John Perry
Question:74 Mr. Perry asked the Minister for Finance if he has studied the tax take from new houses and from first-time buyers; and his views on whether there is scope for reform. [30152/03]
Written Answers. - Tax Code.
It is not possible to establish the precise tax receipts arising from the transfer of residential property as tax receipts are dependent on various factors and assumptions. A number of taxes could apply, especially in the case of a new house. Additionally, the rate of payable stamp duty will depend on the profile of the purchaser whether first-time buyer, owner-occupier or investor.
In the case of the sale of a new house or apartment to a purchaser, VAT applies at the reduced rate of 13.5% both on its construction and on the site, where these are connected contracts and is included in the final price of the property to the purchaser. No VAT applies in respect of the purchase of a second hand house.
In the case of stamp duty, there is no stamp duty on the purchase of new residential property for owner-occupiers, including first-time buyers, where the dwelling is not greater than 125 sq. m. If a new dwelling is greater than this size, stamp duty is charged on the site value or on one quarter of the full house value, whichever is the greater, in the case of owner-occupiers, including first-time buyers, at the relevant rates.
With regard to the transfer of a second hand property, first-time buyers are exempt from stamp duty on properties costing up to €190,500 and can avail of a significantly reduced rate of stamp duty on a property costing up to €381,000.
In addition to VAT and stamp duty, tax receipts in the form of income tax or corporation tax would arise on any tax adjusted profits made by the builder in the case of a new house. PAYE and PRSI also apply in the case of employees involved in the construction of the house. Where the builder purchased the site from a landowner, both capital gains tax and stamp duty would also normally apply.
As the Deputy will appreciate, the housing market is a complex and dynamic one and demands continuous monitoring and adjustments to address changing circumstances. An intervention, therefore, by Government through the tax system or otherwise requires detailed consideration as to the effect on the many different sectors of the market. However, supply remains one of the crucial issues in the continued evolution of the housing market. Given the record increases in housing completions in recent years, it is considered the tax incentives available for the purchase of residential property and the overall tax treatment of residential property represent the optimal mix and are adequately balanced in the light of the current state of the housing market. I have no plans to amend the tax laws relating to new houses or first-time buyers.