I understand that the Deputy is proposing that income tax relief, similar to that which is provided for under Section 644 TCA 1997, would apply where landlords provide long-term leases of residential properties. As the Deputy will be aware, decisions by me in relation to the Tax Acts are made in the context of the annual Budget and Finance Bill process. However, bearing in mind the issues outlined below, I am not minded, at this time, to support a proposal along the lines of that put forward in the Deputy's question.
Generally, rental income, after deduction of allowable letting expenses, is subject to tax as part of the total taxable income of a landlord. Individual landlords are subject to income tax on all their income combined, at the applicable rates, including USC and PRSI where appropriate.
Section 664 of the Taxes Consolidation Act 1997 (‘relief for certain income from leasing of farm land ’) provides for the exemption of certain income from the leasing of farm land, where the land is let under a qualifying lease. This particular relief was designed to encourage longer term leases of farm land, with the targeted policy objective of assisting with the mobility and productive use of agricultural land.
When considering the introduction of any tax expenditure measure, my officials undertake an evaluation of the proposal in accordance with the Department of Finance Tax Expenditure Guidelines. An evaluation will seek to address issues such as identification of the market failure, the policy rationale for intervention, cost, and whether a tax based measure is the most efficient form of intervention. With regard to the latter point, in many cases a market failure may be more appropriately remedied by a direct expenditure measure or through regulation. Other considerations include the potential for deadweight costs, the potential cost of the tax revenue foregone to the Exchequer and the scope for abuse.
Furthermore, 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. I must be mindful of the many demands on the Exchequer and the need to maintain a broad base of taxation.
Finally, as the Deputy may be aware, in Finance Act 2018, and with effect from 1 January 2019, I provided for the full restoration of the amount of interest that may be deducted by landlords in respect of loans used to purchase, improve or repair their residential property, as a means to support the rental sector.