Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

In the light of reports of rising prices in this sector, it is incumbent on the industry to ensure that this relief continues to be passed through fully to the consumer. However, let me be very clear, the taxpayer cannot be the only stakeholder keeping costs down in the sector. If prices begin to rise, the case for retaining the measure diminishes.

The reduction in the VAT rate for tourism services to 9% was funded by the 0.6% pension levy I introduced in the jobs initiative in 2011 and continued in the budget last year. Without the pension levy there would have been no VAT reduction. This is a fact. Not only would this have meant that the thousands of jobs that have been created in the sector may not have been created but that thousands of existing jobs could have been at risk. As a result of the overall improvement in the country’s finances, I am now in a position to continue the VAT reduction but I am also ending the 0.6% pension levy at the end of 2014.

The additional 0.15% pension levy I introduced for 2014 and 2015 will expire at the end of 2015.

Private and Social Housing Market

Every economy needs a fully functioning property market. Despite progress in recent years, the market is not currently meeting the needs of citizens. This is evident in private housing, social housing and the rental market, particularly in Dublin. There is strong demand for housing but insufficient supply. The State alone cannot meet the private and social housing needs of all citizens, nor can it use taxpayer’s money to subsidise private building and construction companies or guarantee their debts and liabilities. Under the Construction 2020 strategy, the Government is removing blockages from the system to get the market moving, generate building activity and increase supply. Across government, we are taking action to support the private and social housing and rental sectors by addressing issues in the planning regulation and development systems, the supply of land and upgrading of existing housing stock and the financing of private and social housing development. The Minister for Public Expenditure and Reform will address the issue of social housing in his statement. My colleague, the Minister for Environment, Community and Local Government, has announced changes to the Planning Act and will be making further improvements to the system in due course.

To increase and improve the housing stock, I am bringing forward a number of measures. The home renovation incentive, HRI, has been very successful to date, with just under 9,300 homes on the HRI online system, representing nearly €190 million worth of works involving some 3,000 contractors. The incentive is generating employment in the tax compliant construction sector and increasing sales in building supplies, hardware and related businesses. To support legitimate operators in the rental and construction sector and help to upgrade the quality of private rental stock, particularly at the lower end, I am extending the home renovation incentive to rental properties the owners of which are liable to income tax. This means that this very successful scheme will now be available to landlords for work carried out from budget night until the end of 2015. This will allow work to be carried out in a cost effective manner and I expect the savings realised under the scheme to be reflected in rent levels.

The living city initiative, announced in budget 2013 and extended last year to all six cities, targets certain areas that are most in need of regeneration in these cities. Discussions with the European Commission are at an advanced stage and I am hopeful the local authorities in each city - Dublin, Cork, Limerick, Waterford, Galway and Kilkenny - will be in a position to suggest final proposals for eligible areas in their cities later this year in time for the full roll-out of the initiative in early 2015. This is a very attractive initiative designed to bring families back into city centres and maximise the use of existing pre-1914 buildings by transforming them into modern homes. This initiative allows home owners to offset the entire cost of renovation against their income tax over a ten year period.

I am also removing the capital gains tax relief I introduced to incentivise the purchase of property between 7 December 2011 and the end of 2014. It has achieved its objective of increasing property transactions and is no longer needed.

I am removing, with effect from 1 January 2015, the 80% windfall tax applying to chargeable gains on the disposal or development of land which are attributable to planning decisions made since October 2009. The 33% rate of capital gains tax and other standard taxation arrangements will now apply to the property market, as it does to other normal functioning capital asset markets.

To support first-time buyers saving for their first homes, I am introducing a refund for deposit interest retention tax, DIRT, on savings used to purchase their homes. This refund will apply from budget night and will run until the end of 2017 in respect of savings up to a maximum of 20% of the purchase price.

As a result, first-time buyers will be able to save for their first home and retain 100% of the interest they earn on their savings. I expect the banks will introduce specific savings products to support this new initiative.

The Ireland Strategic Investment Fund, ISIF, under the auspices of the National Treasury Management Agency, NTMA, is exploring ways through its commercial mandate to support financing projects that will enhance the supply of housing. Potential options include the development of house builder investment funds, enabling of large-scale development projects and investment in social housing public-private partnership projects. There will be no return to the past, where tax incentives for developers drove supply.

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