Paul Gavan (Sinn Fein) | Oireachtas source

I move recommendation No. 14:

In page 33, between lines 17 and 18, to insert the following: “Report on landlords’ tax relief

22.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of the new personal income tax allowance introduced with respect to individual landlords in the private rental sector, assessing its distributional impact, deadweight loss of the relief and implications for social equity within the personal taxation system.”.

The Bill provides a generous tax break for landlords despite all the warnings from Department of Finance officials. As the Department noted in 2022:

Finally, taxation of rental income is often cited as a push factor for Buy-to-Let investors. In fact ... the way in which rental income is treated for tax purposes hasn't changed. Personal rates of income tax have always applied to rental income.

Landlords have benefited from the changes to the personal taxation system every year. The Department went further, stating: "Any favourable treatment of passive personal income such as rent would raise legitimate questions around social equity." This is the core of the issue. Why should a landlord enjoying passive income be taxed any less than a nurse or any other worker?

The Department assessed the option of a separate method of taxing rental income, such as a flat rate or separate rate of tax or other tax reliefs. It noted:

The breadth and depth of argument necessary to support such a fundamental shift in policy has not been provided to the extent necessary to support such a significant change. More specifically, the rationale as to why passive income from property rental should enjoy a lower or preferential rate of tax as compared with, for example, earned income has not been set out.

The Government has not heeded this advice.

Regarding the policy rationale, a survey by the Society of Chartered Surveyors Ireland found that the top three reasons for landlords leaving the rental market were the complex and restrictive nature of rent regulations, landlords finding compliance with rented housing requirements too onerous, and net rental returns being too low. As the Department of Finance noted:

In the case of accidental landlords, it is difficult to envisage any reasonable policy intervention that could dissuade such people from selling their property. People in this situation are keen to sell once they have escaped negative equity and public policy options to prevent such action are extremely limited. In relation to regulation, successive Governments have made a series of specific policy choices to more heavily regulate landlords. This was done in order to respond to legitimate concerns around tenant rights and security of tenure. Changes have been made to the point where the regulatory environment has changed utterly from that which existed before the financial crisis. A natural consequence of these policy choices is the departure of 'amateur' landlords who may not have the time, money or risk appetite to continue with their property in such an environment. The corollary of that is the professionalisation of the rental sector.

It is the case that many landlords are, in effect, cashing out, given the high level of property price growth. As the Department indicated, no tax lever can compensate them for the gains they would otherwise enjoy through selling. It is difficult to disagree with the assessment given by Dr. Barra Roantree, formerly of the ESRI, the Government’s own think-tank, who said that this tax break would cost between €100 million and €150 million, with the vast majority of that going to landlords who never even thought of leaving the market. In his words, it may be “the stupidest tax relief of recent times”.