The move is a bid to quell widespread disquiet in the county over the new tax which comes into force on July 1.
It replaces last year’s bungled Household Charge.
With the Revenue given widespread powers to collect the new tax, most people will be forced to pay.
Payments will be deducted from the salaries or welfare payments of those who refuse to pay directly.
Minister Hogan’s move is a bid to show the tax really is a local one; the remaining 20% of the money will go into a central fund to subsidise all councils, which means Donegal could end up keeping all of the money collected here, and subsidised by larger urban area councils like Cork and Dublin, could get even more in its block grant.
One county council source told Donegal Daily: “This is good news as the Government had previously said that just 65% of the money would stay in the council area where it is collected.
“Now that 80% comes directly to council, and the other 20% could come here as well it really is going to help local Donegal services provided by the council.”
Earlier this week local campaigners vowed to continue their fight against both property and water taxes.