John Paul Phelan (Fine Gael)

I move:

That Seanad Éireann calls on the Government to use the opportunity of the forthcoming budget to reform the existing stamp duty regime as a means of helping first-time buyers and those who have an existing house and are seeking to trade down into smaller properties.

I welcome the Minister of State at the Department of Foreign Affairs, Deputy Treacy, to the House for this important debate. I am disappointed, however, that neither the Minister for Finance nor the Minister of State at that Department are present.

It is my privilege to propose the Fine Gael motion on the stamp duty regime. I begin by expressing my surprise at the content of the Government's amendment. Our wide-ranging motion refers specifically to stamp duty with reference to first-time buyers and those wishing to trade down. The amendment put forward by the Government, however, focuses on income tax, with only one line referring to those wishing to purchase a home. I had hoped this debate would have afforded us the opportunity to discuss, a week before the budget, the differing views among Government and Opposition Members and also within Government on the subject of stamp duty. I am especially disappointed that the Government has tabled an amendment which has no relevance whatever to the motion being discussed.

I signalled last week during the debate on the Estimates that one of the main areas in which this Government has failed citizens is in property prices. The Government has been quick to claim in the past ten years that time began in 1997. In that year, however, one could buy a house in Dublin city for €88,000. Outside Dublin, the average price of a house in 1997 was approximately €70,000. These prices have increased by a multiple of five. The average price of a house in Dublin is now €424,000, while the national average is more than €310,000. A huge proportion of that increase goes to the Government in different forms of taxation, including stamp duty.

The way in which it has neglected those struggling to get on the property ladder is the greatest single indictment of the Government. Every action it has taken in this area during its time in office, whether the abolition of the first-time buyer's grant or its tinkering with stamp duty provisions some years ago, have had negative effects for those seeking to purchase their first home. As soon as the exemption threshold was changed to €317,500, for example, the cost of a two-bedroom house in Dublin increased beyond that level. It is clear that the Government's meddling in this sector of the economy has had disastrous consequences for those who wish to provide themselves with a home. Striving to ensure that citizens can do so should be a basic principle of any government.

The Government does not even succeed in getting its statistics rights in its amendment to the Fine Gael motion. The amendment congratulates the Government on ensuring that 80% of income tax earners pay tax at the lower rate. The statistics are at variance to this. Up to 31% of PAYE workers still continue to pay the top rate of income tax. The Government parties' amendment to the motion is factually wrong. Information garnered in a parliamentary question by one colleague in the other House proves this.

The Construction Industry Federation recently pointed out that in excess of 40% of the cost of a new home goes back to the Government in taxation in one form or another. This figure is continuing to grow despite words to the contrary from different Government spokespersons over the past several years. Frequently, first-time buyers find themselves with stamp duty bills in excess of €20,000. This year it was estimated that stamp duty would garner €2.7 billion for the Exchequer. The actual figure will work out at approximately €3 billion, €1 billion of which will come from residential stamp duty. Of this figure, just €44 million will come from first-time buyers.

In September the Tánaiste and Minister for Justice, Equality and Law Reform stated it was his belief that the Government does not need all the revenue earned from stamp duty by people moving from one home to another. That is correct. As we face into the budget, the Minister for Finance must consider removing first-time buyers from the stamp duty regime, particularly as they only contribute €44 million to the overall figure.

I am disappointed the Government parties put down this amendment, particularly as the Progressive Democrats has its own stance on this issue. I am disappointed the Progressive Democrats Senators will not support the Fine Gael motion which simply asks the Minister for Finance to review the position on stamp duty. Maybe I should not be surprised by the stance. A previous Progressive Democrats election manifesto stated there was a need to reform stamp duty. For five years, the party sat in Government but did nothing by way of positive reform of stamp duty.

The Government must examine how some of our EU neighbours handle stamp duty on residential property. In the United Kingdom, stamp duty stands at 3% for residential property under the value of STG£500,000 and 4% for property over that threshold. In other European countries, the rates are significantly lower. I ask the Minister for Finance to draft a similar stamp duty system to those of other European states.

The current rate of stamp duty is indefensible. Despite the efforts of the Government to ignore the issue, it will not go away. Stamp duty is a large impediment to those trying to get on the first rung of the property ladder. The Government must do its utmost in next week's budget to ensure this obstacle is significantly reduced if not entirely removed. I would welcome support from all Members for my motion.