Dáil Éireann Debate, Tuesday - 24 July 2018
264. Deputy Michael McGrath asked the Minister for Finance his views on option 1 of the report of the working group on the tax and fiscal treatment of rental accommodation providers to accelerate restoration of full mortgage interest deductibility for landlords of residential property; if he envisages changes under option 1 of the report; and if he will make a statement on the matter. [33910/18]
View answer265. Deputy Michael McGrath asked the Minister for Finance his views on option 2 of the report of the working group on the tax and fiscal treatment of rental accommodation providers to allow LPT as a deductible for landlords; if he envisages changes under option 2 of the report; and if he will make a statement on the matter. [33911/18]
View answer266. Deputy Michael McGrath asked the Minister for Finance his views on option 3 of the report of the working group on the tax and fiscal treatment of rental accommodation providers to enhance loss relief for landlords; if he envisage any changes under option 3 of the report; and if he will make a statement on the matter. [33912/18]
View answer267. Deputy Michael McGrath asked the Minister for Finance his views on option 4 of the report of the working group on the tax and fiscal treatment of rental accommodation providers to allow pre-letting expenses to be deducted for previously vacant properties; if he envisages changes under option 4 of the report; and if he will make a statement on the matter. [33913/18]
View answer268. Deputy Michael McGrath asked the Minister for Finance his views on option 5 of the report of the working group on the tax and fiscal treatment of rental accommodation providers to improve the collection and sharing of data on the rental sector; if he envisages changes under option 5 of the report; and if he will make a statement on the matter. [33914/18]
View answer269. Deputy Michael McGrath asked the Minister for Finance his views on option 6 of the report of the working group on the tax and fiscal treatment of rental accommodation providers to allow a deduction against rental income for the capital cost of the property in the initial years of ownership of a rental unit; if he envisages changes under option 6 of the report; and if he will make a statement on the matter. [33915/18]
View answer270. Deputy Michael McGrath asked the Minister for Finance his views on option 7 of the report of the working group on the tax and fiscal treatment of rental accommodation providers to provide capital gains tax relief for properties acquired and retained as rental accommodation; if he envisages changes under option 7 of the report; and if he will make a statement on the matter. [33916/18]
View answer271. Deputy Michael McGrath asked the Minister for Finance his views on option 8 of the report of the working group on the tax and fiscal treatment of rental accommodation providers to provide an incentive to attract investment capital into the construction of property to be let for social and affordable rents; if he envisages changes under option 8 of the report; and if he will make a statement on the matter. [33917/18]
View answer272. Deputy Michael McGrath asked the Minister for Finance his views on option 9 of the report of the working group on the tax and fiscal treatment of rental accommodation providers to review provisions for the holding of rental property via pension vehicles; if he envisages changes under option 9 of the report; and if he will make a statement on the matter. [33918/18]
View answer273. Deputy Michael McGrath asked the Minister for Finance his views on option 10 of the report of the working group on the tax and fiscal treatment of rental accommodation providers to consider the development of a separate method of taxing rental income; if he envisages changes under option 10 of the report; and if he will make a statement on the matter. [33919/18]
View answerI propose to take Questions Nos. 264 to 273, inclusive, together.
The Report of the Working Group on the Tax and Fiscal Treatment of Landlords was published by my Department on Budget Day 2017.
Ten policy options were put forward in the report, divided into short-term, medium-term and long-term timeframes. Five potential short-term options were identified as measures which could potentially be implemented within 18 months, i.e. within Budgets 2018 and 2019.
Option 1 is to allow for accelerated restoration of full mortgage deductibility for landlords of residential properties. In Budget 2017, a phased unwinding of the restriction on interest deductibility over five years for all residential landlords was provided for, with the rate of deductibility increasing by 5% p.a. until full deductibility is reached in 2021. I decided not to further accelerate this deduction in Budget 2018 as to do so would have undermined the social housing tenancies incentive introduced in Finance Act 2015, which allows 100% mortgage interest deductibility where a landlord commits to let their property to social housing tenants for a minimum of three years.
Option 2 is for the introduction of Local Property Tax (LPT) deductibility for landlords. LPT is a relatively small expense and therefore the measure is unlikely to make a significant difference to the position of any individual landlord in cash terms, so may not be regarded by landlords as a sufficient measure to encourage them to stay in or enter the rental market. The measure would also have a deadweight cost in respect of landlords who do not intend to leave the rental market and would create a more favourable position for landlords of property compared to owner-occupiers, as owner-occupiers cannot claim a tax deduction for LPT. I note that one of the recommendations of the 2015 review of the LPT carried out by Dr. Don Thornhill on behalf of the Minister for Finance was that LPT payments should not be allowed as a deduction to landlords against income or corporation tax. Dr. Thornhill’s view was that deductibility for landlords does not rest easily with the concept of the LPT as a tax on the amenity value of residential properties rather than as a business cost. Owners and tenants of rental properties both derive value from the amenity value of these properties (the owner in the form of the rent and the tenant from living in the property). This contrasts with the situation regarding local authority rates on commercial properties. Owner occupiers are not allowed to claim LPT as a deduction against income tax. It is not appropriate on conceptual and equity grounds that they should. Dr Thornhill considered that there was a need to ensure equity between owners of all residential properties, whether owner occupiers or landlords, and that it would be inappropriate to allow LPT as a deduction against the taxation of income from rents on residential properties. Dr Thornhill’s recommendation is being considered in the context of the current review of the LPT which is expected to report around the end of August of this year.
Option 3 is to enhance loss relief for landlords (or a sub-set of landlords), to allow relief for rental losses against other income sources in the same year. Currently, landlords can carry-forward their rental losses for offset against future rental profits, but cannot offset rental losses against other net taxable income in the current year, other than other rental profits from other properties. However, rental losses can currently be carried forward indefinitely against future rental income, even after the loss-making property has ceased to be a rental property. This is in contrast to the treatment of trading losses under Case I, where the loss relief effectively ceases when the trade ceases. The current system of rental loss relief has the effect of encouraging landlords to remain in the market, in order to avail of the loss relief against future streams of rental income. Allowing offset of rental losses against all other income could potentially encourage landlords to exit the market at an earlier date, once their losses had been fully relieved against other income.
I introduced Option 4 in Budget 2018. This allows deductibility for pre-letting expenditure for previously vacant properties. I prioritised this option as it was specifically designed to encourage an overall increase in housing supply by bringing currently vacant property back into residential use.
Option 5 is to improve the collection and sharing of data on the rental accommodation sector. The Housing Analytics Group, chaired by the Department of Housing, Planning and Local Government, is currently active and a number of Departments and agencies are involved in its work, including the Residential Tenancies Board, the Central Statistics Office (CSO), Revenue and the Department of Finance. The guiding principle for the group is that housing policy requires the best evidence available to inform analysis, forecasts and decisions. The group’s initial focus is to review the various sources of housing and housing related data collected nationally. Once gaps or deficiencies have been identified the group will make recommendations for improvement.
Options 6, 7, 8, 9 and 10 are medium-term and long-term options. Medium-term options are measures which work with the current tax system but might take longer to develop and implement, and as such would require a longer lead-in period. The long-term options look at the potential for more fundamental changes to the tax system, and so would require significantly greater resource commitments to progress. Consideration of these options will continue within the relevant time-frames.
Finally, it should be noted that taxation is only one of the policy levers available to the Government through which to boost rental and overall housing supply and that, in line with the Tax Expenditure Guidelines, consideration of whether a tax measure is the most appropriate policy tool for a given purpose is required. Ireland’s past experience with tax incentives in the housing sector strongly suggests the need for a cautionary stance when considering intervention in the rental sector. There are many competing priorities which must be considered when deciding which policy measures to introduce and the rental sector is just one of many other sectors that may require assistance and intervention.
