Joan Burton (Dublin West, Labour) | Oireachtas source

I am pleased to see this recommendation included in the Bill. I pointed out to the Minister on budget day that he had left a glaring hole in the technical framework of the budget by allowing company structure to be used as a mechanism to avoid paying stamp duty. The expected revenue from stamp duty is a considerable complication in his budget arithmetic in a situation where he was under heavy pressure to spend more than seemed to be available at the time. I welcome his quick response to address what was, during the last boom, one of the worst and most widely practised instances of tax avoidance and abuse in this city and across the State. This was a notorious loophole that, prior to the cash, cost the Exchequer tens of millions of euro. I do not know whether Revenue carried out an examination of the total cost to the State from this fairly standard mechanism of avoidance, but it was certainly considerable.

I accept that the intent by the Minister in this recommendation is to close off that particular loophole. However, in regard to the valuation of shares versus the underlying valuation of a property, as set out in the recommendation, is the Minister satisfied that the real market value at which the property is being sold for stamp duty purposes is, in fact, reflected in the value of the consequential share deal? Has that potential disparity been accounted for in drawing up this provision? In other words, as it is a transfer of share, it is possible to vary the price of the shares downwards while the property value is up there, which amounts to an avoidance mechanism.

Another issue I raised on budget day is the resting of contracts. Solicitors and others would argue that this is a feature of the property business. However, at the height of the last boom, it allowed transactions to drag on for years and was effectively a mechanism for property owners, by failing to conclude a deal, to avoid stamp duty. In some cases, a licence to develop the land and enter in on the land was given but the property was not actually transferred. We saw examples of this practice in my constituency and the Minister's constituency when the Department of Education and Skills acquired school sites at extraordinarily high prices. Developers engaged in lengthy delays while, one presumes, they got technical, accounting and legal advice on this particular practice. There was a delay while they set up the arrangement and although they subsequently gave a licence to develop, very often the actual ownership of the site was delayed for a further extended period. I am not clear whether it would require amendment in law to address this issue or, rather, regulation by the Revenue Commissioners such that they would examine the reality of these types of transactions. Any site or property bought for development might be subject to this licensing system rather than there being an actual transfer of the land.

A report published yesterday by the Economic and Social Research Institute, ESRI, stated clearly that the economy is heading into another bubble, particularly in respect of land and house prices. There is no doubt about that. As such, although it is not part of the current discussion, we must find a mechanism to reduce bubble prices, especially in the case of house prices and assets being purchased in developing areas for community purposes. Otherwise, the State will be taken to the cleaners or forced to abandon the acquisition of essential sites, including for nursing homes, schools, community centres and sports facilities. The Department, the Minister and the Revenue Commissioners must be alert to that danger in view of the ESRI report. The evidence is there that we are at the beginning of, if not already in, a property bubble. Certainly, site prices are rising at an extraordinary rate. If we look back to the detailed reports on what caused the last crash, one of the trigger factors was the bubble in development land prices. There is a risk that developers will seek to get back every halfpenny they lost in the crash, and will do so at the collective expense of taxpayers.

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