Rural TDs and the hotel industry are gearing up to fight a plan to bring in a new Dublin hotel room tax.

A report released yesterday shows that tax on overnight accommodation could raise more than €12m a year for the cash-strapped capital.

Kerry TD Michael Healy Rae last night vowed to fight it "vehemently" in the Dáil and said Dublin would be "killing off the golden goose" if it tries to charge rural people even more for staying in Dublin.

The proposal has broad support among Dublin councillors, who see it as a way out of the city's budget hole and a way to fix the crime ridden north inner city, without losing support from local residents.

The idea of a 1% hotel tax was first proposed by the States Commission on Taxation and Welfare and is backed by yesterday's Dublin City Council report.

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Mr Healy Rae said: "They are privileged to have visitors and now they are trying to squeeze every last bit out of us. Look at the price of a pint of Guinness in Dublin, the price of petrol to get there has doubled in recent years, the price of accommodation is through the roof.

"How much more do they think people will take?"

Mr Healy Rae said the tax "doesn't reflect very well on the councillors trying to squeeze that last drop from us".

However, yesterday's report said the council doesn't have the legal power to introduce the tax and it would likely require a Dáil bill - where it is likely to receive "vehement" opposition from rural TDs.

The report will go before Dublin City Council's finance committee next Thursday. Committee chair Seamus McGrattan and several councillors said they would support the proposal.

Daryl Barron of Fianna Fáil said it would be a way to raise funds for the badly needed rejuvenation of O'Connell Street and the surrounding areas.

He added: "We've had a Prime Time investigation showing what is happening in the area. We have Debenhams and other shops closing on Henry Street, partly because people don't feel safe.

"We need a clean, safe city and the accommodation levy is a way to do that, without raising the local property tax which would only hurt marginalised people in the city that can't afford it."

Both he and Mr McGrattan said they expect "resistance" from the hotel industry but said there are similar levies in Barcelona, Madrid and many other European cities that attract large numbers of tourists. Mr Barron said that the idea would require Dáil legislation and could be used by other towns and cities to raise finance.

Councillors Michael Pidgeon and Hazel Chu of the Green Party also said they support the idea as it helps the city's finances without damaging tourism.

The Irish Tourism Industry Confederation (ITIC), an umbrella group for hotels, other accommodation providers, pub-owners, restaurants and attractions, previously said it would strongly oppose the tax and said it would drive Dublin businesses into insolvency.

It said it would also cause yet more inflation and leave Ireland a less attractive place for tourists.

The ITIC includes the Irish Hotel Federation, Restaurants Association of Ireland, vintners groups, airliners, ferry operators and major tourist locations like the Guinness Storehouse.

The DCC report estimated that a tax or levy based on 1% of the cost of accommodation in hotels in Dublin could raise €12.2million in a full year based on an average occupancy rate of 78.5% and an average daily rate of €171.

The Commission on Taxation and Welfare, which sought to identify how the tax and welfare systems can support economic activity and promote increased employment and prosperity in Ireland, recommended the introduction of an accommodation tax in a major report published last year.

It pointed out that several European cities including Paris, Berlin and Vienna already have such taxes applied to hotels.

Rates across EU member states range between an average of €0.40 and €2.50 per night and vary depending on the type of accommodation.

Members of Dublin City Council's finance committee subsequently sought a report from council officials on the potential yield of an accommodation charge if one was introduced in Dublin.

The report, which will be presented to councillors at a meeting of the finance committee on Thursday, stressed that Dublin City Council does not have the legal capacity to introduce a hotel bed tax.

It added: "Requests made to Government in the past by Dublin City Council to enact legislation facilitating the introduction of a hotel bed tax at local authority level were not successful."

The issue is listed in the finance committee's current work programme and councillors will be asked to consider an agreed approach to proceed incorporating full engagement and partnership with key stakeholders including hotel and accommodation providers.

Mr McGrattan said: "It's just one option as part of our overall examination of different ways to find other revenue sources. A hotel bed tax makes sense and it works very well in other cities."

However, he acknowledged that the cost of any tax would need to be kept low "so that it would not affect tourist numbers".

The Sinn Féin councillor said the important issue was to introduce legislation that would allow local authorities across Ireland to introduce a tax on visitor accommodation if they wanted to.

He added: "We hope that this report will help to start that debate."

However, any attempt to impose a tax which could affect the price of tourist accommodation is likely to face strong opposition from hotels and other accommodation providers.