Joan Burton (Dublin West, Labour)
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Question 54: To ask the Minister for Finance his views on the widespread use of avoidance mechanisms in respect of development land and stamp duty, particularly the use of licensing arrangements and the transfer of property via the sale or transfer of shares in a company; if his Department or the Revenue Commissioners have carried out an examination of the actual and potential loss of stamp duty revenue to the Government and the impact of stamp duty avoidance mechanisms on house purchasers and others acquiring property; the estimated cost of avoidance mechanisms; the number of deals in which avoidance mechanisms are involved; and if he will make a statement on the matter. [39326/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Revenue Commissioners have been examining the operations of stamp duty and developers and have undertaken a survey of a number of developers to gather more precise information. I will decide what to do when I receive the observations of the Revenue Commissioners. Stamp duty applies when a title to property is legally conveyed. A legal instrument must convey the title, but such an instrument is not created when a licence is given.

Regarding the conveyance of shares in a company, it has long been the position that conveyances are charged at 1% of the value of the shares irrespective of the assets of the company. There is no provision in law for examining the underlying assets of the company. Legally, a company is a separate legal person to its shareowners. I would be reluctant to overturn that distinction lightly and to make the operation of stamp duty law uncertain or complex in terms of the exchange of shares and company transfers generally because they are a normal part of commercial life.

Joan Burton (Dublin West, Labour)
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According to the pre-budget outlook, first-time buyers will pay €70 million in stamp duty. Does the Minister know how difficult it is for them to understand how he can endorse in the House a situation in which, one month ago, a deal on land transfers to the amount of approximately €400 million in respect of the Irish Glass Bottle site was made? It involved a share transfer and attracted a 1% stamp duty rate. Had the Minister closed that avoidance mechanism, €30 million would have been paid in stamp duty in a similar fashion as the stamp duty paid by first-time buyers of secondhand houses worth more than €317,000.

In the event of the Irish Glass Bottle site being developed as housing and apartments, which has been indicated, first-time buyers of new homes at that location will pay stamp duty if their homes cost more than €317,000. However, Fianna Fáil's friends in the building and development industry have two mechanisms for avoiding paying their fair share, namely, the licences to build and the transfer of shares.

I have raised this question with the Minister seven times since he entered office. Where is the review, why is it taking so long and what is the Minister afraid of in reforming these avoidance mechanisms? For first-time buyers, it is difficult to understand why they are caught for stamp duty when the big boys are not.

Brian Cowen (Laois-Offaly, Fianna Fail)
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This year, Revenue is conducting a broad review of the construction industry. When it reports before the Finance Bill, we will see what it has to say about the situation.

Under the stamp duty code, a developer can obtain a licence from a landowner to build on that land without incurring a stamp duty charge at that stage of the venture. There is no duty on the licence, as the licence only confers on the developer a right to build on the land. Once the buildings, whether commercial or residential, are completed, the conveyances or transfers of such properties to purchasers are chargeable to stamp duty in the normal manner unless specific exemptions are available.

Due to the nature of stamp duty being primarily a tax on legal instruments under which the interest in the property passes, no stamp duty is payable on the legal instrument until the title passes. However, if the property is paid for by a developer in the normal way instead of via taking a licence to build on it, the situation would be reflected in the purchase price because there would be an up front cost to the developer.

In the other situation, which has been a feature for some time, developers get licences to build on land and sell the building to purchasers. In effect, the purchaser buys from the developer and the original landowner. I have asked the Revenue Commissioners to report to me to allow the full consideration of any issue that arises in respect of this matter prior to the Finance Bill 2007.

Joan Burton (Dublin West, Labour)
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Does the Minister have figures on the amount of stamp duty avoided by these mechanisms, the number of such transactions and the amount involved? Does the Minister agree the situation is a scandal and that it is open to him to close these loopholes to ensure a sense of justice and equity between ordinary people buying family homes and big developers and builders, the type of people who go to all of Fianna Fáil's social functions? I cannot understand why the Minister could not take action to close the loopholes available to his friends in the building industry and introduce a level playing pitch.

Brian Cowen (Laois-Offaly, Fianna Fail)
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The continual reference to personal friends is a joke. From the point of view of the person who grants a licence to a developer rather than making an outright sale of the lands concerned, the same amount of capital gains tax would arise as if there were such a sale.

Joan Burton (Dublin West, Labour)
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We are discussing stamp duty.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Sub-sale relief has always existed in the stamp duty code and licensing arrangements with landowners have been a traditional way in which developers develop land. The arrangements involving powers of attorney are more recent, but in recent years and owing to prosperity, the proliferation of developments structured in this way has come to the notice of the Revenue Commissioners and such arrangements are being reviewed by them. I have asked them to let me know the outcome of their review and I will decide what action, if any, is required, bearing in mind the effect on the housing market and the cost to the Exchequer.

Joan Burton (Dublin West, Labour)
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Does the Minister know the cost and the number of transactions?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I do not have a figure for the cost. The Revenue Commissioners are investigating the matter.