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Tax Code.

Dáil Éireann Debate, Wednesday - 26 January 2005

Wednesday, 26 January 2005

Questions (279)

Finian McGrath

Question:

343 Mr. F. McGrath asked the Minister for Finance if he will consider radical new initiatives to assist young persons to buy a home; and if he will reconsider the tax issue whereby the State takes a 40% cut from the sale of every new home. [34303/04]

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Written answers

Government policy in the housing market has focused, among other things, on improving supply thereby assisting home ownership particularly for first-time buyers. In this context, the years 2002 and 2003 were the eighth and ninth successive years of record housing output with 57,695 and 68,819 completions, respectively. This positive trend in supply has continued into 2004, with statistics for the six months to June showing that overall house completions at 35,957 were up 21.4% on the same period last year. The rate of house building is now more than double that in 1996.

In addition, a range of tax incentives exist to facilitate first-time buyers in purchasing their own homes. The Deputy will be aware that I introduced a stamp duty relieving measure in the 2005 budget for first-time house purchasers who are owner-occupiers of second hand houses by increasing the stamp duty exemption threshold for such purchasers from €190,500 to €317,500 and by having reduced rates for house values up to €635,000. The lowering of stamp duty rates for first-time buyers was designed to increase the affordability of residential property for such buyers, thus helping them to get a foothold in the property market. It should be noted that all owner-occupiers are generally exempt from stamp duty on new houses where the property is 125 sq. m. or less whereas an investor who purchases a new house for renting is liable for stamp duty where the price exceeds €127,000.

Mortgage interest relief is available at source in respect of interest paid on moneys borrowed for the purchase, maintenance, repair or improvement of that taxpayer's main residence, including second-hand houses. For owner-occupiers, mortgage interest relief at the standard rate is granted in respect of interest paid up to a ceiling on loans used for the purchase or improvement of a person's sole or main residence. Preferential arrangements exist for first-time buyers over other owner occupiers. The existing higher ceilings for first-time buyers on allowable interest were increased in budget 2003 and currently stand at €4,000 for a single person and €8,000 for married couples and widowed persons. The period for which these increased ceilings apply was extended from five years to seven years.

In relation to the tax take from new homes, the State finds it necessary to raise taxes from this area like all other goods and services. The Deputy may wish to note that I dealt with the issue of the tax take from the price of a new house in a reply to a parliamentary question on 23 November 2004. Figures in excess of 40% have been attributed by the house building industry to the amount that the Government raises in tax from each new home. However, this figure is wrong. In fact, based on the same industry figures, the cost of a new home that accrues directly to the Exchequer through taxation is more like 28%, based on both Dublin and national prices. This is broadly in line with the tax take on the overall economy.

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