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Dáil Éireann Debate, Tuesday - 25 May 2021

Tuesday, 25 May 2021

Questions (203, 210)

Catherine Murphy

Question:

203. Deputy Catherine Murphy asked the Minister for Finance if he will provide the research used to support the increase in stamp duty to 10% in the context of bulk buying housing; the way the research was sourced and from whom; the parameters that were used; the other taxation measures that were considered; and if he will make a statement on the matter. [28164/21]

View answer

Cian O'Callaghan

Question:

210. Deputy Cian O'Callaghan asked the Minister for Finance if he will provide a copy of the advice given that the new 10% rate will provide a really significant disincentive to bulk purchases in relation to the new 10% stamp duty on houses and duplexes. [28365/21]

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Written answers

I propose to take Questions Nos. 203 and 210 together.

As the Deputy is aware, on Wednesday 19th May a Financial Resolution before the Dáil, was passed which had the immediate effect of imposing a stamp duty rate of 10% on the multiple purchase of 10 or more residential property units, subject to certain conditions and exemptions.

This higher charge will also apply to a situation where a person acquires 10 units on a cumulative basis over a 12 month period with the 10% rate applying on the 10th purchase. Once triggered, the 10% rate will apply to any other residential properties acquired in that 12 month period.

This 10% rate is intended to provide a significant disincentive to the practice that has recently emerged of institutional investors purchasing large parts of, or indeed whole, housing estates before they reach the market, thus denying first time buyers (and others) an opportunity to purchase a home.

Acquisitions by Local Authorities and approved housing bodies are already exempt from stamp duty, and this exemption will continue to apply as regards this new higher rate.

A key objective of this proposal is to achieve a balance between addressing the issue of multiple purchases by institutional investors, whilst at the same time ensuring the supply of financing is not undermined, particularly for the construction of new apartment developments. It therefore provides a specific exemption from the higher 10% stamp duty rate for the multiple purchase of apartments at any time, i.e. whether the apartments are being bought at planning permission stage or in the future.

Without this exemption, it is felt that there would be a significant risk that developers would exit from the apartment building market as such projects would no longer be viable, and, if that were to happen, an important element of our housing strategy would be lost.

The choice to set the rate at 10% was made by reference to existing stamp duty rates. In this regard, the standard property rate for purchases under €1m is 1%, with a 2% rate applying on amounts over €1m. Therefore the view was that it had to be significantly higher than that rate to have the desired impact. In addition, it was felt that it had to be a higher rate than the existing 7.5% rate for commercial property. Consequently, it was concluded in this context that 10% was an appropriate rate as it is 10 times higher than the standard lower rate and one third higher than the rate for commercial property. Finally, it should be noted as with all taxes, this matter will be kept under review.

The current UK stamp duty arrangement for companies was also looked at. It applies a higher rate of 15% for corporate bodies, or “non-natural persons”, which can be increased to 17% if the person is a non-resident, however the legislation has a long list of exemptions including property bought for rental purposes. We also established that the UK measure is a narrowly focussed anti-avoidance provision, which appears to have been designed to particularly address specific targeted situations. It was therefore felt that it was not an appropriate alternative to the stamp duty charge set out in the Finance Resolution.

It is intended that the changes provided for in the Financial Resolution will be provided for in formal legislation in the next number of weeks.

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