Minister for Finance Paschal Donohoe has announced a review of the local property tax, the aim of which he said was to provide some stability on future liabilities.

The review will commence next month and look in particular at the 'impact of property price developments'.

At the moment, the tax is calculated on 2013 market values, but property prices have increased substantially since then, particularly in the capital.

There are concerns that the liability could increase massively in some parts of the country after planned revaluations next year.

"Even though it would be 2020 before LPT liabilities would be affected by any property revaluations, it is important that the Government is able to make its position clear in relation to LPT in a timely way so that households will be aware of its plans for the tax in advance of the November 2019 revaluation date and the associated 2020 and beyond LPT liabilities," the Minister said.

"The current review of the LPT will be informed by the principle of achieving relative stability in the LPT payments of those liable for the tax and provide clear direction on the likely payments faced by households in 2020."

The review is due to be concluded by the end of August at which point the group will provide a number of policy choices.

Warnings that tax could double

Earlier, the Chairman of the Committee on Budgetary Oversight said, if nothing changes, homeowners could face a substantial increase in property tax from next year, with some facing a possible doubling of the tax.

Speaking on RTÉ's Morning Ireland, Fine Gael TD for Dublin South West, Colm Brophy, said it was an issue that primarily affected Dublin and cities including Galway, Cork and Limerick.

However, he added, property prices have risen everywhere and an increase would affect everyone.

"If we did nothing, there would be very, very substantial increases for homeowners … But the real impact, if you look at the property price inflation between 2013 and now, it's about 70% in Dublin. So that would be a very substantial impact."

Mr Brophy said the LPT was important to funding local government and widened the tax base.

Earlier this month, Minister for Housing Eoghan Murphy said he favoured a new calculation on property tax that is not exclusively based on market value.

The property tax came into force in 2013 and figures released by the Revenue Commissioners on 5 January show that €477m was collected in property tax in 2017, with a 97% compliance rate.

One third of the amount was paid by those living in Dublin, where the average amount paid in some areas of the capital was four times higher than in rural areas.