Brendan Howlin (Wexford, Labour) | Oireachtas source

It is at this time of year that the Government and individual Ministers start flying kites about what might appear in the budget.

One kite floated in the newspapers this week was that the Minister for Finance, Deputy Donohoe, is considering a capital gains tax break to charge less than half of the regular amount in tax due on the sales or development of vacant property. During the mismanagement of the economy in the 2000s, our tax system became riddled with special exemptions and inducements to private developers. It narrowed and weakened our tax base which collapsed in 2008. Tax revenue fell by 30% which is not normal in any developed economy, yet the Minister for Finance seems prepared to again consider the same failed strategy. He should not.

A second flaw in this approach is that tax breaks create perverse incentives. Instead of business investing on the basis of developing goods and services to meet people's needs in our society, tax breaks drive money to be invested in a tax product which offers the best return. We saw the results of this in poorly planned and poorly constructed buildings right throughout the Celtic tiger period.

The third problem with the Minister's approach, as published, is that it is all carrot and no stick. After 15 years of a prolonged housing boom from the 1990s, we still had a situation with trees growing out of crumbling derelict buildings all around our towns and city centres. This is only possible if it is more profitable to hoard land and to release properties and land slowly, one site at a time, to maximise speculative gain. There is no penalty for the owners of properties from doing just that.

The only way to end land hoarding and speculation is to introduce taxes and duties on property owners. All over Europe, social democratic market economies place stringent requirements on property owners to maintain and develop their properties. Put simply, owners of vacant property should use it or lose it. People's urgent need for housing cannot wait. Any serious economic analysis quickly reveals that tax breaks are the wrong way to boost housing supply. That was the failed strategy of the past.

Will the Tánaiste confirm that property tax breaks will not be proposed in the upcoming budget in order that we do not repeat the failed and disastrous policies of the past?

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