The government is demanding councils cut make cuts worth 13 billion euros over the next five years - three billion euros more than President Emmanuel Macron proposed during his election campaign.
The announcement follows last week's decision that total public spending will be reduced by 64.5 billion euros over the next five years - 4.5 billion euros more than initially announced - to reach the EU's target of a public deficit below 3.00 percent of GDP.
Darmanin broke the news to a conference that brought together ministers and 16 representatives of local government groupings, the first of what is planned to be a six-monthly event.
Prime Minister Edouard Philippe promised consultation with local authorities but insisted that the government would not change course.
Residency tax to be reduced
But he faced opposition both to the cuts and to the government's proposal to drastically reduce the number of households paying the residency tax, which currently provides 22 billion euros to local authorities' budgets.
The government argues that the tax, at present paid by 27 million people, is unfair because it is not based on income but on the value of property.
It proposes to compensate local authorities, whose income it estimates will fall by 8.5 billion euros, from the revenue derived from a rise in the CSG, a national social security tax levied on incomes.
But François Baroin, a senator for the right-wing Republicans party who also heads the French mayors' association, on Sunday declared he was "firmly against" the measure because the tax is "first and foremost a link between the local authority and its residents".
'Enough is enough'
Although the residency tax is not the only levy local authorities can make, opposition politicians claim its abolition will undermine their financial autonomy, which is guaranteed in the French constitution.
"Compensation by the government, we don't really believe that will happen," Republicans Senator Philippe Bas commented to Sud Radio and Public Sénat TV before the conference opened.
The government also plans to shed 70,000 local government jobs.
Baroin on Monday argued that local authorities have made 34 percent of the savings in public expenditure over the last three years, while claiming that "80 percent of the debt is the responsibility of the state".
"Enough is enough!" he added.
Macron has also promised decentralisation.
Philippe on Monday promised that in this case "nothing will be imposed from on high" but that fusions of local authorities will be encouraged.
The International Monetary Fund on Monday praised Macron's "ambitious" reform programme, saying his spending cuts and tax overhaul could "go a long way in addressing [...] longstanding economic challenges".