Vol. 563 No. 4
224 Mr. Haughey asked the Minister for Finance if his attention has been drawn to the difficulties faced by first-time buyers, who signed contracts before budget 2003 for the purchase of a house, as a result of the increase in VAT; if anything can be done to help these people; and if he will make a statement on the matter. [7793/03]
In the 2003 budget, I decided that it was necessary to engage in some revenue raising measures to contribute to Exchequer funding and part of that was an increase in the reduced rate of VAT from 12.5% to 13.5% with effect from 1 January 2003. This was introduced by way of a financial resolution on budget night.
No transitional measures for contracts were included in the resolution. The Deputy will appreciate that any such measures would have reduced the 2003 yield from the VAT increase. It is estimated that transitional measures for all contracts signed prior to budget 2003 would have cost approximately €40 million, the bulk of which would be in respect of housing contracts.
With regard to first-time buyers, in budget 2003 I announced an increase in the tax relief on mortgage interest available to first-time buyers. The current annual ceiling on the amount of interest against which tax relief at the standard rate may be claimed is being raised by over one-quarter from €3,175 single and €6,350 married/widowed to €4,000 and €8,000 respectively. In addition, the period in which this level of relief is available is being extended from five to seven years.
