Joan Burton (Dublin West, Labour)
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Question 111: To ask the Tánaiste and Minister for Finance his views on reports that possibly 40% of large land deals are the subject of substantial tax avoidance measures and that these measures may cost the Exchequer upwards of €250 million on an annual basis; if he plans to reconsider activation of section 110 of the Finance Act 2007; and if he will make a statement on the matter. [13947/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Section 110 of the Finance Act 2007 made provision for a charge to stamp duty where license agreements and other such arrangements are used when land is purchased for development without conveyance or transfer. The provision ensured that these arrangements will incur a Stamp Duty charge where a landowner receives a payment amounting to 25% or more of the market value or consideration concerned. Section 110 is subject to a commencement order on the basis that it would be prudent that the state of the housing and property market be considered before commencing the provision.

For this reason, I commissioned an independent study of the potential effects that such a provision may have on the market. The Deputy was recently given a copy of the report and it is also available for download on my Department's website at http://www.finance.gov.ie/ documents/publications/reports/2008/S110Report.pdf.

The Report makes the point that there are no official data sources on the value of development land sales; therefore, it gives an indicative estimate of the total value of the development land market in 2006 at c. €7bn to €8bn. Based on an assumption that 40% of land transactions using these arrangements, the Report estimated a potential revenue gain in 2006 of c. €251m if the provisions had been in place at that time. However, this estimate is based on the historic levels of activity in 2006 and is not indicative of the revenue gain that would occur following commencement of the provisions. A more realistic figure for the revenue accruing from the provisions is in the order of €50m per annum.

Of particular importance is that the Report indicates that Section 110 would have led to a rise in land prices, with a knock-on increase in house prices, especially for first-time buyers, and possibly risked exacerbating the down-turn in the property market. In addition, the Report highlighted that Section 110 would also have raised the cost to the State of PPP projects because of increased land prices. The commencement of Section 110 of the Finance Act 2007 is kept under constant review and has to take into account circumstances in the housing and property markets.