Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

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. Budget 2018 increased the rate on such property transactions to 6% as of 11 October 2017. While the commercial property market has now recovered strongly, 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 over recent years and is approaching its pre-crisis share of gross national income (Star), GNI*. I am acutely aware that residential construction and the overall housing supply remain well below the level needed to meet demand.

With the commercial market now performing strongly, an adjustment in the rate of stamp duty on non-residential property beyond the current rate of 2% is appropriate. The yield from the increased rate is estimated to be approximately €370 million. In addition to providing additional yield, the increase to 6% should support the desired re-balancing of construction activity towards residential investment and help to address potential overheating in the sector.

I am aware of views that we have over-estimated the potential yield from the stamp duty increase. However, those views appear to be based on the additional yield from commercial property developments only, whereas the stamp duty increase I announced applies to the whole of the non-residential property market.

As regards the Deputy's concern about the perceived leaking of this budget decision, I assure her that I played no part in creating an environment in which my decision could be leaked. Speculation was rife on what I was going to do in regard to this measure and several others because they were contained in tax strategy group papers published last summer. A point was reached in the budgetary process at which commentary appeared to be pointing to how few leaks were occurring and all decisions in relation to taxation were treated very sensitively and carefully by me.

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