Mattie McGrath (Tipperary, Independent)
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4. To ask the Minister for Finance the cost-benefit analysis performed prior to the budget 2018 changes to agricultural stamp duty. [51409/17]

Mattie McGrath (Tipperary, Independent)
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As the Minister knows, I had a lot of engagement with him on the Finance Bill. I tabled several amendments to the Bill and debated them with the Minister on the floor of the House. My question simply asks what cost-benefit analysis, if any, was carried out by the Department of Finance before the introduction of changes to stamp duty relating to agricultural land. Stamp duty is a dangerous tax upon which to predicate any budget because it can change drastically from one year to the next, depending on outturns, sales and so forth. As the Minister knows, there is not a lot happening in rural Ireland. We need stimulation rather than measures that will curtail activity.

Paschal Donohoe (Dublin Central, Fine Gael)
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Just before I answer Deputy Mattie McGrath's question, there are school pupils in the Gallery who are waving, making the thumbs up sign and dabbing down to all of us here. While we cannot wave back, I hope they are having a good visit.

Pearse Doherty (Donegal, Sinn Fein)
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I certainly hope the Minister is not going to dab back.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will neither wave nor dab back but I hope they have a good visit and that one of them will be down here at some point in the future.

11 o’clock

In my Budget Statement I announced an increase in the stamp duty rate for all non-residential property transactions, including agricultural land, from 2% to 6%. An economic rationale for this stamp duty increase was published on budget day. On the recommendation of the Minister for Agriculture, Food and the Marine, I also announced an extension of consanguinity relief for a further three years and that the stamp duty rate applying under the scheme would be fixed at 1%. Consanguinity relief is availed of in transferring farms to younger family members. It encourages the early transfer of farms to younger generations and is mostly relevant where the transferee does not qualify for an alternative relief such as the young trained farmer stamp duty exemption.

Following my Budget Statement I received correspondence from farming interests on a number of issues, including stamp duty. Following further discussions with the Minister for Agriculture, Food and the Marine I decided that, in addition to extending the period of the relief and fixing the associated stamp duty rate at 1%, the age rule for consanguinity relief would be removed. This means that it will be possible for all gifts and sales of farmlands to closely related family members who do not qualify for the 100% exemption available under the young trained farmer scheme to benefit from consanguinity relief at a stamp duty rate of 1%.

The question of an age limit will be revisited when the measure comes up for review towards the end of 2020. The young trained farmer relief will not be affected by the stamp duty rate change, as it provides for a full stamp duty exemption where the qualifying criteria are met.

I have also responded to representations from the Deputy and other Deputies and reintroduced a scheme that allows a farmer to claim relief from stamp duty where he or she sells and purchases land for the purposes of consolidating an existing farm holding. I have introduced these various reliefs in the expectation that they will be of benefit to the agriculture sector and in recognition of the importance of agriculture and the wider rural economy generally.

Mattie McGrath (Tipperary, Independent)
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I appreciate the move the Minister made after the budget Statement, having been contacted by many Deputies and farming organisations. Deputy Michael Fitzmaurice and I tabled amendments on budget night, but they were voted down. The Minister has moved on the consanguinity relief clause and removed the age limit, but uncertainty was caused. He has not clarified the position where land deals are still being finalised. That remains a matter of concern. In the light of the announcement made yesterday by Commissioner Hogan, the Mercosur deal and so on, this is a volatile time for farming. This measure was unsettling and ill thought out. While there might be cranes and a boom in Dublin, there is no boom in agriculture, given the prices of all products - milk, grain, beef, poultry and pigs. In the context of Brexit, it was an ill-judged decision. As I said on the night of the budget, it is not a good idea to bank budget promises on stamp duty. We saw what happened when things went crazy during the boom before the tap was turned off following the bust. It is not reliable and, therefore, a concern.

Paschal Donohoe (Dublin Central, Fine Gael)
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The revenue property-related transaction taxes are generating for the Exchequer will be approximately 3% of the total tax take for next year, which is well below where it was in the period leading up to the crash. Regarding developments in terms of non-housing building and construction, my Department forecasts that this sector accounts for 8% of national income which would rise to 10% in the absence of a measure such as this. The long-term average figure is 7%. I put this measure in place with the aim of shifting some of the human capital and economic activity involved in the delivery of commercial property to the delivery of homes. That is one of my main reasons for introducing the measure. As I have told the Deputy a number of times, the rate of 2% compares to a figure of 6% in recent years and 9% for many years before that. The rate was too low and needed to be increased.

Mattie McGrath (Tipperary, Independent)
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There has been a trebling of the rate from 2% to 6%. The Minister has stated only 3% of total revenue accrues from stamp duty, but it is false recovery. There is only a recovery in Dublin which I am glad that he has said is in the commercial building sector, not house building. The Government cannot build houses. It has completely lost its way in that regard. The Minister needs to climb a crane to look around to see what to do about the housing crisis. This measure was ill-judged and ill-timed. The Minister for Agriculture, Food and the Marine was unclear on what was happening on the night of the budget and the day after. As a result, he gave misleading information because he did not know. It has sent the wrong signal to farmers, particularly young farmers, who are trying to consolidate. Because of Brexit farmers must consolidate, having regard to how they are being treated by the banks, prices and the World Trade Organisation talks. They cannot be static. I tabled an amendment on taxing vulture funds that were buying up land. The Minister did not accept it, but it would have generated significant revenue. He missed that opportunity and instead penalised ordinary farmers.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have introduced measures to deal with the issue of consolidation. We made a further change to the Finance Bill to deal with the specific issue so as to ensure the incentives to allow farmers to consolidate their farm holdings would remain in place. I introduced a stamp duty rate of 1%-----

Mattie McGrath (Tipperary, Independent)
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I accept that.

Paschal Donohoe (Dublin Central, Fine Gael)
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-----which is consistent with what we have done in the case of consanguinity relief.

Mattie McGrath (Tipperary, Independent)
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Since the Budget Statement.

Paschal Donohoe (Dublin Central, Fine Gael)
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On the recovery in the commercial property market, commercial property values have risen by 75% since 2013.

Mattie McGrath (Tipperary, Independent)
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In Dublin.

Paschal Donohoe (Dublin Central, Fine Gael)
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These are national figures.

Mattie McGrath (Tipperary, Independent)
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In Dublin.

Pat Gallagher (Donegal, Fianna Fail)
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The Minister to continue, without interruption.

Paschal Donohoe (Dublin Central, Fine Gael)
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Values are up by 75%. If we do not use opportunities such as this to reset tax rates after that level of growth, we will be back on the path to having a narrow tax base that will not help to sustain the public services. It is the right measure. I faced a challenge. If I had redefined the definition of non-residential commercial property in the Finance Bill to remove a particular category of property in order that it would not be subject to a higher rate, everyone covered by the definition would then have expected me to do the same for them, but I cannot do that. It is the definition that has been in the tax code for a long period. Changing it for one would created an expectation that I would change it for everyone.