asked the Minister for Finance if he considers it in the national interest to introduce a capital gains tax where land required for essential social purposes is sold on a speculative basis.
Ceisteanna — Questions. Oral Answers. - Capital Gains Tax.
30.
It would not be in the national interest to introduce such a tax because the tax would, in the long run, be passed on to the purchaser and the end result would be to increase the cost of land for essential social purposes.
Attempts by other countries to impose a tax in the form of levies have not been particularly successful in keeping down the price of building land and they have given rise to many anomalies in practice. We tried, in the Finance Act, 1965, to charge to income tax the profits arising from land or building development but this proved to be unworkable in practice and gave rise to unintended and unforeseen tax liabilities. It became necessary last year to restrict its application to profits arising from a business of dealing in or developing land.
On general principles, a levy on capital gains should extend to gains on the realisation of capital assets of any description, including land. The Commission on Income Taxation examined this question and concluded that the grave disadvantages associated with a capital gains tax left them no option but to recommend that it should not be introduced.
The most effective way of countering speculation in scarce building land is to increase the available supply and to encourage local authorities to acquire a pool of land well in advance of requirements. An adequate supply of such land would greatly reduce the scope for profitable speculation. This is the course the Government have been following and which they propose to pursue further in accordance with the policy set out in the White Paper "Housing in the Seventies".
Surely the Minister is aware of the unavailability of land for social purposes and surely he is equally aware that it is now well over ten years since the Commission on Income Taxation recommended there was no necessity for such a tax. In the interval there must have been changes involving the national interest. Conscious of the considerable public interest in this matter, and of the fact that a land development tax has been introduced in Britain, surely his Department might usefully consider setting up a committee, departmental or inter-departmental, to examine this question and report——
This is a long statement.
——in view of the fact that speculators can make tax gains from land in this country?
There is a good deal involved in this. We are watching the situation very closely and, without being unduly critical I would say that the results of the working of the Land Commission in Britain have not been satisfactory by any means and that certainly does not seem to be the ideal way of dealing with this matter. I believe, and the Government have been following a policy based on this belief, that the right way to eliminate speculation in land and to ensure that the price of land for building and other essential social purposes is kept at a tolerable level is by making more land available. By the way, I think there is a great deal of misconception about speculation in land in the form of persons buying land and selling that land again at a profit. The extent to which this is happening is grossly exaggerated. What we need is not just land, but more serviced land, and we have in each of the last three years given Dublin Corporation £1 million over and above their normal allocation to enable them to buy land. We have also encouraged them by making money available to them to service these lands.
Ultimately, I believe that is the best way of dealing with this problem. The solution is to make a great deal more serviced land available for builders so that they can build houses. The Minister for Local Government has been encouraging local authorities to look well ahead and even to go outside their own boundaries to buy land well in advance of their needs so that they can buy it at a reasonable price and have it available when required.
Would it not be feasible to publicise that land is serviced or will be serviced within a certain period? If this were done there would be less speculation.
That might be double-edged.
Might I point out to Deputies that Questions conclude at five o'clock. There are 148 questions on the Order Paper and many of these have been on the Order Paper for two weeks. To be fair to Deputies still awaiting replies, Deputies should curtail their supplementary questions.
I will be very brief. Where land is purchased and subsequently a local authority adds massive servicing to the land and this becomes known and anticipated by those purchasing the land, does there not arise in the national interest a situation in which some form of registration or some surveillance by the Revenue Commissioners will be necessary to ensure that certain people will not benefit by such investment.
I do not think there is any problem there. Where a person buys land and sells it again that would almost certainly attract liability to normal income tax and there would be no need to have a capital gains tax in such a case. Certainly, if a person did that twice in succession, he could be shown to be carrying on a business of dealing in land; and, even if it were only one isolated transaction, where a person bought land and did nothing else with it except sell it again at a profit, an assessment could be raised in such a case under the ordinary income tax law.
He could do it in the name of a company.
No matter what way he did it he could be assessed.