Written answers

Tuesday, 13 December 2005

11:00 pm

Photo of Fergus O'DowdFergus O'Dowd (Louth, Fine Gael)
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Question 63: To ask the Minister for Finance the action he proposes to take to address the fact that the average house price in Dublin exceeds the €315,000 stamp duty threshold set in budget 2005; and if he will make a statement on the matter. [38842/05]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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All owner occupiers are generally exempt from stamp duty on new houses where the property is 125 sq. m. or less. The 2005 budget introduced a stamp duty relieving measure for first time house purchasers who are owner occupiers of second-hand houses by increasing the stamp duty exemption threshold for such purchasers from €190,500 to €317,500 and by having reduced rates for house values up to €635,000. In addition, mortgage interest relief is available at source in respect of interest paid on moneys borrowed for the purchase, maintenance, repair or improvement of that taxpayer's main residence, including second-hand houses.

Any proposed amendments to the current stamp duty regime must be approached with caution as even minor amendments may significantly alter the dynamics of the housing market. Therefore, I do not have any plans to introduce changes in this regard at present. There have been record levels of housing construction over the last few years. This increased supply of houses will assist in bringing supply and demand into balance, thereby reducing the level of price increases.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Question 64: To ask the Minister for Finance if his Department has received representations from the US authorities regarding the tax status of US companies operating in this jurisdiction; his views on descriptions of this country in sections of the US media as a tax haven; his response to these descriptions; and if he will make a statement on the matter. [38985/05]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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As I stated in my reply to Question No. 53 today, I have received no such representations. Furthermore Ireland cannot be regarded as a tax haven. We have a comprehensive taxation system covering income, capital and indirect taxes. In addition, Ireland has 44 tax treaties in place, a system of full exchange of information and proper regulation of activities to the highest standards.

I emphasise that companies locate here for a variety of reasons and, in this regard, Ireland offers many advantages to US investors such as access to the European Union, a well educated workforce, political stability and an enterprise friendly administration.

Jerry Cowley (Mayo, Independent)
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Question 65: To ask the Minister for Finance his views on whether hotels here would get a big increase in lucrative international conference business if VAT refunds available in other countries were allowed here; his further views on the fact that Irish and international companies are not allowed to reclaim VAT paid on hotel accommodation and restaurant bills at conferences held in the Republic but refunds are given to companies which hold their conferences in Northern Ireland; his plans to change the situation; and if he will make a statement on the matter. [38737/05]

Jerry Cowley (Mayo, Independent)
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Question 227: To ask the Minister for Finance his views on whether Irish hotels will get a big increase in lucrative international conference business if VAT refunds available in other countries were allowed here; his further views on the fact that Irish and international companies are not allowed to reclaim VAT paid on hotel accommodation and restaurant bills at conferences held here but refunds are given to companies which hold their conferences in Northern Ireland; his plans to change the situation; and if he will make a statement on the matter. [39046/05]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take Questions Nos. 65 and 227 together.

The issue of allowing businesses to deduct VAT on conference related business expenses has been raised on a number of occasions in recent years. The Government's tourism action plan implementation group has recommended a change in the VAT rules to allow for the deductibility of VAT incurred by businesses on conference related expenditure, that is, hotel accommodation and meals. In this regard, its proposal distinguishes between routine business travel which is non-discretionary and location specific and a subset of business travel known as MICE — meetings, incentives, conferences and events — which is discretionary and is not location specific. The main argument put forward in favour of the proposal is that it would allow Irish hotels to compete more favourably with their European counterparts for conference related business.

We do not currently allow businesses to recover VAT incurred in respect of hotel accommodation and meals. There is a similar block on deductibility for business cars and petrol. These restrictions were put in place to limit revenue loss and tax avoidance. EU VAT law allows such restrictions.

While it would, in theory, be possible to remove or reduce these restrictions, it would not then be possible under EU law to reinstate them. In addition, any scheme designed to remove or reduce these restrictions would have significant cost implications for the Exchequer. The Revenue Commissioners have estimated that if full deductibility was allowed on accommodation and meals, it would cost €115 million in a full year. Furthermore, Article 17(6) of the sixth VAT directive limits the type of deductibility allowable to business expenses. This means there is no provision in EU law that would permit expenditure on entertainment to be allowable. Therefore, any scheme that would allow businesses to deduct VAT on accommodation and meals would have to take account of this fact.

The Revenue Commissioners also raised concerns regarding potential abuse, and it is clear the design of a scheme that would allow businesses to deduct VAT on such expenses, even in a limited form, is complex. However, officials from my Department, the Revenue Commissioners and the Department of Arts, Sport and Tourism are examining this issue. Specifically, they are exploring if the focus of the proposal could be narrowed by certain administrative solutions to ensure that it is targeted and complies with EU law. I have asked for this examination to be completed as soon as possible.

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