Brian Cowen (Laois-Offaly, Fianna Fail)

The figures the Deputy is using are figures presented by the Irish Home Builders Association as part of its pre-budget submission last year, which estimates that the total tax take from the cost of a new home is more than 40%. However, the calculation by the IHBA is based on the presentation of statistics in a manner that is open to question. In its calculation, the IHBA included VAT as a percentage of the house price net of VAT. Normally one would show the tax as a percentage of the overall price, including tax. If, for example, a person who earns €10,000 pays tax at 40% and PRSI at 3%, it would not be the case that the individual's liability for tax and PRSI would be expressed as a percentage of net income, namely, 75%. To say one is paying €4,300 out of €5,700 would be misleading.

Taking the base figure used by the IHBA, and presenting the statistics, as would commonly be done in practice, as a percentage of the total cost, including VAT, the actual cost of a new home that accrues directly to the central Exchequer through taxation is in the order of 28%, based on both south Dublin and national prices. This is broadly the order Exchequer tax represents on all economic activity across the economy. In addition, the IHBA has included in its calculations pay-roll taxes, even though it accepts that construction labour might be employed elsewhere in the economy.

Given the high levels of employment currently experienced in the building industry, and that it is a pay-roll tax and not specific to housing, it appears there is a strong argument for exclusion of that tax. Removing this element reduces the central Exchequer tax take to almost 18.5% for a house in Dublin and under 17% based on national prices. On the basis of the figures used by the IHBA for a new house in Dublin, the Exchequer tax take, comprising capital gains tax, stamp duty on site transaction and corporation tax on profit and VAT, excluding pay-roll taxes and other local authority charges and levies, is €54,365 of an average house price of €295,000, which is less than 18.5%.

Even if we add the estimates of home builders for other charges, which are not strictly Exchequer taxes but rather local authority charges such as the development levy application to each house and the cost per house of the obligation of the developer to transfer land under Part V of the Planning and Development Act 2000, that brings the total take by the State, excluding pay-roll taxes, to just under 26%, or €76,010, for a house in Dublin and less than 23% for a new house based on national prices.

On the other question——

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