Brian Cowen (Laois-Offaly, Fianna Fail)

The Government is very aware of the importance of the construction sector to the economy, as evidenced by the large numbers working in the area and the sums that come from it in taxation. With the sector directly responsible for 13.5% of total employment, Government policy should be aimed at supporting an important driver of economic activity.

The provision of adequate numbers of new houses has been a key policy priority in recent years. We have seen numbers of house completions increase to over 93,000 in 2006, up from 52,000 in 2001. We are now at a stage where housing demand is beginning to match housing supply, and that is reflected in the market, with a significant slowdown in property inflation. That is clear evidence that our housing policy is working well.

The stamp duty code applies a single rate to the full value of the property, where the rate applicable depends on the value of the property concerned. Given the growing market of recent years, it is not surprising that the yield from stamp duty has increased. However, such growth cannot be taken for granted in future. However, as the Deputy is no doubt aware, no stamp duty is paid on the vast majority of new houses bought by first-time buyers and other owner-occupiers.

Consideration of ways to improve the structure of the tax would have to have regard, among other things, to simplicity and cost. For example, the estimated cost of introducing a system whereby stamp duty would be applied on a marginal basis for houses priced above the current exemption thresholds, based on the full year 2006 yield, is €553 million — that is, more than 42% of the yield on residential property.

In particular, the Government wants to assist those who are trying to buy their first home. That is why I increased the exemption and reduced stamp duty rates for first-time buyers in budget 2005 and why I increased mortgage interest relief for first-time buyers in budget 2007, with benefits to those about to purchase and those who had purchased in the last seven years. By making these changes, I was able to assist first-time buyers directly without impacting on the overall market conditions.

This must be a key consideration in the continuing evaluation of policy in this area given the vital importance of the construction sector to the economy.

Stamp duty is a significant contributor to the Exchequer, which helps fund public services such as health and education, while keeping the direct tax burden low, thereby facilitating continued economic success which is of benefit to all taxpayers. It has helped us to reduce taxes on work and enterprise with clear benefits for the economy as a whole.

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