Alice-Mary Higgins (Independent) | Oireachtas source

I move recommendation No. 7:

In page 23, between lines 21 and 22, to insert the following: “Report on the application of Capital Gains Tax to REITs

19. The Minister shall, within three months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a report on—

(a) the introduction of Capital Gains Tax at a rate of 33 per cent where a REIT, IREF, or group of REITs or IREFs, disposes of a property of its property rental business,

(b) the introduction of a stamp duty surcharge on REITs buying up residential properties,

(c) the effect of REITs on the supply and prices of residential housing on the rental market, and

(d) the effect of REITs on the supply and prices of residential housing on the open market for private household purchase.”.

The Minister will be aware that there was debate in the Dáil where similar amendments were tabled. It is important to table them again, however. Currently, REITs do not pay capital gains tax when they are disposing of a property. The tax is only paid at the point where dividends are distributed to shareholders. The argument is often made around double taxation. I do not believe that applies here, however, because considerable things happen and in many businesses and many areas of activities, tax is paid along the way over different activities that happen. It is notable that in terms of IREFs, taxable events are not considered to be the disposal of an asset or the collection of rent. This seems to me to be a very significant omission.

I urge the Minister to take on board my recommendation, which would seek first of all to look at the options for the introduction of capital gains tax at a rate of 33% where REITs, IREFs, or groups of REITs or IREFs, dispose of a property and its property rental business, and the introduction of a potential stamp duty surcharge on REITs that are buying up residential properties. Again, that is something on which more could be done.

I refer to the effect of REITs on the supply and price of residential housing in the rental market. This is a factor. REITs are effectively competing with first-time buyers. That is part of it. We talked about things that are driving up inflation and prices. It is certainly not solely the help-to-buy scheme. Another factor is the fact that first-time buyers are competing against REITs. Killian Woods has given very detailed analysis and examples of this in his reporting, as have others, where local authorities must compete with REITs in terms of the purchase of housing.REITs that have the potential of getting leasing contracts with local authorities or others are effectively outbidding local authorities for what is often a limited supply of private housing for purchase in rural and other areas, as described earlier by Senator Casey. Local authorities then find themselves forced into leasing properties on which they were outbid. We need to know the effect of REITs on the supply and the price of residential housing, whether they are part of the inflationary effect if help-to-buy is only a small factor and their impact on residential properties available on the open market for private purchase. These are two factors that I hope the Minister might be able to address. Senator Gavan has tabled a similar recommendation on this issue.