Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

I have about 400 notes coming at me from all different directions. We have had conversations previously about other taxes. The 2% stamp duty rate was the emergency rate. We had to reduce the rate to this to try to get the property market moving. The standard rate in times gone past was 6%. The rate has returned to that. It was based on a sustainable, broad tax base. The rate was as high as 9% prior to its being 6%.

We discussed earlier the VAT rate for the hospitality sector. There is always pain when taxes reduced during an emergency are returned to a sustainable level that puts the nation's finances onto a solid footing. Everybody in this room, and in both Chambers, wants the taxation system to be sustainable so we will not return to the cliff face we were at in previous years.

If it is acceptable, I will not address the matter of consolidation until speaking on amendment No. 67. I will read my notes and deal with each section in turn.

Amendments Nos. 64 to 66, inclusive, and 69 have been grouped together. Amendments Nos. 64 and 65 deal with the proposed amendments to the stamp duty rates charged on non-residential property. Amendment No. 66 is specific to agricultural land, and amendment No. 69 seeks a report within six months on the sustainability of stamp duty receipts from commercial property.

Budget 2018 includes an adjustment to the rate of stamp duty on non-residential property from 2% to 6%, projected to raise €376 million in 2018. This is based on estimates in Revenue's pre-budget ready reckoner, which showed that a 0.5% increase in the stamp duty rate applying to non-residential property would result in a €47 million increase in the yield. From a €376 million yield, a four percentage point increase was derived.

For non-residential stamp duty, this yield projection for 2018 is based on receipts for previous years, combined with an ongoing assessment of expected receipts by the end of the current year and for next year as well as impacts of earlier policy changes.

Following budget 2018, Revenue has updated the ready reckoner to a post-budget basis, taking account of budgetary changes and revised growth forecasts from my Department for 2018. The post-budget ready reckoner indicates that each 0.5% increase in the stamp duty rate applying to non-residential property would result in a €49 million increase in the overall yield. This would indicate that the estimated additional yield from the increase in stamp duty rate on non-residential property could be in the region of €392 million rather than €376. While the estimated yield makes an assumption of no behavioural change, basing receipts on 2016-17 levels and trends is the most reasonable option. The estimate also assumes current exemptions and other reliefs remain unchanged.

There has been some commentary regarding the estimated yield of €376 million. Most of the commentary has focused on the level of commercial property assets traded, with estimates putting this between €2 billion and €4.5 billion per annum. It is clear from Revenue data, however, that the levels of commercial and other non-residential property transactions significantly exceed that which has been estimated by some commentators. A simple extrapolation of the receipts for 2016, based on €256 million at a rate of 2%, implies transactions valued at over €12 billion in that year. Adjusting for significant once-off transactions in 2016, which were stripped out, receipts in the three-year period 2014 to 2016 were quite stable. For the nine months from January to September 2017, revenue receipts indicate a level of commercial activity in the order of €6.4 billion. This is significantly more than the estimates of certain commentators, and it is reasonable to expect this level of activity to continue.

The latest forecast from CBRE for new office supply in Dublin from 2017 to 2020 is 880,000 sq. m. This includes projects with planning permission granted and planning applications submitted, as well as projects under construction and recently completed, in 2017.

Naturally, tax receipts under all heads are monitored closely and reported on in the monthly fiscal monitor, which incorporates the Exchequer statement. Any developments are, of course, examined by my officials. This ongoing monitoring is more useful than a static report at some future time.

Amendments Nos. 64, 65 and 66 would result in a reduction in stamp duty yields that would have to be made up from other taxation measures in order to maintain overall budget arithmetic. I am informed that the estimated loss in yield under amendment No. 64 would be €162 million, while the estimate in respect of amendment No. 65 would be €105 million. The estimated reduced yield from Deputy Doherty's proposal, in amendment No. 66, would be €32 million.

In my budget statement I announced an extension of consanguinity relief for another three years and that the stamp duty rate applying under that scheme would be fixed at 1%. Consanguinity relief is availed of in transferring farms to younger family members and is particularly relevant where the transferee does not qualify for an alternative relief, such young trained farmer stamp duty exemption.

Following discussions with the Minister for Agriculture, Food and the Marine, I decided that in addition to extending the period of the relief and fixing the associated stamp duty rate at 1%, the age rule for the consanguinity relief will be removed. This means it will be possible for all gifts and sales of farmlands to closely related family members who do not qualify for the 100% exemption from stamp duty under the young trained farmer scheme to benefit from the consanguinity relief at a stamp duty rate of 1%. For the reasons I have outlined, I do not propose to support amendments Nos. 64, 65, 66 and 69.

There are a number of other issues with which I want to deal. Land purchase is not the only option. I am one of the farmers in the room, and there are others. Budget 2014 reflected the analysis of the release for the farming and agriculture sectors. There is a really substantial relief. Farmers have the opportunity to rent their land to other farmers tax-free for the income up to €40,000. This is really beneficial. Farmers enter an agreement to have a long-term lease, the lessor can get up to €40,000 for the duration of the lease. It is not correct to state nothing has been done for farmers who choose to expand. A tax-free sum of €40,000 is a lot of money over the period of the lease. That should not be ignored.

I want to touch on some of the issues mentioned. Commercial stamp duty at 2% yielded €252 million in 2016. At a rate of 6%, we are stating it will yield €376 million, representing an increase of €94 million based on an increase of 4%.