Each council is permitted to retain 80pc of revenue it collects from the charge, while 20pc is earmarked for a €140m equalisation fund which is then distributed to less well resourced local authorities.
The minister plans to establish a new review group which will include representation from the Council and City Management Association and Association of Irish Local Government to examine the fund.
There will also be public consultation ahead of the introduction of a new funding system.
Mr Murphy’s assessment of the how property tax is allocated is happening in tandem with a review by Minister for Finance Paschal Donohoe examining how the payment is calculated.
Both reviews are expected to be completed by August.