Bernard Durkan (Kildare North, Fine Gael)
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101. To ask the Minister for Finance his plans to reduce tax on the construction sector with a view to bringing down the cost of houses, in particular for first time buyers; and if he will make a statement on the matter. [23878/17]

Michael Noonan (Limerick City, Fine Gael)
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VAT is governed by the EU VAT Directive, with which Irish VAT law must comply. While most economic activity is subject to the standard VAT rate of 23%. Construction services already avail of the reduced VAT rate of 13.5%.  Ireland has historically applied the 13.5% reduced rate of VAT to all construction services under a derogation from the EU VAT Directive. 

The Programme for Partnership Government committed to 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, both public and private, timed to generate the maximum impact on supply and to target principally the purchasers of affordable homes.  In its Report of June 2016, the Oireachtas Committee on Housing and Homelessness reviewed the costs of construction including VAT, in the light of the Programme for Partnership Government commitment. They recommend that the Housing Agency annually review construction costs but did not recommend that the VAT rate on new residential property be reduced.

Ahead of last year's Budget I decided that relief would be better operated through the income tax rather than the VAT system, as applying the 9% VAT rate to the construction of new residential properties would involve having two separate VAT rates applying to construction services.

As the deputy will be aware, I introduced the Help-to-Buy incentive in Budget 2017 to help encourage the building of additional new homes. That scheme will run until the end of 2019.