Richard Bruton (Dublin Bay North, Fine Gael) | Oireachtas source

I move:

(1) THAT for the purposes of stamp duty charged by virtue of the Stamp Duties Consolidation Act 1999 (No. 31 of 1999) Schedule 1 to that Act be amended--(a) in the Heading “CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance.”--

(i) in paragraph (4), by substituting “6 per cent” for “2 per cent”, and

(ii) in paragraph (5), by substituting “1 per cent of the consideration which is attributable to property which is not residential property” for “a duty of an amount equal to one-half of the ad valorem stamp duty which, but for the provisions of this paragraph, would be chargeable under this heading”,

and

(b) in the Heading “LEASE”, in paragraph (3)(b), by substituting “6 per cent for “2 per cent”.(2) THAT paragraph (1) of this Resolution shall have effect as respects instruments executed on or after 11 October 2017.

(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

As the Minister for Finance stated, the Finance Bill will contain transitional arrangements to cater for situations in which binding contracts have been entered into, as happened previously when stamp duty impositions were changed.

This is the resolution on the commercial property stamp duty increase and the extension of consanguinity. In 2011, the rate of stamp duty applying to non-residential property transactions was fixed at a flat rate of 2% as a supply side measure. The rate has not been adjusted since then. The effect of this financial resolution will be to apply a rate of 6% to non-residential property transactions as of 11 October 2017. An economic rationale for the measure is published as part of the budget documentation.

The commercial property market has recovered and is performing strongly. However, the recent sharp increase in investment in construction activity poses a risk that this could, if left unchecked, give rise to overheating in the sector and in the domestic economy generally. This view is shared by commentators, including the ESRI. Investment in non-residential construction has expanded rapidly in recent years and is approaching its pre-crisis share of GNI*, which is the new sustainable definition of national income.

The Minister for Finance is acutely aware that residential construction and the overall housing supply remain well below the level needed to meet demand. The Minister considers that, with the commercial market now performing exceptionally strongly, an adjustment in the rate of stamp duty on commercial property beyond the current rate of 2% is appropriate. The yield from each 1% increase is estimated to be in the order of €100 million. In addition to yielding approximately €400 million, the increase to 6% will allow the desired rebalancing of construction activity towards residential investment and help to address potential overheating in the construction sector. This financial resolution provides that stamp duty applicable to leases of commercial property will also increase to 6%.

Regarding commercial land purchased for the development of housing, the Minister announced in his Budget Statement that he will introduce a stamp duty refund scheme to assist with our housing policy challenges. The details of the refund scheme will be set out in the Finance Bill, but will be subject to certain performance criteria, including the commencement of housing development within a period of 30 months. The scheme will allow for a refund of two thirds of the stamp duty paid in accordance with the criteria to be specified in the Bill. This measure should avoid increased stamp duty feeding into house prices.

In addition, the Minister for Agriculture, Food and the Marine has highlighted to the Minister for Finance that consanguinity stamp duty relief is set to expire at the end of this year. Under certain conditions, consanguinity relief currently provides for a net 1% stamp duty rate on property transfers to certain close relations, such as a father and son or aunt and niece.

The Minister for Finance is extending this relief by three years as otherwise farmers who are planning succession based on this relief will find themselves subject to the full rate of stamp duty, which is to be increased to 6%. The Minister is also fixing the stamp duty rate for persons who satisfy conditions for consanguinity relief at 1%. This means persons availing of consanguinity relief will continue to pay stamp duty at 1% for the next three years. This change also comes into effect as of 11 October 2017.

That is the proposal being set out. As the Minister outlined, it is designed to raise duty in a way that is consistent with the position in the housing and non-housing market where one is proceeding very rapidly and the other needs attention. This is a provision in conjunction with other provisions in the budget that will help to unlock land for housing development while raising important revenue from a sector that is now in a very strong and healthy condition.

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