Government TDs representing Dublin constituencies have warned that local authorities in the capital should not be discriminated against because of higher property tax returns. The Irish Times reported yesterday that exchequer grants to Dublin councils for housing and other services are likely to be cut and redirected elsewhere in the State because of the higher property tax yield in Dublin.

Councils, which have the power to vary property tax by 15 per cent, must notify the Revenue Commissioners by September 30th of the rate they will implement for 2015. The deadline has given the search for an urban-rural “equalisation” an added urgency, with sources saying there is a desire in Government to have the issue resolved by the final Cabinet meeting in July.

However, Dublin South East Labour TD Kevin Humphreys said he and other TDs had raised the issue with Minister for Public Expenditure Brendan Howlin when the property tax was being introduced. Mr Humphreys said he would "cause havoc" if exchequer grants were reduced and diverted to other councils and he would be raising concerns with Mr Howlin again.

“Dublin councils should not be discriminated against over the allocation of Government grants next year. Dublin citizens are paying more property tax than elsewhere and should receive the benefits that flow from that. We cannot ask the people of Dublin to subsidise the services of every other local authority in Ireland while they receive less.”

Dublin Mid West Labour TDs Robert Dowds said it was unfair for Dublin to be "discriminated against". Mr Dowds said that while he recognised the need for a property tax, the means of calculating the amount paid per household needed to be reassessed.

Fine Gael Dublin South TD Olivia Mitchell said councils in Dublin would be hit harder if they chose to reduce the tax by 15 per cent, as they were entitled to do.

Ms Mitchell cited the example of Dún Laoghaire-Rathdown County Council, which took in €25.9 million in property tax over six months last year. She said “15 per cent of €25 million is a lot of money, so it is going to impact on services”, while the same proportion of the €1.1 million collected by Leitrim and Longford County Councils last year was nowhere near as significant. “They’ll still be getting a substantial central government grant and we’d be getting nothing from the Government if they cut it,” she said.

One Minister said some councils and TDs would like “no equalisation”, which would cause a “big windfall for Dún Laoghaire and a massive shortfall for Longford. “It’s hardly realistic and they know it but that’s politics. The objective is to make sure none of the rural counties end up worse off.”