Stephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

Businesses all over Dublin are coming under significant pressure because of spiralling commercial rents. Dublin has the second highest rents in the eurozone. Not only are they high, they are rising quickly. In the past two to three years, commercial rent in Dublin has nearly doubled. Obviously, that is bad for businesses, but it is also bad for consumers, who must pay too much money for what they buy, and for people who are trying to buy or rent a home, given that the returns on developing commercial property are so much higher than those on residential property that developers want to build offices and not homes.

Why is this happening? It costs approximately the same amount to build in Dublin as it does everywhere else. People earn approximately the same amount in Dublin as they do everywhere else. Hence, the cost of commercial rents should be the same, but they are not.

One of the reasons for this is tax breaks. In recent years, the Government introduced generous tax deferral mechanisms for landlords, including large foreign landlords, namely, real estate investment trusts, REITs, and Irish collective asset management vehicles, ICAVs. These tax deferral mechanisms have led to large foreign landlords pouring money into Ireland and, specifically, Dublin, which is jacking up rents on commercial property as well as the cost of commercial and residential property.

We were told that these mechanisms were going to be shut down in the Finance Bill. That was the clearly stated intention of the Minister for Finance, Deputy Noonan. He stated that economic activity carried on in Ireland must be taxed properly in Ireland. This obviously includes property. However, not only has the Finance Bill not shut down REITs and ICAVs, but it has turned tax deferral mechanisms into complete tax breaks. We have gone from landlords being able to defer tax to them having to pay no tax whatsoever.

The Finance Bill will make the entire commercial property sector tax free. This will tax a large chunk of assets out of the tax net. It will drive up the cost of doing business, which will drive up the cost of living and lead to Irish banks lending into a property bubble again less than ten years after the last property bubble collapsed.

In the middle of a housing crisis and a commercial property bubble and at a time when we need more public money to invest in services and infrastructure and we need to be reducing the costs of business and living, why is the Government about to make the entire commercial property sector completely tax free?

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