Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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238. To ask the Minister for Finance the total revenue raised by the Exchequer in 2023 from VAT on new build residential homes; and if VAT reductions can be applied to new-build homes for sale to owner-occupiers only rather to all new build homes including those intended for the private rental market. [28911/24]

Jack Chambers (Dublin West, Fianna Fail)
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I am advised by Revenue that traders are not required to identify the VAT yield generated from the supply of specific goods and services on their VAT returns. Therefore, it is not possible to provide a costing for the measures outlined above using information provided on tax returns. However, a tentative estimate based on third party data for the VAT yield for 2023 on new build residential homes based on tax returns and other sources available to Revenue is estimated at approximately €1.3 billion.

I am also advised by Revenue that the VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. Under the Directive the supply of property (which encompasses the sale of homes) is generally liable to VAT at the standard rate. However, the Directive allows for a Member State’s historic VAT treatment to be maintained under certain strict conditions and, on this basis, Ireland has retained its long-standing application of its reduced rate, currently 13.5%, to the supply of all property; one of the conditions is that the rate applied under the historic arrangement is ‘parked’, which means that EU law prohibits it being reduced below 12%.

For the purposes of applying VAT rates, it is not permissible under the Directive to differentiate between the sale of new-build homes to owner-occupiers and those intended for the rental market.

The Directive does allow for Member States to apply a reduced rate of VAT, of between 5% and 15%, to the supply and construction of housing, as part of a social policy, as defined by the Member State. Any proposal for Ireland to introduce a lower rate to social policy related housing, e.g. reduce to 9%, would need to be very carefully assessed as it would present significant tax policy and cost challenges as well as operational implications linked to increased avoidance risks.

Finally, from a policy effectiveness perspective, there is a real concern that a reduction in the VAT rate for certain housing may not lead to lower costs or increased affordability as the benefit of the measure may not be passed on to councils, approved housing bodies or other purchasers, but instead could be absorbed by the developers or suppliers of such property.