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Dáil Éireann díospóireacht -
Tuesday, 10 Dec 1996

Vol. 472 No. 6

Written Answers. - Stamp Duty.

Liam Fitzgerald

Ceist:

45 Mr. L. Fitzgerald asked the Minister for Finance his views on whether it is unfair to ask young couples to pay 6 per cent of the purchase price of a house in the form of stamp duty in view of the recent significant price increases in the real property market, particularly in the Dublin area, and in view of the fact that an average three bedroom terrace house can cost from £70,000 upwards, which means that a young couple buying a house for the first time pay in excess of £4,200, almost half the annual wage of unskilled workers and also of a large number of newly graduated third level students; and if he will make a statement on the matter. [23954/96]

There are a number of important reliefs and exemptions which are primarily aimed at assisting house buyers to purchase new homes. There is a full exemption from stamp duty for purchases of new houses with a floor area below 125 square metres. Purchases of new houses with a larger floor area attract stamp duty based only on the site value, subject to a minimum site value of one-quarter of the full house, plus site, value. The targeting of these stamp duty reliefs in favour of new houses takes account, inter alia, of the fact that most new house sales are subject to VAT at 12.5 per cent, whereas sales of second-hand houses generally are not. There is also 100 per cent mortgage interest tax relief for first time buyers of both new and second-hand houses and a reduced rate of relief for other mortgage holders. In addition, there is a generous £3,000 new house grant available for first time buyers of new houses. All these exemptions/reliefs and grants help to moderate the cost of housing generally and also play an important role in promoting employment within the construction sector.

It is the case that house prices have been rising in some areas at a rate greater than inflation in recent years. However, it is by no means certain that a reduction in the rates of stamp duty would be passed on to the purchaser of a property, particularly, in a buoyant property market. The likelihood is that, in such circumstances, any reductions in stamp duty would accrue to those selling second-hand properties and would not benefit home buyers. In fact, I believe that the current levels of stamp duty on the transfer of second-hand houses do serve, to a very real extent, to protect the housing market against property speculation. This is supported by commentators within the property market itself.
Finally, the importance of the substantial Exchequer yield from stamp duty on the transfer of land and buildings which is estimated at between £180 million and £190 million for this year must be borne in mind when framing taxation policy. The yield from stamp duty represents a large component of the overall yield from capital taxes and makes a very significant contribution towards the cost of implementing the Government's important social and economic programme. Were the Exchequer yield from this stamp duty to be reduced, which would be the case if the threshold at which the 6 per cent rate applies were to be increased, it would be necessary to bring in compensating measures elsewhere in the taxation code.
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