Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

Amendment No. 4 deals with negative equity, stamp duty and necessary adaptations to cater for people with disabilities and so forth. We tabled separate amendments, which will clearly not be reached, relating to negative equity in amendment No. 27 and stamp duty in amendment No. 26, so I will speak to amendment No. 4 on these issues.

The first issue is negative equity. Many speakers on this side of the House have spoken well and eloquently on the matter. There is a generation of people who are broken and destroyed. The Minister can blame the banks, the builders or Fianna Fáil, but it does not matter. They have a problem and they must deal with it. It is an extremely serious problem. We all know people who are deep in negative equity. They are people with whom we went to school or college or with whom we worked. Consider what the problem means for them. They now cannot afford to hold onto their home. They might have decided to move in with their parents or they might have had to move elsewhere to get work. They might own a house in Cork, for example, and could not get work there but managed to get work in Dublin.

The consequences for them are quite severe. First, they will lose the mortgage interest relief they enjoyed as an owner-occupier of the property. If they were fortunate enough to have a tracker rate, they will lose it because they are not occupying the property. A potential stamp duty issue arises, depending on when they first bought the property, because they have now vacated the property. They will now pay universal social charge, PRSI and income tax on the rental income they are receiving. Of course if they are also renting themselves, as many are, they will pay the private residential tenancies board, PRTB, charge and the non-principal private residence, NPPR, charge in respect of the house they are renting out.

These are the people who are in negative equity. The Minister is a wily politician and has much experience. In the last general election campaign he identified a market, targeted the people who bought their homes between 2004 and 2008 and promised them additional mortgage interest relief. He delivered on that in the Finance Act earlier this year. It was a crude measure and could have been better targeted, but the Minister implemented it and it helped many people in that category. However, he appears to be oblivious of the circumstances in which these people find themselves in respect of this property tax. As has been said, these people will spend the next 20 or 30 years getting back to a starting position.

What annoys me is that the Minister is proposing exemptions in the Bill for people who buy property now or in the next number of years. These are people who will buy at what might be the bottom of the market, although who knows whether property prices might fall by another 50% over the next two years? People who buy for those prices will get a break and will be exempt from this property tax up to 2016, but people who bought at the peak in 2006 and 2007 will get no relief. That is fundamentally unfair. If Fianna Fáil had proposed this, the Minister would say we were bailing out builders, developers and looking after our friends again. That is what the Minister is doing here, and he is ignoring the plight of the people who paid at the peak and many of whom are now in negative equity. Let us be honest, anybody who bought a house from the turn of the millennium on is now probably in negative equity. It is a major problem for them.

On the stamp duty issue, the average amount of stamp duty paid on the purchase of a house was approximately €20,000. The Thornhill report examined this and did not recommend that the Minister take that into account. The Commission on Taxation also examined it and came to a different conclusion. It recommended that the Minister make some type of credit available for people who paid a large amount of stamp duty. The people who paid the stamp duty probably will be the people who purchased their houses in recent years and probably will be in negative equity. They might have paid €20,000 to €30,000 in stamp duty. As far as they are concerned, they have paid their property tax for many years to come.

Earlier, the Minister outlined his definition of fairness. He said everybody should pay something. There is merit in that argument, but the problem with the way the Minister has structured this tax is that it is not based on capacity to pay. The Minister said people should pay something based on their capacity to pay. However, two families could be living in houses that are located side by side. One family might have two handsome incomes and be doing quite well. This property tax will be a bearable burden for them and will not cause a dramatic change in their lifestyle. The family next door, however, might have had only one income and have suffered the loss of that income due to the economic crisis and now face unemployment. The family lives in an identical house which will be valued at the same level under this tax. The family's liability for the tax will be also identical, despite the dramatically different circumstances in which both households find themselves. That is not fair. I do not agree with the Minister's definition of fairness if that is what he means. There should have been a way of taking capacity to pay into account in this proposal.

I have no problem with the third issue relating to adaptations which was outlined by Deputy Doherty,

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