Vol. 561 No. 1
232 Mr. R. Bruton asked the Minister for Finance the cost of introducing automatic indexation to the thresholds for stamp duty for residential property; the total cost of stamp duty; and if he will make a statement on the desirability of such a change. [3364/03]
At present, the various thresholds for stamp duty on the transfer of residential property are reviewed on a periodic basis instead of being automatically indexed. There are a number of questions which would impact on the cost of changing from the current periodic review basis to one based on indexation, including the index used, and the likely changes that would have otherwise been made over the reference period had the move to indexation not been made.
The most commonly quoted indexation measure in the economy is the consumer price index. If the CPI had been used in recent years for such indexation, it would not have kept pace with the rate of house price inflation. For example, in 1996 stamp duty was payable on the transfer of a house valued £5,000 or more, and at 6% where the value of the house was £60,000 or more. Had these values been then index-linked to the CPI, this would mean that a house today valued more than €7,950 would be liable for stamp duty, and this would be at a rate of 6% if it were over €95,307. Currently, no stamp duty is paid on a second hand house if it is valued less than €127,000, or €190,500 for first-time buyers. Thus under that scenario, there would have been a gain rather than a cost to the Exchequer from such CPI indexation.
It should be remembered that adjusting the various stamp duty thresholds on residential property is an economic policy instrument which the Government may use to achieve various required outcomes, in matters such as supply of rented accommodation, home ownership, employment in the building industry and the raising of tax revenue for Exchequer purposes. Fixing the thresholds to the level they were on a particular date, allowing only their increase with reference to inflation, would remove flexibility in an important area of policy, and tie Government hands when an alternative threshold may more effectively match the needs of the time.
As regards the total cost of stamp duty, it is assumed that the Deputy may be referring to the cost of stamp duty to those who pay it. This is equivalent to the yield from the duty and the total yield from stamp duty in 2002 has been estimated at €1.14 billion, of which €349 million is estimated to be in respect of residential property.
For these reasons I would not be in favour of the introduction of such a change as that referred to by the Deputy.
