Amendment No. 1 is consequential on amendment No. 4 and amendments Nos. 5 and 6 are alternatives to amendment No. 4. These amendments may be taken together by agreement. Is that agreed? Agreed.
Finance (No. 2) Bill, 2000: Committee and Remaining Stages.
Section 1 agreed to.
SECTION 2.
I move amendment No. 1:
In page 3, subsection (1), line 16, after "Subject to subsection (2)" to insert "and except where otherwise expressly provided".
I propose to take amendments Nos. 1 and 4 together.
The Minister has moved amendment No. 1 but can also discuss amendment No. 4.
The purpose of amendment No. 1 is to facilitate the later commencement date being introduced for the changes being made by amendment No. 4 to the wording of the definition of "first time purchaser" in section 4. Amendment No. 4 amends the definition of a first time purchaser in the following manner. From today, companies will not be able to avail of first time purchase relief; a person who acquired property in a fiduciary capacity in the past will also be excluded from this relief in respect of a subsequent purchase, notwithstanding the fact that the prior purchase was not for that person's benefit; and a gift to a person of part of a dwellinghouse or apartment on or after today will preclude that person from qualifying for first time purchase relief in respect of subsequent purchases or gifts. The Bill as already published provides for the situation where there is a gift of the whole of a dwellinghouse or apartment.
Amendment agreed to.
Amendment No. 2 is out of order.
A Cheann Comhairle, I presume amendment No. 2 is out of order because it seeks to impose a charge?
The Deputy would have been notified about that.
I have been in the House all day between Question Time and Private Members' time and I have not received any direct notification to that effect, unless something was sent to me on paper.
It would have been sent to the Deputy.
With your forbearance, a Cheann Comhairle, if I could—
We can raise the matter under the section when we come to it.
That is fair enough.
Amendment No. 2 not moved.
Amendment No. 22 is cognate on amendment No. 3 and these amendments may be taken together by agreement. Is that agreed? Agreed.
I move amendment No. 3:
In page 3, after line 30, to insert the following subsection:
"(4) Evidence in writing of a contract for the purposes of subsection (2)(b) shall include–
(a) a receipt for the payment of a deposit, and
(b) a written contract executed by the purchaser, and, for the purposes of that subsection it shall not be necessary to prove that the contract in question was enforceable or unconditional.".
The majority of stamp duty changes are effective from midnight on 15 June.
On a point of order, a Cheann Comhairle, what is the position with amendments Nos. 5 and 6? Am I required to move them at this stage or what do we do?
Those amendments have been included with amendment No. 1 for discussion purposes.
Amendment No. 1 has been disposed of.
Yes. Those amendments can be formally moved when we come to them but they cannot be discussed further. Sorry, they cannot be moved.
Why can they not be moved?
We will deal with that when we come to the amendments. We are on amendment No. 3.
A Cheann Comhairle, I have not been notified that any of my amendments is out of order; at least I have not received any such notification today. Has notification been sent to me? Perhaps the Chair could let us know at this stage which amendments are out of order?
When we come to them.
A Cheann Comhairle, in terms of framing the debate it would be helpful if we had some idea of what was out of order. Are amendments Nos. 5 and 6 out of order?
If amendment No. 4 in the name of the Minister is carried then amendments Nos. 5 and 6 cannot be moved.
Amendment No. 4 has not yet been put. Is that correct?
No, that is why I have advised the Deputy that we are jumping ahead.
I take it the Minister has not yet moved amendment No. 4.
No, he has not formally moved it.
Can I speak to amendments Nos. 5 and 6 when the Minister moves amendment No. 4?
The discussion was on amendment No. 1. The Minister will formally move amendment No. 4 but there cannot be any further discussion.
I apologise to you, a Cheann Comhairle, and to the House but I did not appreciate that fact as I did not see that amendments Nos. 5 and 6 were alternatives. They deal with net issues which are not dealt with by the Minister's amendment.
They are alternatives to the text.
I do not see that they are, a Cheann Comhairle. They seek to amend—
Again we are anticipating the discussion. We have not come to those amendments so perhaps we—
The Deputy can put them down for Report Stage.
Amendment No. 4 takes out the text the Deputy's amendments are seeking to amend. If the Minister's amendment is agreed that text is gone, so the Deputy's amendments would refer to text which does not exist.
In that case I will debate the issue on Report Stage.
We are discussing amendments Nos. 3 and 22.
These amendments are grouped by the Bills Office in a manner which is somewhat difficult to follow. I appreciate what the Deputy is trying to do. For example, amendments Nos. 3 and 22 are grouped.
I am particularly concerned about first time purchasers who are buying a second hand house. These people will have paid a deposit and signed a contract with their solicitor which has not been countersigned by the vendor. As a result, they could be caught in a limbo between 15 and 16 June. I am proposing that an alternative proof of the bona fides of the purchaser would be inserted in the Bill which would amount to a receipt for the payment of the deposit and a written contract executed by the purchaser.
However, for the purposes of proof of intent to purchase it would not be necessary that the contract in question was enforceable or unconditional. Many solicitors would have proceeded to the point where the deposit would have been paid and the contract would have been signed by one side. However, there are significant delays because of the amount of business in the conveyancing sections of solicitors' offices. I urge the Minister to accept these amendments so people will not be caught simply because of a professional delay.
I support the Deputy's comments. We are talking about people who have commenced the process of purchasing a property, have put down a booking or contract deposit and have indicated their bona fides in terms of seeking to purchase the property. We all live in the real world and know it is possible and, dare I say it, likely that some contracts will be back-dated to take advantage of the date prescribed by the Minister. It should not be necessary for people to behave in what is essentially a dishonest manner and I am sure people would not wish to do so.
We have to examine situations where people have commenced the process of purchasing a property in good faith. The intention is to give the benefit to such people and Deputy Noonan's suggestion is reasonable in those circumstances.
The purpose of amendment No. 3 would appear to be to exclude investors from the 9% stamp duty in a case where the purchaser had already paid a deposit and signed a contract prior to the financial resolution of 15 June 2000, notwithstanding the fact that the vendor had not signed the contract prior to that date or that the contract was still conditional immediately prior to the date. Under the existing wording of the Bill it is unnecessary that a contract exists and that it is evidenced in writing prior to 15 June 2000. It is not necessary that the contract be signed or that it be unconditional. Deputy Noonan's concerns have, therefore, been addressed in the wording as drafted.
The purpose of amendment No. 22 is to exclude certain contracts from the scope of section 5(5). Section 5(5) provides that for the purpose of deciding who is the person liable for the new tax in the case where the party in question is subject to a contract for a sale on the relevant valuation date, the existence of the contract is to be ignored. In the unlikely event that a property which was contractually sold before 15 June was still subject to that same contract on 6 April 2001 or some later valuation date, the wording of section 5(5) provides that such a contract be excluded from this provision. As I have already explained, the Deputy's concerns in this area are already addressed in the Bill as drafted. Under the existing wording, it is not necessary that the contract in question be signed or that it be unconditional. Accordingly, I oppose the amendment.
We have transposed to this Bill the transitional arrangements which applied to the change of circumstances in the 1998 Bill. This matter caused confusion before and there were some discussions with the Incorporated Law Society and the Revenue Commissioners who are satisfied with the arrangements. A contract regarding the sale of property must be evidenced in writing. For example, if I made an arrangement with Deputy Noonan to buy his car, although I hope I will not have to buy a private car for quite a while—
Deputy Noonan is after the Minister's car.
Deputy Noonan cannot buy my car. He would be get it free from the State. If I made a private arrangement with Deputy Noonan to buy his car at a certain price, we would have agreed a contract which would be enforceable. If Deputy Noonan changed his mind and wanted a higher price, the arrangement would be enforceable because we had made an agreement. However, if one was to agree a price on property or land, it would have to be evidenced in writing. This matter is clearly stated in law.
As it has been explained to me, evidence in writing does not necessarily mean a contract has to be drawn up and signed by Deputy Noonan as the vendor and me as the purchaser. However, there must be evidence in writing and there have been interesting cases in Irish conveyancing law in this regard. Evidence in writing means exactly that – something in writing. I hope I am not misleading the House. There is a well-known case relating to the sale of property and businesses. This matter has been clarified with the Incorporated Law Society. This amendment is not necessary.
Deputy Noonan made a separate case which relates to deposits paid. As we discussed previously, a booking deposit, unless there is something in writing, is exactly as it implies, a booking deposit. It does not necessarily mean there is a contract. What we are doing here is exactly the same as we did in 1998 regarding the transitional arrangements. Deputy McDowell, a solicitor, might know a little more about this. I hope I have not said anything incorrect. That is my understanding regarding the 1998 and current arrangements about evidence in writing. If I am wrong, my learned officials will tell me. They believe I am right.
The evidence in writing proposed in the amendment would include a receipt for the payment of a booking deposit and a written contract executed by the purchaser. The amendment is not an either/or provision but both. I am left in the position where I have to accept learned counsel's legal opinion.
Perhaps Deputy McDowell would like to contribute.
To disturb the consensus. As I understand it, the Bill as phrased only covers some of the instances we are talking about. The usual practice when a booking deposit is received by an estate agent is that they set out the details of the agreement but then include a rider that the contract is not enforceable and that memo is not a memo for the purpose of the statute of frauds and is therefore not enforceable as such. As I understand it, the Bill when enacted will not allow that letter or the paying of a deposit to be evidence of the contract because usually it will specify it is not meant to imply the existence of a contract. One would need to progress to the stage of an unconditional contract.
Is the Minister saying that the contract does not need to be executed, or at least not executed by both parties?
That is how I understand existing law.
The contract would not normally be enforceable if it was not executed. The Minister is informed by his officials that the existence of a written contract will be sufficient, notwithstanding the fact it is not executed. That progresses matters a little further. However, that being the case, there is no real reason one could not go back one stage and accept the booking deposit and the memo from the estate agent. This will be arbitrary one way or another. There will be a certain amount of "readying-up" no matter what happens. We might as well cast it in such a way to minimise the number of hard cases.
This is the way we have done it before and it has been accepted. If it is not done this way between now and next year's Finance Bill, I will look at the matter again. This did not cause difficulty in 1998 or any other time we have had transitional arrangements. We had no complaints and I do not anticipate any on this occasion.
I can see how it might be workable.
Amendment, by leave, withdrawn.
Question proposed: "That section 2, as amended, stand part of the Bill."
On section 2, there are also a number of hard cases. Young couples who were first time purchasers of second-hand homes were charged stamp duty a couple of weeks ago which they would not have to pay now. I know the changes took place on the strike of midnight on 15 June. However, to be human about it, people who had scrimped and saved a deposit to purchase a house, one would feel very sore if they had paid stamp duty on a starter home at £125,000 in the west of Dublin when now one does not have to pay any stamp duty. The amendment, which was ruled out of order, sought to backdate the provision, only in respect of first time purchasers of second-hand homes, to the start of the tax year, 6 April or the start of the year, 1 January. I know there is no legal case for this but we have all received representations. I have received half a dozen telephone calls from people asking if there is any chance that this can be backdated as they had just signed a contract and are liable for stamp duty. If they could get it back, they could furnish the house. As a gesture of goodwill which would not cost very much, the Minister should backdate the provision to some degree.
It might cost a great deal of money. Much as I would like to accede to the requests of the Deputy and his colleagues who have received representations and the Department of Finance who have also received representations, I would not like to create a precedent. It is traditional that taxation changes come into effect on the night of the budget or sometimes on the day an amendment to the Finance Bill is published or announced. We do not go beyond that date. For example, last year I made a significant change to capital acquisitions tax and applied it to inheritances arising on or after 1 December. I received many representations from deserving cases whose relatives had passed on in previous months. If I established such a precedent, there would not ever be a final date. It would haunt successive Ministers for Finance. Deputy Noonan proposed that the provision should be backdated to 1 January 2000 which is no better or worse a date than any other. What happens in the cases of those who signed a contract on 31 December? There are always cases where people are excluded. Much as I understand the Deputy's argument, I cannot accede to making a change.
Perhaps I could explain my two amendments in the context of the debate on the section, rather than taking up time later on Report Stage.
Which amendments?
The two amendments which were ruled out of order, or rather which I was not allowed to discuss.
They are not out of order.
They were not discussed because I did not move them in time.
It would be more appropriate to discuss them on section 4.
I am happy to do that on section 4 if the Chair prefers.
Question put and agreed to.
SECTION 3.
Question proposed: "That section 3 stand part of the Bill."
I am opposing the section. There are two changes I would like to make. First, I would like the imposition of stamp duty at a nil rate to extend to second-hand homes up to the value of £200,000 rather than the £150,000 proposed by the Minister. That would be more in line with the Dublin market at the moment. I appreciate that the £150,000 limit will benefit purchasers of the average house around the country. However, the average second-hand house in Dublin costs significantly more than £150,000 now – probably around £170,000 or £175,000. That is the purpose of a series of amendments I have tabled.
Also the rate of 9% is excessive and should be reversed to the status quo. I intervene now because I found this Bill technically difficult to deal with from the Opposition benches. Normally one would look at the Explanatory Memorandum and attempt to draft amendments to change the numbers in the Explanatory Memorandum. However, when one turns to the Bill, there are no such numbers in the text of the Bill. Cross-referencing to the Principal Act is great fun if one has research facilities like those in Congress in Washington, but not when one has only one full-time secretary who is working on constituency business all day. We simply do not have the facilities here, so the Minister will bear with me if the debate is a little ragged.
I need the Chair's guidance. Amendments Nos. 7 to 10, inclusive have been grouped together. Amendments Nos. 9 and 10 are in my name. They are intended to deal with the net points Deputy Noonan has mentioned. Perhaps it would facilitate the debate if we were to discuss these at this stage. I am not quite sure what the Minister's reaction to that would be.
Deputy McDowell is right.
Shall we take them all together?
We should dispose of section 3.
If we hear the Minister on the section, we might make progress.
This section, together with the Schedule to the Bill, imposes the new stamp duty rates on conveyances, transfers and leases of residential property. These are as follows: aggregate consideration, other than rent, not exceeding £100,000 is subject to a rate of 9%; amounts between £100,001 and £150,000 are subject to 9%, and so on. Section 3 amends Schedule 1 of the Stamp Duties Consolidation Act, 1999, to replace existing rates by the new rates and these are contained in the Schedule to the section.
On that basis, we may as well take them all together. At least, I am happy to have the debate at this stage.
We must dispose of section 3.
I appreciate that, a Cheann Comhairle.
I just think that stamp duty at 9% is a bad idea. It will drive investors out of the market. As the Minister argued earlier in respect of mortgage interest relief in relation to investment property, which he abolished previously, the market will reassert itself and find a new equilibrium. That is right. The market will reassert itself in this case and find a new equilibrium. Investors will not stay out permanently. Some will come back in, despite the 9%. However, rents will go up. The investor who re-enters the market paying stamp duty at 9% on £200,000 will need to recoup £18,000 and he has only one place to go for it. As well as that, once the investors are out of the market, given the state of the rental property market in Dublin at the moment, many people will be looking for houses and the rental market will be very tight.
Much of what the Government is doing is contradictory. I am sure the Minister appreciates this. The Government is at loggerheads with itself. The Tánaiste, with Craig Barrett, announced a huge new extension to Intel in Leixlip last week. One thousand workers are supposedly going in. At the press conference, Intel announced that 50% of those workers would have to be brought in from continental Europe because the local labour market could not supply the demand. That means that of the 1,000 workers, 500 will be coming in immediately. Where are they going to live? Does the Minister think they are going to buy houses? They will be all over west Dublin looking for rental accommodation.
And Kildare.
It happened before. Now we have students coming into Dublin and our own young people coming back from abroad. The population of Ireland is rising, particularly on the east coast. The population of young people in Dublin is increasing by the week. They will all need rental accommodation and this measure will put a block on the market. Investors will clear out. I agree totally with the Minister that a new equilibrium will occur. I am a free market adherent too, but in a different way. There will be a new equilibrium and rents will go up, and when the rents go up new investors will come back into the market.
There would be some merit in this if we were in a tight fiscal position and the Government needed the revenue. However, there is no suggestion that the Government needs revenue. This is purely a tool of management and it is a deliberate policy choice to put on 9%. Someone has a theory that if 9% is put on investment residential property the result will be to reduce the price of houses. That will not happen. Many of the people who are in rental accommodation paying increased rents are young couples trying to put a deposit together to buy a new house. This is what I meant when I said on Second Stage that it is a seamless market. The supply cannot be reduced in one sector without causing knock-on effects on local authority housing lists and on the supply of new houses. I do not agree with the section. It is a very bad idea and the Minister probably does not agree with it himself. The net point is that if the Minister puts it to the House, I will call for a voice vote on it.
As somebody who has a little less faith in the free market than either of my two colleagues, allow me to intervene on this. I support the 9% rate. However, I do not disagree with most of what Deputy Noonan has said. It will take investors out of the market, probably for a period of two years, more or less. It is more than likely that they will come back in, and if they come back into the market in circumstances where supply has not increased in the meantime, rents will undoubtedly go up.
What I assume this measure is intended to do – it is the reason I support it – is to give us the breathing space, the couple of years we need in order to bring supply on stream. That is the only reason I seek to reallocate the limited supply available at the moment so as to favour first-time buyers. To do that it is necessary to take investors out of the market. Nobody believes that taking investors out of the market is good in itself. It is not. We need investors in the market. We need people to invest with a view to renting out. The fact that we have to interrupt the normal flow of investment for the next two or three years is regrettable, but it is something that simply has to be done because of the circumstances in which we find ourselves. However, if the supply has not increased by the time the effects of which Deputy Noonan speaks come into play in two or three years' time, the whole thing will have been a miserable failure.
If that were the full picture, I would agree with Deputy McDowell. However, the other point, which I made on Second Stage, is that one cannot interfere with demand without affecting supply. Anybody who is in touch with planning offices around the country knows that already developers who intended building 20 apartments on a corner site are now inquiring from the planning officials about how a commercial application would be treated. It is not a question of investors being driven out of the market. Builders are being driven out as well. The supply of residential units is, therefore, being reduced because the developers who were going to build the 20 apartments on a corner site near a shop for the rental market now see it as a bad idea. They will say they cannot get people to buy them, given the combination of the 2% and the 9% stamp duty, and as a consequence they will think about a series of offices over a number of small shops. That is what is happening in planning offices in the real world. I think the Minister well understands this, but the political people in the Department of the Environment and Local Government do not understand that supply adjusts as soon as demand is affected. While builders who are half way through a building project cannot adjust a development, resulting in a temporary favourable blip, supply and demand will find a new equilibrium in a very short period, given that builders are in the market for profit.
I do not want to do the Minister's job for him, but the evidence in the third Bacon report is instructive in this regard and suggests there was a short-term slowing, particularly in the building of apartments. However, it was only short-term. Last year 44% of new house units were apartments, most of which were for rental, compared to 30% the previous year. This suggests that builders very quickly came back into the market because they realised money was to be made.
Rents doubled, the Deputy said that today.
Without doubt rents will increase in the absence of increased supply.
Of course rents will be driven up if, for example, everybody from Intel is looking for accommodation and are earning good money, but who gains?
The 9% is not a revenue raising measure, not that the Department of Finance is averse to revenue raising measures. I listened to the debate and there are merits on both sides of the argument. I know the theory behind the proposal which is to take out of the market for a period the investor and in the interim supply will increase. If supply does not increase, the investor will return to the market in the way Deputy Noonan suggested. Deputy Noonan also suggested that developers responding to the market will examine schemes to see if residential developments can be changed to commercial developments. However, as the economy comes back into line, that would not work.
The theory is that the proposal will have a temporary distortionary effect, allowing supply to catch up with demand. As I said in an earlier contribution, all the consequences of making adjustments to the market cannot be predicted. Bacon refers to the reasonably well paid person – a Deputy, a Minister or a professional person – getting into the market in anticipation that prices will continue to rise. This could give the bubble effect. We want to take investors out of the market for a period, and we make no apologies for that. We want to give the market a chance of reaching equilibrium so that first time buyers will have a chance. That is the basis and raison d'être of these proposals. In terms of the first report, Mr. Bacon was correct in that it had an effect for a short time, but the market returned to equilibrium, as I said it would on more than one occasion in the House. This is what normally happens in a market. The economy has continued to grow, as has the number of people returning. Deputy Noonan referred to the recent announcement of an additional 1,000 jobs at Intel in my county.
Taking all the measures into account, including the supply side measures which make up the bulk of the three Bacon reports, and the other initiatives taken by the Government, supply should come into line with demand. Of course, if tens of thousands continue to come to Ireland over the coming years and economic growth continues, the market will remain out of sync. This is one of the down sides of economic growth, but nobody is suggesting we double unemployment to 10% or have between 40,000 to 60,000 leaving the country every year, as happened in the 1980s. I made this point during Question Time in the context of inflation and other matters. One cannot deal with one small segment of the economy. We could solve the tightening of the labour market, for example, if we doubled unemployment, but nobody is suggesting that.
This proposal is an attempt by Bacon to introduce another distortionary effect for a period, namely, to take out the investor. I think it will work, definitely in the short-term. In the longer term if supply does not meet demand, the market will again find its own equilibrium. Stamp duty of 9% will affect people's thinking unless they are very wealthy. I know from friends in my county that people in the very recent past were buying blocks of six houses or eight apartments. People from Deputy Enright's and Deputy Noonan's counties were—
The key question is whether they were leaving them empty.
No, they were not, but—
That is the point.
The Deputy is correct and there is no point gainsaying it.
The Minister has very wealthy friends.
Those in this market were not all solicitors, barristers or such people, but people I would consider to be of moderate income, the same as those going to Spain and Portugal to buy properties. They are very ordinary, not wealthy, people who could be regarded as having an ordinary standard of living. This is the result of people having more disposable income and people are entitled to so invest – I wish them the best of luck. Unfortunately, I am not in a financial position to do the same. The anticipation was that people could not lose, that the market would continue to grow, that the investment would return good rents and that selling the houses or apartments would result in a reasonable capital gain. The temporary tax measures on the demand side are to discourage people from so investing. Discouraging people from buying three or four houses or apartments should bring the market back somewhat and stabilise prices to give some chance to first time buyers. Other downsides have been alluded to by myself and other Members, but the raison d'être of the Bacon reports is to give Joe Enright, for example, from Birr who is married or thinking of getting married the chance of buying a house. Hopefully, this aim will be achieved.
That is frightful nonsense.
At least I made an attempt.
Question put and declared carried.
SECTION 4.
I move amendment No. 4:
In page 7, to delete lines 1 to 18 and substitute the following:
92B.–(1) In this section 'first time purchaser' means–
(a) a person, or
(b) as respects instruments executed on or after 27 June 2000, a person, being an individual, who, at the time of the execution of the instrument to which this section applies, has not, either individually or jointly with any other person or persons, previously purchased (other than the purchase of a leasehold interest by way of grant or assignment for any term not exceeding one year), or previously built–
(i) directly or indirectly on his or her own behalf, or
(ii) as respects instruments executed on or after 27 June 2000, in a fiduciary capacity, another dwellinghouse or apartment or a part of another dwellinghouse or apartment and for the purposes of this definition–
(I) any dwellinghouse or apartment taken under a conveyance or transfer operating as a voluntary disposition within the meaning of section 30 of the Principal Act shall be deemed to have been taken by way of purchase where that conveyance or transfer was executed on or after 22 June 2000, and
(II) any part of a dwellinghouse or apartment taken under a conveyance or transfer operating as a voluntary disposition within the meaning of section 30 of the Principal Act shall be deemed to have been taken by way of purchase where that conveyance or transfer was executed on or after 27 June 2000.
Amendment agreed to.
Amendments Nos. 5 and 6 not moved.
We now proceed to amendment No. 7. Amendments Nos. 8 to 10, inclusive, are related. Is it agreed that amendments Nos. 7 to 10, inclusive, be discussed together? Agreed.
I move amendment No. 7:
In page 7, to delete lines 28 to 40 and substitute the following:
"paragraph (1), (2) or (3) or clause (i), (ii) or (iii) applies, to nil, and where–
(a) paragraph (4) or clause (iv) applies, to an amount equal to three-ninths;
(b) paragraph (5) or clause (v) applies, to an amount equal to three and threequarter-ninths;
(c) paragraph (6) or clause (vi) applies, to an amount equal to four and one half-ninths;
(d) paragraph (6A) or clause (vii) applies subject to the aggregate consideration or aggregate part of the consideration (other than rent) referred to in paragraph (6A) or clause (vii) attributable to residential property, not exceeding £550,000, to an amount equal to seven and one half-ninths,".
The purpose of this amendment is to exempt houses up to a value of £200,000 from stamp duty. Under the Minister's proposal the Bill will apply to houses up to a value of £150,000. I would like to see this figure raised to £200,000. The £150,000 limit is reasonable in respect of houses outside Dublin but if the average house in the greater Dublin area is to be caught, the figure needs to be raised to a minimum of £175,000 or £180,000. The sum of £200,000 is a nice round figure which would allow for the increases in house prices which will inevitably occur as a consequence of the Bill in the next 12 months.
Amendments Nos. 8 to 10, inclusive, would have the same effect of pushing up the exemption limit from £150,000 to £200,000. Deputy Noonan is right, the average figure outside Dublin is less than £150,000 whereas the average price of a new house in Dublin is £160,000 plus and of a second hand house, £175,000 plus. To put it in simple terms therefore the average house in Dublin will not be caught by the Bill which will not benefit sufficiently first time purchasers of average houses in the greater Dublin area. Setting the exemption limit at £150,000 was to be to their benefit but to do so effectively it has to be pushed out a little further.
I fully support the amendment. To try to ease the problems presented by stamp duty, in his initial efforts the Minister raised the exemption limit in stages but they were of insufficient benefit. If he had been more generous he could have assisted many of those for whom stamp duty caused financial difficulties because of the value of their incomes and the house being purchased. House prices in towns such as Tullamore and Portlaoise are slightly above average. This is causing problems for purchasers. The figure of £200,000 is, therefore, reasonable and would be of benefit to many people who would otherwise be caught for onerous stamp duty.
The purpose of the amendments is to increase the first time buyer exemption limit from £150,000 to £200,000. Deputy Noonan has also proposed a revised scale of rates for first time buyers. In increasing the first time buyer limit from £60,000 to £150,000 and in giving a 25% reduction on other owner-occupier rates applying between £150,000 and £300,000 we are responding fully to the needs of first time buyers. In 1999 the average price paid by a first time buyer for a new house in the country as a whole was £100,000 and in Dublin, £126,000. It is likely that the figures for second hand houses vary significantly from these figures. I will keep the position under review and will consider an increased limit should this be necessary as time elapses. Accordingly, I must oppose the amendments.
May I take it that the average price of a second hand house was higher?
Yes. In the debate on the financial resolutions passed two weeks ago Fine Gael's able spokesperson on housing, Deputy Hayes, made an interesting contribution on stamp duty which was later repeated. Fine Gael has been proposing for some time that the limits should be raised. As Deputy Noonan rightly reminded me I was opposed to this. I had many good grounds for so doing. We have now taken account of the suggestions made by Mr. Bacon. I expressed the viewpoint previously that in increasing the thresholds in this way one will also push up prices by the same level as the stamp duty saving will be eaten into by the vendor. One either believes that the market will take care of itself or that it will not. Deputy Hayes inadvertently made this point for me in his contribution. I reminded him—
He was obviously impressed by the Minister's arguments.
The increase in the exemption limit should be of benefit to first time buyers but there is a view, with which I do not necessarily disagree, that the market reacts quickly. I have a feeling that in pushing the exemption limit to a higher level prices will move in the same direc tion. The changes proposed by Mr. Bacon under which the exemption limit will be pushed from £60,000 to £150,000 are substantial. The figure is realistic and I hope I will not have to readjust it in years to come.
The question is, "That the words and figures proposed to be deleted stand."
Question put.
Tá
|
Ahern, Michael.Ahern, Noel.Andrews, David.Ardagh, Seán.Aylward, Liam.Blaney, Harry.Brady, Johnny.Brady, Martin.Brennan, Matt.Brennan, Séamus.Briscoe, Ben.Browne, John (Wexford).Byrne, Hugh.Carey, Pat.Collins, Michael.Cooper-Flynn, Beverley.Coughlan, Mary.Cowen, Brian.Cullen, Martin.de Valera, Síle.Dempsey, Noel.Dennehy, John.Doherty, Seán.Ellis, John.Fahey, Frank.Fleming, Seán.Flood, Chris.Fox, Mildred.Gildea, Thomas.Hanafin, Mary.Harney, Mary.Haughey, Seán.Healy-Rae, Jackie.Jacob, Joe.Keaveney, Cecilia.Kelleher, Billy.Kenneally, Brendan. |
Killeen, Tony.Kirk, Séamus.Kitt, Michael.Lawlor, Liam.Lenihan, Brian.Lenihan, Conor.McCreevy, Charlie.McDaid, James.McGennis, Marian.McGuinness, John.Martin, Micheál.Moffatt, Thomas.Molloy, Robert.Moynihan, Donal.Moynihan, Michael.Ó Cuív, Éamon.O'Dea, Willie.O'Donoghue, John.O'Flynn, Noel.O'Hanlon, Rory.O'Keeffe, Batt.O'Keeffe, Ned.O'Kennedy, Michael.O'Malley, Desmond.O'Rourke, Mary.Power, Seán.Roche, Dick.Ryan, Eoin.Smith, Brendan.Smith, Michael.Treacy, Noel.Wade, Eddie.Wallace, Dan.Wallace, Mary.Walsh, Joe.Woods, Michael.Wright, G. V. |
Níl
|
Ahearn, Theresa.Allen, Bernard.Barnes, Monica.Barrett, Seán.Belton, Louis.Boylan, Andrew.Bradford, Paul.Broughan, Thomas.Browne, John (Carlow-Kilkenny).Bruton, Richard.Burke, Liam.Burke, Ulick.Carey, Donal.Connaughton, Paul.Cosgrave, Michael.Coveney, Simon.Creed, Michael.Currie, Austin.D'Arcy, Michael.Deenihan, Jimmy.Durkan, Bernard.Enright, Thomas.Farrelly, John.Finucane, Michael.Fitzgerald, Frances.Flanagan, Charles.Gormley, John. |
Hayes, Brian.Higgins, Jim.Higgins, Joe.Higgins, Michael.Hogan, Philip.Howlin, Brendan.McCormack, Pádraic.McDowell, Derek.McGahon, Brendan.McGinley, Dinny.McGrath, Paul.Mitchell, Jim.Mitchell, Olivia.Moynihan-Cronin, Breeda.Naughten, Denis.Neville, Dan.Noonan, Michael.Ó Caoláin, Caoimhghín.O'Keeffe, Jim.O'Shea, Brian.O'Sullivan, Jan.Owen, Nora.Penrose, William.Perry, John.Quinn, Ruairí.Reynolds, Gerard. Ring, Michael. |
Níl–continued
|
Shatter, Alan.Sheehan, Patrick.Stagg, Emmet.Stanton, David. |
Timmins, Billy.Upton, Mary.Wall, Jack.Yates, Ivan. |
Tellers: Tá, Deputies S. Brennan and Power; Níl, Deputies Barrett and Stagg.
Question declared carried.
Amendment declared lost.
Amendments Nos. 8 to 10, inclusive, not moved.
Amendment No. 11 is in the name of the Minister. Amendment No. 11 is consequential on amendment No. 12 and amendment No. 13 is related. They may be discussed together by agreement.
I move amendment No. 11:
In page 10, line 3, to delete "property."." and substitute "property.".
The first amendment is a technical drafting change to facilitate the second amendment.
The purpose of the second amendment is twofold. First, the trustees of a trust, whose trust funds are established out of public subscriptions for the benefit of permanently incapacitated persons, will be entitled to first-time buyer relief in respect of the first house bought, following the establishment of the trust, for occupation by the beneficiary or where there is more than one beneficiary, for each of the beneficiaries.
Second, a person, who has left the former marital home due to the marriage having been dissolved or the subject of a judicial separation and who buys a new house to live in, will be entitled to claim first-time purchaser relief provided that, at the time of the purchase, he or she does not retain an interest in that former marital home and that, at the time of the new purchase, the other spouse still occupies the former marital home which was occupied by both of them prior to the dissolution or judicial separation.
The purpose of Deputy Noonan's amendment is to give first-time purchaser relief to both spouses where a marriage breaks up in various ways and the family home is sold. The amendment in my name already cover most situations which are the subject of Deputy Noonan's amendment, and I believe will deal with the main hardship situations involving marriage break-up.
The question of nullity is more difficult as a decree of nullity effectively means that a couple were never legally married. Granting first-time buyer status in such cases would raise the question of equality of treatment with unmarried cohabiting couples. While this is a difficult area, I will keep the definition of "firsttime buyer" under review and, if necessary, bring forward amendments for the 2001 finance Bill.
Accordingly, I must put forward my own amendments and in the meantime oppose the Deputy's amendment.
I am not quite sure to what extent the second portion of the amendment meets my intent. I wanted to change the definition of the first-time purchaser to include persons who have to purchase a dwellinghouse after a marriage was broken up by one of the legal methods by which people separate, that is, divorce, nullity or separation; and where the settlement would involve the sale of the principle private residence, that parties to the marriage would be treated as if they were first-time purchasers, if either or both subsequently had to buy a home. Has the Minister met the intent of my amendment?
I believe that I have, except on the question of nullity. As I said, the question of nullity is quite complex in that a decree of nullity is a de facto decision by the court that a marriage never existed in the first place, but I dealt with all other aspects in my amendment or at least I think so. If anything has been left out, I must come back to it on the next finance Bill.
The intention of my amendments was to ensure that where a marriage breaks up by a decree of divorce or by judicial separation, that person is not penalised as a result. The Deputy's amendment involved a similar idea. The only difference is that Deputy Noonan's amendment includes the provisions in my amendment but also mentions a decree of nullity.
What is the Minister's problem with it?
I do not have a problem with it except that, as I have explained, a decree of nullity effectively states that a marriage did not exist in the first place.
I agree that it states that a marriage did not exist in the first place, but a family home did exist. If it must be sold arising from nullity proceedings, the persons in the marriage which was annulled should be treated as first time purchasers when they have to find accommodation.
Another problem exists with people who are co-habitees. How would I deal with such people when they break up? They were not married in the first place, which is the same as the decree of nullity. That adds further complications.
Yes, but neither of us propose to deal with that. Ultimately the courts will decide on it because someone will take a person to court on the grounds that he or she was a common law spouse. A decision will then have to be made. The argument put forward by the Minister does not negative the argument that nullity should be included if separation and divorce are included.
I will have the matter considered further in the finance Bill but, in the limited time available to us, I have decided it would be unwise for me to open up a vista at this stage regarding the question of co-habitees. Many people in relationships do not get married nowadays, and I would create other difficulties were I to deal with them in the Bill. However, I can consider it between now and 2001.
There are two other circumstances which the Minister should consider. One is the commonplace arrangement whereby people separate and it is a recognised separation done by agreement which does not require a decree in court. As the Minister doubtless knows, most people who obtain a judicial separation do so without the need to go to court and obtain a decree. It seems unreasonable to penalise people who are able to come to agreement without the intervention of the courts, and that could be dealt with by a relatively simple amendment.
There is the slightly more complicated circumstances of people, who might come under the Family Law Act, 1981, who have bought a house in contemplation of marriage. The law already deals with those people and provides for the division of the property in circumstances where the marriage does not take place. If an engaged couple buy a house and break up before they get married – unfortunately this happens more often than we might think – at least one of the couple, if it is only one who is buying another house, should be entitled to the first time buyer's exemption and reduced rates.
Regarding the nullity question, we are speaking of the house in which the couple had been living and the fact that, if the house is sold because of nullity, they will not receive the benefit of exemptions when they each buy other houses. Nullity is similar to a divorce in that the couple initially purchased the house in the belief a marriage existed which it later transpired did not because a decree of nullity was obtained. That is very similar to the cases where the exemption is granted.
I promised to keep the situation under review. If I can find suitable amendments between now and the next finance Bill and if matters come to my attention where this causes difficulties, I will further amend the Bill. I do not want to do it at this stage.
I accept the Minister's commitment and withdraw my amendment.
Amendment agreed to.
I move amendment No. 12:
In page 10, between lines 3 and 4, to insert the following:
"(7) Notwithstanding subsection (1), a trustee of a trust to which section 189A of the Taxes Consolidation Act, 1997, applies shall be deemed to be a first time purchaser for the purposes of the definition in subsection (1), in respect of a conveyance or transfer including a conveyance or transfer operating as a voluntary disposition within the meaning of section 30 of the Principal Act, to that trustee of that trust, of a dwellinghouse or apartment or a part of a dwellinghouse or apartment, subject to–
(a) where there is only one beneficiary of that trust, this subsection applying to one such conveyance or transfer only, being the first such conveyance or transfer executed on or after the date of the establishment of that trust, and
(b) where there is more than one beneficiary of that trust, thissubsection applying to as many conveyances or transfers, executed on or after the date of the establishment of that trust, as there are beneficiaries of that trust for whose benefit any such conveyance or transfer is made.
(8)(a) Notwithstanding subsection (1), a spouse, to a marriage the subject of a decree of judicial separation or a decree of divorce, shall be deemed to be a first time purchaser for the purposes of the definition in subsection (1), in respect of a conveyance or transfer including a conveyance or transfer operating as a voluntary disposition within the meaning of section 30 of the Principal Act, to that spouse after the granting of that decree, of a dwellinghouse or apartment or a part of a dwellinghouse or apartment but only in respect of the first such conveyance or transfer, provided at the date of execution of the instrument giving effect to such onveyance or transfer–
(i) that spouse is not beneficially entitled to an interest in the dwellinghouse or apartment or that part of the dwellinghouse or apartment referred to in paragraph (b), and
(ii) that the other spouse to that marriage continues to occupy, since the date of the decree, as his or her only or main residence, the dwellinghouse or apartment most recently acquired prior to the date of the decree or that part of the dwellinghouse or apartment most recently acquired prior to the date of the decree which was the only or main residence of both spouses at some time prior to the date of the decree.
(b) In this subsection–
"decree of divorce" means a decree under section 5 of the Family Law (Divorce) Act, 1996, or any decree to like effect that was granted under the law of a country or jurisdiction other than the State and is recognised in the State;
"decree of judicial separation" means a decree under section 3 of the Judicial Separation and Family Law Reform Act, 1989, or any decree to like effect that was granted under the law of a country or jurisdiction other than the State and is recognised in the State.'.".
Amendment agreed to.
Amendment No. 13 not moved.
Question proposed: "That section 4, as amended, stand part of the Bill."
I wish to address the two amendments I had tabled to section 4. One amendment sought to redefine the definition of "first-time purchasers" by including the words "in the State". Essentially I am seeking clarification from the Minister and to cater for the position where people return from abroad. A person might have emigrated and purchased a house in Britain or on the Continent or wherever. Are those people treated as first time purchasers when they return? It is not clear from the wording of the Bill.
They are not, for the purposes of the first time buyer's grant.
These people would not be treated as first time purchasers?
No.
There is a case for doing so. The Bacon report uses the figure of 200,000 which is taken from statements made recently by the Minister for Enterprise, Trade and Employment. It suggests the Government is seeking to encourage up to 200,000 people to come into the country. Many would have purchased properties abroad. Many people might have left Ireland when they were young, stayed in England or elsewhere for ten to 15 years and purchased a property. They are selling properties in a market which has much lower property prices than here and they find it difficult to return as a result. If it is our policy to encourage them to return and work, we need to give them additional assistance in getting into the housing market as well as the labour market. It could be effected by a relatively simple amendment.
I understand what the Deputy says, but the basic principle of the Bacon initiative is to try to get the first time buyer on to the first rung of the ladder. We are trying to help the Deputy's constituents who cannot get into the housing market at present to get their first foot on the housing ladder. I take the Deputy's point about people returning from abroad but the purpose of this range of measures in the third Bacon report is not aimed at such people but at people resident here who cannot get on the first step of the ladder.
We are agreed on the substance of the amendment I tabled but I take it that the Minister is not inclined to accept it. It is Government policy to encourage people to return. State agencies in Britain, North America and in Germany are encouraging Irish people resident there to return home. One of the reasons they cannot do it is because they cannot get into the housing market. This would be a useful means of helping them do that. In any event, the Minister is not prepared to accept the amendment, so perhaps he will revisit the matter.
Question put and agreed to.
NEW SECTIONS.
I move amendment No. 14:
In page 10, before section 5, but in Part 1, too insert the following new section:
"5.–Stamp duty shall be payable by first time purchasers (as defined in section 4) at the rate applicable only on that part of the consideration which exceeds the threshold at which that rate becomes payable.".
This relates to the amendments to the resolutions which I proposed last week. We had a fascinating discussion about slabs and steps. The Minister argued for the step way of doing things as opposed to the slab method. Essentially, we are saying that, once a person becomes liable for stamp duty, he is liable on the entire property and the immediate impact is very heavy. There should be some means of mediating that impact to make it more gradual. This amendment is intended to apply only to first time purchasers as another way of assisting them enter the market.
I explained the slab and step system on the previous occasion. From the time stamp duty was first introduced, it has always been applied in this way in that the new rate applied above a certain threshold.
The fact that things were always done a certain way never bothered the Minister before.
Perhaps I should have a chat with myself about these matters in future, but it is probably too late in my life to change the way I behave and I have no intention of doing so.
The Minister could not keep better company than in talking to himself.
I have often found that, because I have never had any disagreements in those discussions.
Stamp duty is a method of raising revenue for the State, and it takes a certain amount of money to provide health and educational services and social welfare payments. Stamp duty is an important revenue raising measure for the State. Deputy McDowell and others have proposed that there should be a threshold which would act as an exemption limit and above which the different rates would be paid. If that were to be done, the entire stamp duty code would have to be restructured. If there were an exemption of £150,000, for example, stamp duty rates of 30%, 40% or 50% would have to be applied not that much higher up the scale to achieve the same monetary returns. Therefore, even though there is a certain attractiveness to this at face value, if there was a £150,000 exemption limit, giving all first time buyers an opportunity to enter the market, we would, however, have to raise the same amount of money in stamp duty. The stamp duty rates would be colossal to raise the revenue accruing from stamp duty at present. That is why I oppose this.
We never adopted such an approach to stamp duty in the past and it is not my intention to introduce it now. If Deputy McDowell becomes Minister for Finance after the next election, he can introduce such a proposition.
The Minister is not usually shy about doing things in an innovative manner. It surprises me that he would dismiss something simply because it is innovative.
It is too costly.
The take from stamp duty has increased enormously in recent years, largely because the price of houses has increased enormously. We are now taking in a multiple of what we took in five years ago. The specific proposals in this amendment are geared only at first time buyers, not the rest of the system. It would, therefore, take in only a small number of the people paying stamp duty. It is not true to say that in order to maintain the high levels of take we have from stamp duty, we would need very high rates. The reduction in the total take would be sustainable in the current budgetary context.
What was the total yield from stamp duty for the sale and purchase of residential property in 1999? What is the estimated figure for 2000? What will be the estimated loss to the Exchequer from the reliefs being introduced today and the estimated yield to the Exchequer from the 9% imposition on investment residential property?
The stamp duty yield from residential property, both new and second hand, in each of the years from 1995 to 1999 is as follows: £94 million in 1995; £117 million in 1996; £153 million in 1997; £168 million in 1998 and £207 million in 1999. The estimated figure for 2000 is £241 million. The total stamp duty yield on property in 1998 was £304 million, £434 million in 1999 and the post-budget estimate for the total yield for property in 2000 is £505 million.
What are the pluses and minuses in this Bill?
The pluses and minuses are between £5 million and £10 million.
Is that a plus or a minus?
That includes the 9% surcharge and the other changes.
Is that a plus or a minus?
It is a minus. There is a caveat in that. When I was changing capital gains tax some years ago, I included a minus of £19 million for prudence sake. I thought the figures might be in the opposite direction and they were. The cost of stamp duty changes as an estimated loss to what the figure would have been without the changes must be included as a caveat. The figure for the end of the year will hopefully show an increase on last year's figure. The cost of the changes is the loss on the amount it would have been if we had not made the changes – between £5 million and £10 million.
Will the Minister give a figure for the estimated yield from the anti-speculative tax?
The anti-speculative tax will have succeeded—
If no one pays it.
—if the yield is nil. It is the first tax in the history of the State where its success depends on its yield being nil. It is the first time a Minister for Finance has introduced a measure where the purpose is to gain a return of nil.
The Minister will get nothing anyway so he can claim a victory now.
No Minister for Finance had the courage or ingenuity to introduce a system where stamp duty is paid in a graded manner. Someone buying a house for £150,000 will pay a certain rate of stamp duty. Once the price rises to £150,001 the rate may rise from 3% to 4% just because of £1 extra. I accept that the State must provide ancillary services such as education, health and public transport, but the take in stamp duty on residential property has risen from £117 million in 1996 to £241 million this year. It is important to collect tax but it should not be so punitive. To penalise first time buyers or those buying homes for their sons or daughters is very harsh. There should be a graded system with exemptions at certain levels. Such a system should have been introduced long ago.
We have not reached section 16 but the penalty clause for those who are late paying their penalties should be re-examined. A penalty of 1% per month for someone who is not in a position to pay the money there and then is excessive.
Deputy Enright is very reasonable and makes the case for a stepped approach to the stamp duty system. That, however, is not on my agenda, nor will it be on the agenda of the next two budgets I hope to introduce. I have many plans for taxation, but such changes to the stamp duty system are not among them. There is no point in my misleading the Deputy. Perhaps I will consider it when I am Minister for Finance in the next Government.
Amendment, by leave, withdrawn.
I move amendment No. 15:
In page 10, before section 5, but in Part 2, to insert the following new section:
"5.–This Part shall not apply to those administrative counties comprised for the time being within the region recognised by the European Union as qualified for Objective One support.".
This amendment seeks to exempt the Objective One area from the anti-speculative tax. The housing market in urban areas is not the only housing market in the State. There are other parts of the country, such as the county in which the Leas-Cheann Comhairle resides, in which people should be encouraged to invest. I do not believe those counties should be subjected to the anti-speculative tax. There would be no loss to the Exchequer nor any diminution of the effectiveness of Dr. Bacon's proposals if that were done.
I am opposed to this amendment.
As it is now 10.30 p.m. I am required to put the following question in accordance with an order of the Dáil of this day: "That the amendments set down by the Minister for Finance for Committee Stage and undisposed of are hereby made to the Bill; in respect of each of the sections not disposed of, the section or, as appropriate, the section, as amended, is hereby agreed to in Committee; the Schedule and Title are hereby agreed to in Committee; the Bill as amended is accordingly reported to the House; Fourth Stage is hereby completed; and the Bill is hereby passed."
Question put and agreed to.
The Bill, which is a certified money Bill, will now be sent to the Seanad.