Jackie Cahill (Tipperary, Fianna Fail)
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91. To ask the Minister for Finance his plans to introduce a VAT reduction for construction to encourage the industry to increase its output, given the housing crisis, as the current VAT rates are prohibitive and are depressing the market; and if he will make a statement on the matter. [12033/16]

Michael Noonan (Limerick City, Fine Gael)
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The construction sector have been calling for the 9% VAT rate to be extended to residential construction. It should be noted that while most Member States apply the standard rate to construction services on average 21.5% - Ireland already applies a 13.5% reduced rate of VAT to all construction services under a derogation from the EU VAT Directive. The ESRI recently reported that any tax incentives aimed at developers such as the application of the 9% VAT rate - are likely to have little effect on supply while other constraints are in place, such as stringent planning regulations, infrastructural constraints, access to finance and building costs, including the impact of building regulations. In the presence of such constraints, the introduction of any tax incentive could simply lead to a transfer of tax revenue from the State to developers without any significant effect on supply.

The Deputy will be aware that housing and homelessness is a priority for this Government and the Programme for a Partnership Government states that the Government will ask the Oireachtas to consider the merits of a temporary targeted reduction of the rate of VAT from 13.5% to 9% on new, affordable, houses and apartments timed to generate the maximum impact on supply and to target principally the purchasers of affordable homes within the first year of Government. In this context the Oireachtas Committee on Housing and Homelessness is looking at the issues involved and the Government will consider its recommendations.

The Deputy will also be aware that any changes to tax administration tend to be implemented as part of the annual Budget and Finance Bill process.