Dáil debates

Tuesday, 20 November 2007

2:30 pm

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
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Question 48: To ask the Tánaiste and Minister for Finance his views on whether the present structure relating to stamp duty is equitable in its impact; and if the faltering in the housing market presents an opportunity for reform. [29950/07]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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The question of equity in the treatment of housing, of which the stamp duty code is a part, must be seen in the context of the overall tax treatment of property owners. The OECD has reported that Ireland "has some of the most generous tax provisions for owner-occupied housing". Ireland is the only country to allow tax relief on rent, mortgage interest payments, capital gains and capital acquisitions, while not applying an annual property tax. Furthermore, stamp duty helps fund public services such as health and education, while keeping the direct tax burden low. This facilitates continued economic success which benefits all taxpayers and their families and has allowed us to reduce taxes on work and enterprise with clear benefits for the economy as a whole.

It is a long-standing tradition that the Minister for Finance does not comment on tax measures in the run-up to the budget. However, the programme for Government commitments in this regard have been met. The Finance (No. 2) Act 2007 introduced a full exemption from stamp duty for first-time buyers in accordance with the commitments made in the programme for Government. This change brought about a positive impact upon the ability of first-time buyers to purchase their first home. This has widened the choice available to first-time buyers and removed an obstacle to their establishing their own homes in the neighbourhoods and communities in which they grew up. These matters are monitored on a continual basis.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
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Does the Minister agree that the legislation he introduced prior to the summer recess was a sham? The legislation to which I refer did nothing in respect of introducing mobility to the market. As matters stand at the end of the third financial quarter, almost 10,600 fewer houses have been built this year compared to last. The Minister's pre-budget outlook is built on the estimated completion of approximately 60,000 houses. The eminent firm of Goodbody Stockbrokers has indicated that the actual figure may be as low as 50,000. As the Minister is aware, there is a loss of almost €1 billion for every reduction of 10,000 in the overall figure.

The Minister last night stated, as part of the Indecon public policy lecture he delivered at the Royal Irish Academy, that he was building his budget on three priorities, one of which was equity in tax treatment. The current position on stamp duty is inequitable. The Minister must follow through on his public pronouncements and make what he is saying part of policy.

Does the Minister agree that the Finance (No. 2) Act 2007 which was passed before the summer recess has had no impact on the market? He stated stamp duty was a great provider of revenue. However, the Exchequer is going to be short almost €600 million because he failed to introduce the stamp duty proposals he was supposed to bring forward. HIs former colleague, Michael McDowell, previously indicated that stamp duty was to be done away with. This week, another of his former colleagues, Tom Parlon, as head of the Construction Industry Federation stated the goose that was laying the golden eggs was no longer doing so. The Minister must reform the stamp duty regime. Will he do so?

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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These matters were widely amplified and articulated as the people went to the polls and made decisions in respect of some of them. I note the Deputy's interest in protecting the tax base. His party's election campaign proposal in respect of this matter would have cost €660 million in a full year and would not have had any impact on prices or accrued any benefits for first-time buyers, the only ones who come into the market without equity. The housing market has been extremely buoyant for the past decade. In the past, criticisms from the benches opposite in respect of this matter related to the affordability of house purchases.

It is important to consider this issue in the proper context. I am glad the Deputy referred to the speech I made last night in which I set out where the priorities for the economy in the next decade should lie. Since I became Minister for Finance, I have brought forward initiatives which have in my view and in any objective analysis improved equity within the tax system. When the Deputy's party was in office, hundreds of thousands on low pay or the minimum wage paid tax. They no longer do so. That is a testimony to the improvements in equity for those in most need who were not catered for when the Deputy's party was in office.

That we have continued to improve the lot of those paying tax at the standard rate by widening the bands is another achievement. When one considers the contribution of capital taxes as against that of income tax and consumption taxes paid by individuals, one can see that the percentage of the tax take has more than trebled, from 4% to almost 12%, since the Deputy's party was in office. These are indications of the improvements that have been made.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
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The facts do not speak for themselves. House prices have decreased by 5% in the past year. The tax take is down as regards stamp duty. The Minister is forgetting that stamp duty is part of a basket of taxes. If it is not collected in respect of houses, neither is VAT. We talk about stamp duty and CGT holding at 15% but that is not the case. The Minister must reform this area. During the election campaign Fine Gael put forward an extremely pragmatic proposal——

Photo of Brendan HowlinBrendan Howlin (Wexford, Labour)
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The Deputy must put a question.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
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——to the effect that the first €100,000 should be exempt, the next €350,000 should be taxed at 5% and the balance at 9%. Will the Minister adopt and introduce this practical measure? It would move the market which is in need of movement.

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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I know the Deputy was busy canvassing in his constituency at the time but these arguments were all rehearsed and a democratic decision was taken in respect of them, particularly in the context of his party's specific proposal.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
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Members of the public want reform.

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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In the two years prior to the general election house prices were rising. When one considers movements in house prices, it is important to recognise that one is coming at this matter against a background of previous rises in such prices.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
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There is also negative equity.

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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The rises to which I refer occurred during a period when we were trying to make house prices more affordable. One cannot, depending on which vested interest one talked to most recently, jump from one side of the argument to the other.