James Bannon (Fine Gael)

What Government would, in a "dog in the manger" way, insist that hard pressed couples, struggling to get a foot on the property ladder, pay a tax that forces them to face lifelong repayments, yet tell them it is unnecessary and unwanted? What justice is that? The Government is ripping us off and it is interfering with the efficient conduct of the property market. Stamp duty is widely unpopular and a penalty on living and it interferes with the normal movement of people through different property types during their lives. In the past nine years, the Government has collected €13 billion from home buyers through this controversial tax. Fine Gael would abolish stamp duty for first-time buyers on properties up to the value of €450,000, while the best the Government can do, in the face of mounting pressure, is consider marginally increasing the stamp duty exemption threshold from €317,500 for first-time buyers, with broad reform unlikely. Continuing the "dog in the manger" approach, the Minster for Finance is unlikely to bring in sweeping concessions, while the Progressive Democrats, in the face of public opinion, are pushing stamp duty reform, for which they would get the credit, but they will not get their way.

Currently, the rates of stamp-duty applicable in Ireland are less than €127,000, exempt; €127,000 to €190,500 exempt for first-time buyers, 3% full rate; €190,501 to €254,000 exempt for first-time buyers, 4% full rate; €254,001 to €317,500, first-time buyers exempt, 5% full rate; €317,501 to €381,000 first-time buyers 3%, 6% full rate; €381,001 to €635,000, first-time buyers 6%, 7.5% full rate; and more than €635,000, first-time buyers rate 9% ,and 9% full rate. Second hand houses are exempt from stamp duty for first-time buyers up to the value of €317,000 while a first-time buyer of a property worth more than €635,000 will pay 9% duty. The percentage of tax receipts from stamp duty has increased considerably in recent years and it represents a greater share of revenue for Ireland than any other European country for which data are available, as pointed out by my colleagues, Senators John Paul Phelan and Brian Hayes. In Britain, for example, stamp duty is charged at 3% on properties valued at less than Stg£500,000 and 4% on those valued higher.

While the exemption threshold amounts in Ireland have been raised ad hoc in the past few years, they have failed to keep pace with property price inflation and the rate at which stamp duty on residential property is charged has led to large revenue gains. Of last year's take, approximately €949 million was generated by residential sales and when investors are excluded, it is estimated that €600 million was paid by those buying their first property or trading up. In contrast, in most other European countries property price inflation has been moderate and-or stamp duty is charged at a fixed level, not as a percentage of the value of the transaction.

Ireland does not impose a residential property tax and is unique in the EU in this respect. Stamp duty is a tax on the transfer of property, while residential property tax is a tax on the ownership of property. A tax on the ownership of an asset does not impinge on the workings of the market as punitively as a tax on its sale or purchase. Taxes on the transfer of assets are ineffective in that they discourage the operation of the free market and tend to encourage owners of assets to hold on to them longer than they might otherwise consider doing. The presence of stamp duty will reduce willingness of buyers to pay the reserved price by a certain amount, particularly in the case of first-time buyers, thereby further delaying the point at which the asset can be sold on to the person most likely to develop it to its best use.

Two groups are adversely affected by the imposition of stamp duty — younger people looking to get a foot on the property ladder and those looking to trade up. Young people can be hardest hit with a stamp duty bill of between €20,000 and €30,000, while established purchasers are looking to trade up to a larger more costly property. Stamp duty on a €1 million property will cost them a staggering €90,000. As the Tánaiste and Minster for Justice, Equality and Law Reform has stated, the money collected on residential property could technically be foregone this year. The Government should, therefore, seek to return the tax for this period rather than just abolishing it. However, for how many years could a Government throw away more than €1 billion in revenue? The easiest solution would be to retain the tax in principle but, as Fine Gael is recommending, abolish it for first-time buyers on properties up to the €450,000 and levy stamp duty at a rate of 9% on excess value, which would cost less than €35 million a year.

Fine Gael would also target proposals for the old and disabled trading down and moving into more suitable accommodation and it is proposing the same exemptions for those over 70 years as for first time-buyers and the abolition of stamp duty on properties under the value of €550,000 for people with disabilities. Fine Gael is also proposing a house deposit saving scheme, similar to the SSIA scheme, for those saving for a deposit on a first home.