Paschal Donohoe (Dublin Central, Fine Gael)

-----and I do not want to not respond to the Deputies on what is a significant element of the Finance Bill, given that Minister of State, Deputy Troy, would not have heard what the speakers said in the way that I have.

In relation to the point regarding this measure taking effect from 8 October, the advice I have received is clear. VAT is a consumption tax that is placed on a product whenever value is added at each stage of the supply chain from production to the point of sale. If legislation was introduced that sought to apply different rates of VAT to the sale of identical points at the same point in time, based on the circumstances or timing of when work on these goods began, it would breach the principle of fiscal neutrality. This is the principle that the supply of goods and services that are identical or sufficiently similar from the perspective of a consumer should be taxed in the same way.

The advice I have received is clear. I have to go back to what is the bigger picture in relation to why I am bringing this in. Yes, it will be improve the profitability of apartments, but we have tens of thousands of apartments that are not being built. We have to find ways in which they can be built and their delivery through the private sector can be accelerated. The numbers with regard to that at the moment are stark. We now have 98,000 apartments that have planning permission but no projected start date. That is 98,000 homes that could make a huge difference to people who could be living in them and paying a mortgage or rent.

What I am trying to do is identify ways in which we can accelerate the delivery of those homes. While I understand the deadweight argument clearly, I have also been clearly advised that because this is VAT, and VAT refers to point of sale, I cannot differentiate with regard to the point of commencement. The advice has been clear with regard to that.

There is a further question to consider that is independent of the advice and does not arise because the advice to me has been so clear. If I said that the rate of VAT would be applied at some point in the future but not immediately, what effect would that have on the apartments currently being commenced and would it make a difference to the point at which somebody would be able to purchase them? That matter does not arise because the advice I received was so clear, but it is an additional policy matter that I would have considered if the advice was not as clear as it is.

In relation to the question of where the principles I have been advised of come from, they come from the first EU directive and the ruling of the Court of Justice of the European Union with regard to the matter. I heard what Deputy Doherty said with regard to it and his recognition of the general principle of equal treatment and the second category of the general principle of equal treatment, which I am aware of, but the advice I have on this matter is very clear. To differentiate based on the point of consumption and the point of commencement is something that is not possible to do because we are talking about VAT. That is why it is being implemented in the way I am recommending to the committee this afternoon.

With regard to the assessment of this that has been there in the past, I am bringing forward this measure on the basis of the social grounds I outlined earlier. Accelerating the delivery of more homes is very consistent with an area of social policy and offers the best prospect that we have of meeting the homes targets that we need to deliver through apartments. If we do not build more apartments, it will be extremely difficult to meet the target that is there for more homes because of the planning needs we have to get more homes in higher density environments.

Is this giving more to developers? I acknowledge that it is an economic support that is being made available to developers. It is a means to an end. The end is to get more homes built and to get the apartments that have planning permission but are not a reality built and turned into homes.

Deputy Farrell asked me a question regarding what this could me for outside of Dublin. Of the 98,000 apartments I referred to earlier, some 42,000 are in Dublin, which means there are 56,000 allocated in different parts of our country, maybe including in Deputy Farrell’s own city. That figure is so big, I want to find a measure that can be targeted and play a role in accelerating their delivery.

Deputy O’Callaghan questioned whether this could influence the density of homes being built. I heard his description of the benefits of medium-density developments, and I agree. These are really good products when they are delivered, but we are delivering enough of them. In the part of Dublin I am most familiar with, they are not happening at the scale they need to happen. What we are doing could affect the density of homes that are built in the future by seeing more apartments built, but they still have to meet planning regulations. The density still has to be of a certain level. They have to be delivered up to a very high quality. We have a choice between the imaginary potential of homes that have planning permission but are not being built and the reality of trying to find a way of putting that forward and leading to them being delivered.

Have we done any analysis on the effect this could have on different patters of home ownership?

We have not done that. However, we have looked at the additional homes that could be delivered through this measure and that is the argument I have taken the committee through.