Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context

329. To ask the Minister for Housing, Planning, and Local Government if he will simplify the calculation on the way in which local authorities retain property tax collected in their county. [39988/25]

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context

330. To ask the Minister for Housing, Planning, and Local Government if he will simplify the calculation on the way in which local authorities retain property tax collected in their county. [39541/25]

James Browne (Wexford, Fianna Fail)
Link to this: Individually | In context

I propose to take Questions Nos. 329 and 330 together.

Local Property Tax (LPT) is administered and collected by the Revenue Commissioners and subsequently transferred into the Local Government Fund (LGF). The funds are ultimately redistributed, by my Department, to local authorities in accordance with the Government’s allocation policies.

In overall terms, LPT broadens the tax base and reduces the level of central funding required by local government, freeing up resources for expenditure in other areas. Funding allocations are decided in advance of collection, based on estimates (from the Revenue Commissioners) of the LPT yield in individual local authority areas for the following liability year. The annual LPT allocation currently stands at €696.7 million for 2025 and will further increase to €767.1 million for 2026.

The LPT allocation mechanism was changed in 2023 to allow for 100% of the estimated LPT yield to be retained locally within the local authority area where it is collected. Apart from the yield, there are three other factors that ultimately determine the annual LPT allocation for an individual local authority; namely, the local authority’s LPT baseline (minimum funding requirement), the amount of any surplus above an authority’s LPT baseline used to self-fund certain local housing or roads services, and, finally, the local adjustment factor.

Under the LPT allocation model, every local authority has a minimum level of funding available to it, known as the baseline. If the estimated LPT yield in a local authority area is lower than an authority’s baseline, the authority is topped-up or equalised to that baseline by the Exchequer. Baselines for 2024 were adjusted in accordance with the recommendations of the 2023 Baseline Review working group, and furthermore, every authority received an increase in baseline funding of at least €1.5m. In total, LPT baselines increased by €75.4m at that time. Building on the baseline increases of 2024, there will be a further increase of €42m in 2026, which will ensure that any benefit from the revaluation of LPT will go directly to the sector where it is needed. In addition, the allocation model for 2026 is changed to allow those authorities with an LPT income above their baseline to retain a greater portion of the surplus for their own use, increasing from 22.5% to 31% of overall yield. Both changes together will lead to an increase in own use funding in the overall sum of €85.4m

Local authorities may vary the rate of Local Property Tax (LPT) in their administrative area by up to 15% of the basic rate of the Tax. The decision to vary must be taken by resolution of the Council. While recent changes to the LPT legislation will allow elected members to adjust the Local Adjustment Factor (LAF) upwards to a maximum of 25%; due to the timing of the legislation, commencement of this section will be delayed until the 2027 LPT liability year.

If a local authority decides to vary the LPT basic rate upwards; 100% of the resultant additional income is available for the authorities’ own use. Similarly, if an authority decides to vary the LPT basic rate downwards (by up to 15%), the resultant loss in LPT income is reflected in reduced LPT funding to the authority. The power to vary LPT rates enables elected members to directly influence the level of LPT income they have to meet their expenditure requirements. 25 local authorities resolved to increase their LPT rates above the basic rate for 2026, whereas 3 local authorities decided to reduce the basic rate locally. The overall net gain arising from the variation decisions for 2026 is €23.2m.

Detailed information regarding LPT allocations, is published by my Department at the following link: www.gov.ie/en/collection/ea27d-local-property-tax-allocations/

As mentioned at the outset, LPT allocations to individual local authorities are decided annually in accordance with Government policies. The allocation policy for 2026 was decided by Government earlier this year and local authorities were informed by circular of their individual calculations. Accordingly, I have no plans to amend the allocation methodology for the coming year.

That said, in line with commitments in the Programme for Government, a Local Democracy Taskforce has been established to reform and strengthen local government. The work of the Taskforce is focused across four themes. One such theme is the funding of local authorities, of which, LPT is a significant proportion. The Taskforce will bring forward proposals for Government consideration, including in the area of enhancing local authorities’ fiscal autonomy. I look forward to engaging across Government on these matters of importance to local democracy in advance of any proposals being finalised.