Local Property Tax 2018 And Redistribution9 Nov 2017
The Local Property Tax (LPT) redistributes funding to areas with lower LPT bases through the Equalisation Fund. In 2018, the Fund is worth almost €139 million, and 21 Local Authorities will benefit from it.
Each Local Authority directs 20% of the Local Property Tax (LPT) it collects into the Equalisation Fund (EF). It keeps the remaining 80% for local use.
The Equalisation Fund amounts to almost €139 million for 2018. It will support services in 21 of the 31 Local Authorities. Table 1 ranks the 21 Local Authorities that will benefit from the Equalisation Fund in 2018.
Table 1 –Beneficiaries of the Equalisation Fund, 2018
(Source: DHPLG, 2017)
As shown in table 1, twelve Councils receive more than 50% of their LPT income through the Equalisation Fund (EF). Leitrim is the biggest beneficiary of the Fund when considered as a share of their total local property tax income in 2018 at 81%. Of Leitrim’s €9 million LPT in 2018, €2.1m will be collected locally, with €7.3m coming from the distribution of the EF. Leitrim is followed by Longford (80%), Monaghan (73%) and Roscommon (69%).
The largest absolute beneficiary from the Equalisation Fund of the LPT in 2018 will be Tipperary, which will gain almost €16.5 million through the Fund. This amounts to 61% of its total estimated LPT in 2018 of €27.1 million. It is followed by Donegal which will receive €16.4 million from the Fund; equivalent to two-thirds of its total LPT of more than €25 million.
How is the Equalisation Fund allocation determined?
To illustrate how the Equalisation Fund (EF) is calculated, Kerry County Council will be used as an example.
Case Study: Kerry County Council
The Local Property Tax baseline for 2018 is the level of funding which each Local Authority requires to provide its services, as determined by the Department of Housing, Planning and Local Government. It is calculated as the sum of the General Purpose Grant (from Central Government) plus the Pension-Related Deduction (pension levy), as found in 2014. It aims to ensure that no Local Authority falls below this baseline.
As shown in table 2, Kerry County Council is expected to obtain €14.5m in Local Property Tax (LPT) in 2018. The Council will collect €14.1m locally, direct 20% (€2.8m) to the Equalisation Fund, and retain 80% for local services (€11.3m). See Table 2.
Table 2 – Kerry County Council – Local Property Tax and Equalisation Fund, 2018
(Source: DHPLG, 2017)
Given that the LPT baseline in numerous Local Authorities is significantly higher than the ability of the local property base to meet these thresholds, the Equalisation Fund acts as a redistribution method similar to other taxes and benefits in Ireland.
1 Kerry County Council voted to increase the basic rate of the Local Property Tax by 5% for 2018. This decision by the Council is known as the local adjustment factor, which permits elected officials to vary the basic rate of the local property tax by plus or minus 15%. The decision sees an extra €704,000 in LPT revenue for Kerry.