Dáil debates

Tuesday, 24 October 2017

Ceisteanna - Questions - Priority Questions

Budget Measures

4:15 pm

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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4. To ask the Minister for Finance the projected effect of pre-budget publicity of an increase in non-residential stamp duty on such transactions in advance of 10 October 2017; his views on market reports that the projected 2018 yield from the 4% increase will not be achieved; and if he will make a statement on the matter. [44872/17]

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I wish to ask the Minister about the extensive leaking in the days before the budget of his intention to raise significantly the rate of stamp duty from 2% and, potentially, to double it. Such leaks have never been as blatant or widespread as in the run-up to budget 2018 and certain individuals may have been in a position to profit very significantly from them.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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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.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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An examination of media reports, in particular for the 48 hours before the budget, would suggest differently because those reports very specifically said that the stamp duty was going to increase by a very significant amount and generally suggested an increase from 2% to at least 5%. Such reports were carried by practically all of the major national newspapers and organisations such as BreakingNews.ie. That meant that if commercial property owners had their transactions ready, they could save considerable sums of money by moving and completing the transactions during the 48 hours before the budget. The sources of the leak were clearly within the Department of Finance because the leaks were very specific and their accuracy was confirmed when the Minister read out the budget. This is a bad policy because it has allowed some very large property transactions to escape the tax. If this is to be the standard set by the Minister in charge of the budget, it is extremely disappointing and costly for the taxpayer.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I categorically reject the absolutely unfounded allegations made by Deputy Burton. Because she agrees with the decision I made, she can do nothing beyond making unfounded and inaccurate allegations regarding my conduct and that of my Department. The decision on this matter was treated with the utmost sensitivity by my officials and me. During the time period to which the Deputy refers, many other assertions were made regarding what would happen on budget day, the majority of which proved unfounded.

4:25 pm

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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If the Minister is that concerned, he has a very easy remedy that would put all our minds at rest, namely, backdate the introduction of the measures to 8, 9 or 10 October. The budget was brought in on 11 October. If he wanted to, the Minister could even backdate the introduction of the measures to 1 October. It is a fundamental principle of fairness in taxation that those in the know should not have access to privileged information which would allow them, as in this case, to mitigate significantly the likely amount of stamp duty they would have to pay. In addition, subsequent to the budget, fairly respected commentators suggested that the target would not be reached, partially, I suspect, because of the leaking, and that people in the business of tax arrangements and tax avoidance were able, therefore, to anticipate what the Minister would do. That was foolish from the Department's point of view. There were suggestions that the actual yield from the tax will not be what the Minister indicated in his budget speech. Obviously, we will discover the actual position over the coming year.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I again reject the allegation the Deputy has made. If, in the context of this measure, the best she can do is infer that I or my Department engaged in behaviour for which she has no evidence whatsoever, it points to the poverty of ideas she and the Labour Party are offering regarding our economy and how all of us want to move it forward. This is the right policy measure to put in place. The Government made the correct decision in terms of broadening the tax base. Given the Deputy's background and what I understood to be the policy of the Labour Party, I would have thought that they would support this. If the best the Deputy can do is allege that I was involved in behaviour that would allow some to benefit from decisions I make, she has a very poor grasp of the standards I and my Department try to stand by when we are involved in the development and implementation of policy. The Deputy's comments are unfounded and a slur on the quality of the officials in my Department, who have helped me draft and implement policy options. The Deputy should know - I suspect she does but is not willing to make the point because she is seeking political gain - that at no point would I be involved in seeking to bestow a benefit on anyone as a result of a decision that could be made on budget day. It ill behoves the Deputy to suggest otherwise.

Photo of Seán Ó FearghaílSeán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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I thank the Minister. Question No. 5-----

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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May I respond to that briefly?

Photo of Seán Ó FearghaílSeán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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No. I am sorry-----

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I just want to say one sentence-----

Photo of Bríd SmithBríd Smith (Dublin South Central, People Before Profit Alliance)
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The Deputy always does this.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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-----to the Minister. There was a time when a previous leader of Fine Gael, Garret FitzGerald, had to seek the resignation of a Fine Gael Minister of State because there was an inadvertent leak of information-----

Photo of Seán Ó FearghaílSeán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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We know about that.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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-----which may have resulted in advantage to some of the players involved. If Fine Gael standards have really-----

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I think the Deputy is realising just how spurious is the ground on which she is raising this matter. She is now talking about inadvertent leaking in contrast to the serious allegations-----

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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That was inadvertent in those days.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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-----she levelled at me a moment ago.