Written Answers. - Tax Yield.
John Perry
Question:
95
Mr. Perry
asked the
Minister for Finance
if he will reduce the 9% stamp duty to that which pertained prior to the third Bacon report, where an average house was charged duty between 3% to 4%; if he will abolish the further tax of 2% per annum for three years on top of the 9% paid at time of purchase; if his attention has been drawn to the fact that this taxation is halting the development of the BMW region and is a contradiction to the special tax incentives which he launched in the 1998 and 1999 Finance Acts; and if he will make a statement on the matter.
[22715/00]
The context for the recent taxation measures on housing, which I introduced in the Finance (No. 2) Act 2000, is the difficult housing market situation at a national level. These market conditions, which are fully elaborated on in the most recent study into the housing market by Peter Bacon and Associates, economic consultants, required prompt action. In particular there was a pressing need to strengthen the position of first time owner-occupier buyers compared to investors. The third Bacon report pointed to speculative demand which was helping to drive up housing prices. The restructuring of the stamp duty regime is one of the measures designed to help first time owner-occupier buyers. Given the constraints on resources in the building sector at the present time there is also need to focus more on provision for people who need homes which they will live in throughout the year.
As the Deputy is aware, a flat 9% stamp duty rate will now be charged on all categories of investors buying new or second hand residential property. The Government decided to apply this rate of 9% to all non owner-occupier purchasers of new and second hand residential property, irrespective of the value of the property, as it was considered that the previous graduated scale of rates might encourage investments in the lower end of the market. This would not be a desirable development from the point of view of the first time owner-occupier purchaser as it would bring further pressure on prices at the lower end of the market.
Stamp duty is a relatively simple self-assessed tax which is applied on a once-off basis. It is not a taxation that readily lends itself to exemptions on a regional basis. There is a risk that such exemptions could lead to distortions. These could hinder the overall national goal of increasing the supply of new homes especially to meet the needs of first time buyers who are trying to get a foothold in the housing market. The tax incentives which I introduced in the Finance Act, 1998, and the Finance Act, 1999, referred to by the Deputy, far outweigh the once-off charge to stamp duty arising on the purchase of an investment property in a designated area.
In relation to the new 2% anti-speculative tax, this tax will apply to second and additional residential properties acquired on or after 15 June 2000. The tax will be limited to a three year period. In addition, there are exemptions in certain circumstances including 'section 23' properties under the rural renewal scheme for the upper Shannon area.
These new measures should also assist in applying resources in the home building sector to the construction of homes for first time owner-occupier purchasers. As I stated during the passage of the Finance (No. 2) Act, the Government is not prepared to countenance the possible development of a situation where the goal of home ownership might be pushed beyond the reach of a significant proportion of people who reasonably aspire to it. As well as the social problems that this would cause it would also present difficulties for the wider economy in the shape of adding to wage demands and in reducing mobility in the labour market.
I consider that the latest package of measures should assist in restoring balance in the market and curbing price-increases. This price moderation is in the interests of all in the property sector whether first time buyer, owner occupier or investor.
