Financial Resolutions, 1997. - Financial Resolution No. 4: Stamp Duties

Wednesday, 22 January 1997

Dáil Éireann Debate
Vol. 473 No. 4

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The Taoiseach: Information on John Bruton  Zoom on John Bruton  I move Financial Resolution No. 4:

(1) THAT in this Resolution—

“the Act of 1891” means the Stamp Act, 1891;

“the Act of 1978” means the Local Government (Financial Provisions) Act, 1978 (No. 35 of 1978);

“the Commissioners” means the Revenue Commissioners;

“the First Schedule” means the First Schedule, as amended by the Finance Act, 1970 (No. 14 of 1970) and subsequent enactments, to the Act of 1891;

“community hall”, “mixed hereditament”, “secondary school” and “valuation lists” have the meanings, respectively, assigned to them by section 1 of the Act of 1978.

(2) THAT this Resolution shall have effect as respects instruments executed on or after the 23rd day of January, 1997:

Provided that this Resolution shall not apply as respects any instrument executed prior to the 1st day of April, 1997, in pursuance of a contract which was evidenced in writing prior to the 23rd day of January, 1997.

(3) THAT the First Schedule be amended—

(a) by the substitution of the Heading and the provisions thereto which are set out in Part I of the Schedule to this Resolution for the Heading (as amended by the Finance Act, 1992 (No. 9 of 1992) “CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance” and the provisions thereto, and

(b) by the substitution of the subparagraph set out in Part II of the Schedule to this Resolution for subparagraph (a) of paragraph (3) of the Heading “LEASE” (inserted by the Finance Act, 1991 (No. 13 of 1991).

(4) THAT section 122 of the Act of 1891 be amended by the insertion of the following definition after the definition of “marketable security”:

“The expression ‘residential property’, in relation to a sale or lease, means—

(a) a building or part of a building which, at the date of the instrument of conveyance or lease—

(i) was used or was suitable for use as a dwelling, or

(ii) was in the course of being constructed or adapted for use as a dwelling, or

(iii) had been constructed or adapted for use as a dwelling and had not since such construction or adaptation been adapted for any other use, and

(b) the curtilage of the residential property up to an area (exclusive of the site of the residential property) of one acre:

Provided that—

[1023] (i) where in the year ending on the 31st day of December immediately prior to the date of that instrument of conveyance or lease—

(I) a rate was made by a rating authority as regards any hereditament to which the provisions of section 3 of the Act of 1978 did not apply, or

(II) a rate was made by a rating authority, and an allowance made under that section of that Act, as regards any hereditament which was at the time the rate was made a mixed hereditament, secondary school or community hall, or

(III) a hereditament was described as exempt, or partially exempt, from rating in the valuation lists,

then the whole or an appropriate part of that hereditament as is referable to ordinary use other than as a dwelling at the date of that instrument of conveyance or lease or, where appropriate, when last ordinarily used, shall not be residential property, in relation to that sale or lease,

(ii) where the area of the curtilage (exclusive of the site of the residential property) exceeds one acre then the part which shall be residential property shall be taken to be the part which, if the remainder were separately occupied, would be the most suitable for occupation and enjoyment with the residential property.”.

(5) THAT section 58 of the Act of 1891 be amended by the insertion of the following subsection after subsection (1):

“(1A) Where—

(a) any property which consists partly of an interest in residential property is sold to any person and the sale (hereinafter in this subsection referred to as ‘the first-mentioned sale’) does not form part of a larger transaction or of a series of transactions, or

(b) the sale to any person of property consisting in whole or in part of such an interest forms part of a larger transaction or of a series of transactions,

the consideration attributable to the first-mentioned sale and the aggregate consideration (other than rent) attributable to that larger transaction or series of transactions, as the case may be, shall be apportioned, on such basis as is just and reasonable, as between that interest in residential property and the other property or part concerned, and that aggregate consideration shall likewise be apportioned as between each other such interest (if any) comprised in that larger transaction or series of transactions and the other property or parts concerned, and notwithstanding the amount or value of the [1024] consideration set forth in any instrument, the consideration so apportioned to that interest shall be the amount or the value of the consideration for the sale which is deemed to be attributable to that interest and the consideration so apportioned to the aggregate of all such interests comprised in that larger transaction or series of transactions shall be the amount or value of that aggregate consideration which is deemed to be attributable to residential property.”.

(6) THAT section 77 of the Act of 1891 be amended by the addition of the following subsection after subsection (5):

“(6) Where—

(a) any property which consists partly of an interest in residential property is leased to any person and that lease (hereinafter in this section referred to as ‘the first-mentioned lease’) does not form part of a larger transaction or of a series of transactions, or

(b) the lease to any person of any property consisting in whole or in part of such an interest forms part of a larger transaction or of a series of transactions,

the consideration other than rent attributable to that first-mentioned lease and the aggregate consideration (other than rent) attributable to that larger transaction or series of transactions, as the case may be, shall be apportioned, on such basis as is just and reasonable, as between that interest in residential property and the other property or part concerned, and that aggregate consideration shall likewise be apportioned, as between each other such interest (if any) comprised in that larger transaction or series of transactions and the other property or parts concerned, and notwithstanding the amount or value of the consideration set forth in any instrument, the consideration so apportioned to that interest shall be the amount or the value of the consideration for the lease which is deemed to be attributable to that interest and the consideration so apportioned to the aggregate of all such interests comprised in that larger transaction or series of transactions shall be the amount or value of that aggregate consideration which is deemed to be attributable to residential property.”.

(7) THAT the amount upon which stamp duty is chargeable by virtue of the provisions of section 112 (as amended by section 100 of the Finance Act, 1993 (No. 13 of 1993) of the Finance Act, 1990 (No. 10 of 1990), shall be deemed, for the purposes of the Act of 1891, to be the amount or value of the consideration for the sale or lease in respect of which that duty is chargeable.

(8) (a) THAT in this paragraph of this Resolution—

[1025] (i) a reference to a sale includes a reference to a lease,

(ii) a reference to a vendor includes a reference to a lessor,

(iii) a reference to a vendee includes a reference to a lessee,

(iv) a reference to subsection (1A) of section 58 of the Act of 1891 includes a reference to subsection (6) of section 77 of the Act of 1891, and

(v) “residential consideration” means—

(I) in the case of a sale to which paragraph (a) of subsection (1A) of section 58 of the Act of 1891 refers, the amount or value of the consideration for the sale which is deemed to be attributable to residential property, and

(II) in the case of a sale to which paragraph (a) of subsection (1A) of section 58 of the Act of 1891 refers, the amount or value of the aggregate consideration (within the meaning of that subsection) which is deemed to be attributable to residential property.

(b) THAT where, in relation to any sale, the provisions of subsection (1A) of section 58 of the Act of 1891 apply, an estimate (hereinafter in this paragraph of this Resolution referred to as the “vendor's estimate” or as the “vendee's estimate”, as the case may be) of the residential consideration shall be made by the vendor and by the vendee and those estimates together with the amount or value of the aggregate consideration (within the meaning of that subsection), shall be brought to the attention of the Commissioners in the statement delivered under the provisions of subsection (2) of section 5 of that Act and that statement shall be signed by the vendor and the vendee and where the requirements of this paragraph of this Resolution are not complied with any person who executes the instrument whereby that sale is effected shall for the purposes of subsection (3) of section 5 of that Act be presumed, until the contrary is proven, to have acted negligently:

Provided that where—

(i) the aggregate consideration (within the meaning of subsection (1A) of section 58 of the Act of 1891), or

(ii) in the case where the sale does not form part of a larger transaction or of a series of transactions, the consideration for the sale,

does not exceed £150,000, those estimates need not be brought to the attention of the Commissioners in that statement unless a request in that regard is made by the Commissioners.

(c) THAT where the vendee's estimate (hereinafter in this paragraph of this Resolution [1026] referred to as the “submitted value”) is less than the residential value agreed with, or ascertained by, the Commissioners (hereinafter in this paragraph of this Resolution referred to as the “ascertained value”) then, as a penalty, the duty chargeable upon the instrument shall be increased by an amount (hereinafter in this paragraph of this Resolution referred to as the “surcharge”) calculated according to the following provisions:

(i) where the submitted value is less than the ascertained value by an amount which is greater than 10 per cent. of the ascertained value but not greater than 30 per cent. of the ascertained value, a surcharge equal to 50 per cent. of the difference between the duty chargeable by reference to the ascertained value and the duty chargeable by reference to the submitted value;

(ii) where the submitted value is less than the ascertained value by an amount which is greater than 30 per cent. of the ascertained value, a surcharge equal to the difference between the duty chargeable by reference to the ascertained value and the duty chargeable by reference to the submitted value:

Provided that—

(I) notwithstanding any other provision to the contrary in the Act of 1891, the vendee shall, subject to subparagraph (II) of this proviso, be entitled to recover from the vendor one half of that surcharge,

(II) where the vendor's estimate is greater than the submitted value, the amount which the vendee shall be entitled to recover from the vendor shall not exceed one half of what the surcharge would be if the vendor's estimate were equal to the submitted value.

(9) THAT the furnishing of an incorrect certificate for the purpose of the First Schedule shall be deemed to constitute the delivery of an incorrect statement for the purposes of section 94 of the Finance Act, 1983 (No. 15 of 1983).

(10) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

Conveyance or Transfer on Sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance

“CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance.

[1027](1) Where the amount or value of the consideration for the sale does not exceed £5,000 and the instrument contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions, in respect of which the amount or value, or the aggregate amount or value, of the consideration exceeds £5,000 Exempt
(2) Where paragraph (1) does not apply and the amount or value of the consideration for the sale does not exceed £10,000 and the instrument contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration exceeds £10,000:
for every £100, or fractional part of £100, of the consideration £1.00
(3) Where paragraphs (1) and (2) do not apply and the amount or value of the consideration for the sale does not exceed £15,000 and the instrument contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or a series of transactions in respect of which the value, or the aggreagate amount or value, of the consideration exceeds £15,000:
for every £100, or fractionalpart of £100, of the consideration £2.00
(4) Where paragraphs (1) to(3) do not apply and the amountor value of the consideration for the sale does not exceed £25,000 and the instrument contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration exceeds £25,000:
for every £100, or fractional part of £100, of the consideration £3.00
[1028](5) Where paragraphs (1) to (4) do not apply and the amount or value of the consideration for the sale does not exceed £50,000 and the instrument contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a serifor every £100, or fractional part of £100, of the consideration £4.00
for every £100, or fractional part of £100, of the consideration £4.00
(6) Where paragraphs (1) to (5) do not apply and the amount or value of the consideration for the sale does not exceed £60,000 and the instrument contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration exceeds £60,000:
for every £100, or fractional part of £100, of the consideration £5.00
(7) Where paragraphs (1) to (6) do not apply:
(a) if the instrument contains a statement—
(i) that the amount or value of the consideration for the sale does not exceed £150,000 and that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration exceeds £150,000, or
(ii) that no part of the consideration for the sale is attributable, or deemed to be attributable, to residential property:
for every £100, or fractional part of £100, of the consideration which is not deemed to be attributable to residential property £6.00
[1029](b) if the instrument contains a statement that the provisions of subsection (1A) of section 58 of this Act apply in relation to the sale:
for every £100, or fractional part of £100, of the consideration for the sale which is not deemed to be attributable to residential property £6.00
(c) if the amount or value of the consideration for the sale which is attributable to residential property or which is deemed to be attributable to residential property:
(i) does not exceed £150,000 and the instrument contains a statement certifying that the provisions of subsection (1A) of section 58 of this Act apply in relation to that sale and that the amount or value of the aggregate consideration (within the meaning of that subsection) which is deemed to be attributable to residential property, or which would be deemed to be so attributable if the contents of residential property were considered to be residential property, does not exceed £150,000 £6.00 for every £100, or fractional part of £100, of the consideration
(ii) does not exceed £160,000 and the instrument contains a statement certifying that the provisions of subsection (1A) of section 58 of this Act do not apply in relation to the sale or that the provisions of that subsection do apply in relation to the sale and that the amount or value of the aggregate consideration (within the meaning of that subsection) which is deemed to be attributable to residential property, or which would be deemed to be so attributable if the contents of residential property were considered to be residential property, does not exceed £160,000, and subparagraphs (a)(i) and (c)(i) do not apply £7.00 for every £100, or fractional part of £100, of the consideration
[1030](iii) does not exceed £170,000 and the instrument contains a statement certifying that the provisions of subsection (1A) of section 58 of this Act do not apply in relation to that sale or that the provisions of that subsection do apply in relation to the sale and that the amcontents of residential property were considered to be residential property, does not exceed £170,000 and subparagraphs (a)(i), (c)(i) and (c)(ii) do not apply £8.00 for every £100, or fractional part of £100, of the consideration
(8) Of any other kind whatsoever not hereinbefore described:
for every £100, or fractional part of £100, of the consideration £9.00
(9) Where in the case of a conveyance or transfer on sale or in the case of a conveyance or transfer operating as a voluntary disposition inter vivos the consideration for the sale or the value of the property exceeds £5,000 and the instrument contains a certificate by the party to whom the property is being conveyed or transferred to the effect that the person becoming entitled to the entire beneficial interest in the property (or, where more than one person becomes entitled to a beneficial interest therein, each of them) is related to the person or each of the persons immediately theretofore entitled to the entire beneficial interest in the property in one or other of the following ways, that is to say, as a lineal descendant, parent, grandparent, step-parent, husband or wife, brother or sister of a parent or brother or sister, or lineal descendant of a parent, husband or wife or brother or sister:
a duty of an amount equal to one-half of the ad valorem stamp duty which, but for the provisions of this paragraph, would be chargeable under this Heading.”.
PART II
Lease
“(3) For any other definite term or for any indefinite term of any lands, tenements, or heritable subjects:
[1031](a) where the consideration, or any part of the consideration (other than rent), moving either to the lessor or to any other person, consists of any money, stock or security, and—
(i) the amount or value of such consideration does not exceed £5,000 and the lease contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions, in respect of which the amount or value, or the aggregate amount or value, of the consideration other than rent exceeds £5,000 Exempt
(ii) the amount or value of such consideration does not exceed £10,000 and the lease contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration other than rent exceeds £10,000 and subparagraph (i) does not apply:
for every £100, or fractional part of £100, of the consideration £1.00
(iii) the amount or value of such consideration does not exceed £15,000 and the lease contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration other than rent exceeds £15,000 and subparagraphs (i) and (ii) do not apply:
for every £100, or fractional part of £100, of the consideration £2.00
[1032](iv) the amount or value of such consideration does not exceed £25,000 and the lease contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or thfor every £100, or fractional part of £100, of the consideration £3.00
for every £100, or fractional part of £100, of the consideration £3.00
(v) the amount or value of such consideration does not exceed £50,000 and the lease contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration other than rent exceeds £50,000 and subparagraphs (i) to (iv) do not apply:
for every £100, or fractional part of £100, of the consideration £4.00
(vi) the amount or value of such consideration does not exceed £60,000 and the lease contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration other than rent exceeds £60,000 and subparagraphs (i) to (v) do not apply:
for every £100, or fractional part of £100, of the consideration £5.00
(vii) where subparagraphs (i) to (vi) do not apply:
(I) if the instrument contains a statement—
[1033](A) that the amount or value of the consideration other than rent does not exceed £150,000 and that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or (B) that no part of the consideration is attributable, or deemed to be attributable, to residential property
(B) that no part of the consideration is attributable, or deemed to be attributable, to residential property £6.00 for every £100, or fractional part of £100, of the consideration
(II) if the instrument contains a statement that the provisions of subsection (6) of section 77 of this Act apply in relation to the lease:
for every £100, or fractional part of £100, of the consideration which is not deemed to be attributable to residential property £6.00
(III) if the amount or value of such consideration which is attributable to residential property or which is deemed to be attributable to residential property:
(A) does not exceed £150,000 and the instrument contains a statement certifying that the provisions of subsection (6) of section 77 of this Act apply in relation to that lease and that the amount or value of the aggregate consideration (within the meaning of that subsection) which is deemed to be attributable to residential property, or which would be deemed to be so attributable if the contents of residential property were considered to be residential property, does not exceed £150,000 £6.00 for every £100, or fractional part of £100, of the consideration
[1034](B) does not exceed £160,000 and the instrument contains a statement certifying that the provisions of subsection (6) of section 77 of this Act do not apply in relation to that lease or that the provisions of that subsection do apply in relation to that lease and that the amcontents of residential property were considered to be residential property, does not exceed £160,000, and clauses (I)(A) and (III)(A) do not apply
£7.00 for every £100, or fractional part of £100, of the consideration
(C) does not exceed £170,000 and the instrument contains a statement certifying that the provisions of subsection (6) of section 77 of this Act do not apply in relation to that lease or that the provisions of that subsection do apply in relation to that lease and that the amount or value of the aggregate consideration (within the meaning of that subsection) which is deemed to be attributable to residential property, or which would be deemed to be so attributable if the contents of residential property were considered to be residential property, does not exceed £170,000 and clauses (I)(A), (III)(A) and (III)(B) do not apply
£8.00 for every £100, or fractional part of £100, of the consideration
(viii) the case is of any other kind whatsoever not hereinbefore described:
for every £100, or fractional part of £100, of the consideration £9.00.”.

[1035] This Financial Resolution provides for an increase in stamp duty charged on the transfer of second-hand and certain new residential property where the amount upon which the stamp duty is chargeable is in excess of £150,000. The rate is 6 per cent at present. It is proposed to introduce three new rates; these are 7 per cent on residential property valued between £150,000 and £160,000, 8 per cent on residential property valued between £160,000 and £170,000 and 9 per cent on residential property valued in excess of £170,000.

The background to this is that the Government announced the abolition of residential property tax last month. The purpose of these measures is to replace the revenue lost by the abolition of residential property tax. The yield from the measures proposed here is expected to be £11 million in 1997 and £13.5 million in a full year. This compares with the 1997 revenue that would have been obtained from residential property tax of £14 million. Therefore, there is a slight loss of approximately £500,000.

There may be many Members who may be tempted to criticise this proposal but I would ask them whether they would prefer to have residential property tax continue. I think the answer would be “no”. There may also be many vague and general suggestions as to how one might replace lost revenue from the abolition of residential property tax. It falls to the Government to introduce a specific fair measure for this purpose, one that perhaps will have some modest effect in dampening down the increase in house prices, something to which I am sure nobody would object in view of the inflation risks flowing therefrom.

No doubt there will be a number of questions Members will want to raise in the course of the debate on this resolution. For example, the question of mixed properties may arise where part of the property is a shop and part is residential. The test will be the one used for rating purposes. If a property is rated as a commercial one, the portion of the house rated as commercial will not be included in the total for calculating stamp duty for the purposes of this section which applies to residential property. There may be other questions which Deputies may wish to raise during the debate and I will be happy to provide answers.

In the case of guesthouses, registered ones will be considered to be business premises and will not be subject to the residential stamp duty regime. However, unregistered premises will not be in the same category. Obviously, this will create an incentive to register properties so that they will not be categorised as residential properties for the purpose of the tax.

A problem which might arise as regards the treatment of a farm with a substantial home is that the purchaser and the seller will separate the payments being made in respect of the residential portion of farm premises. The residential portion will be subject to stamp duty in this instance but [1036] the non residential farm portion will not be. That is a matter which can be dealt with adequately by the relevant arrangements and by virtue of agreement between the purchaser and the seller. The arrangements reached will, in most instances, be acceptable to the Revenue Commissioners because there will be a divergence of interest as regards the apportionment of the purchase price between the purchaser and the seller. Any agreement reached between them on the matter is likely to be approximately valid because of their divergence of interest.

There may be some who will claim the level of stamp duty will be particularly high in comparison with other countries. Some may, for example, quote the British rate. In Britain residential property bears a council tax which does not apply here. That tax must be paid every year, not only at the time of sale. When comparing the stamp duty of 1 per cent in Britain with that here, one should also add the cumulative effect of paying council tax of somewhere in the region of £1,000 per year, which adds up to a much larger sum of money over a period. Stamp duty on property in Belgium is 12.5 per cent and other countries also have high rates.

The final argument which decides that this is the right course to follow is that by making these changes in stamp duty, which are only payable if people decide to sell their house — one has a choice — and which are only paid once in the normal lifetime unless one frequently buys and sells houses, we have been enabled to abolish residential property tax. There has been much complaint about this tax. I have no doubt many Opposition Members were looking forward to campaigning on this issue and may have already printed literature which they will find is null because the Government has acted.

The Government is acting in accordance with the wishes of the majority of people. It is substituting a simple tax, stamp duty, for a very complicated one, residential property tax, or a certain tax for an uncertain one. The Government has made a good decision on this matter and I have no doubt the House and the country will approve.

Mr. R. Burke: Information on Ray Burke  Zoom on Ray Burke  This side of the House will vehemently oppose the introduction of this iniquitous stamp duty. The Taoiseach made the case that he has generously removed residential property tax and that this is a replacement. Why do we need a replacement for what was an unjust tax which should never have been imposed? It was an ideological plaything of the Labour Party which first introduced it. It was an unfair form of taxation and the Government was merely responding to pressure from this side of the House for its removal, and rightly so. It brought in about £13 or £14 million. Why do we need another tax to replace it?

According to today's figures, overall expenditure for the year will be £13.584 billion. This Government has lost control of the public finances. It came to Government on a commitment [1037] that Estimates would not rise by more than inflation plus 2 per cent. In the period it has been in office inflation has been 6.5 per cent and public expenditure has risen by 20 per cent. Surely with £13.5 billion it was possible for the Government to find savings to balance the loss of approximately £13 or £14 million when removing the iniquitous and unjust residential property tax? I do not deny that some will be able to afford to pay this tax, but it will mainly hit those who cannot afford it.

In the case of a family home, if one or both parents retire and wish to move into a nursing home or a care facility, they will try to sell their home and will look for the best possible price. That price will be dramatically hit by the introduction of this tax. We are not talking about small amounts of money. In the Dublin region and residential areas elsewhere, a £170,000 house is not a massive one. However, we are talking about stamp duty of £15,300 on such a house and approximately £10,500 on a house worth £150,000 which will affect the price a person will get for their property because the purchaser will have to pay. The price of houses will drop accordingly and those who borrowed and invested in doing up their property and who want to move on for various reasons, whether they are elderly or wish to buy elsewhere, will find that the second-hand house market will be badly hit by the introduction of this measure.

Property tax should never have been introduced and I find it wrong that the Taoiseach should try to link stamp duty with it. If the Government did its business properly we would not have this £13.5 billion level of expenditure and in calculating the Estimates it should have been in a position to find savings without having to impose this unjust increase in stamp duty. It is a totally unfair form of taxation and will have very damaging effects on the property market.

It will especially hit many of our older citizens and their families who want to sell what has been the family home for many years, the nest egg bought at a lower price. Many would not have had to pay property tax because their incomes would have excluded them from it. Their nest eggs are being damaged by this Government to the extent of £15,000 or £10,000 in some cases.

It is not a case of hitting the wealthy. For example, I was in an estate last night in my constituency of Dublin North where houses which sold two years ago for £75,000 to £80,000 are now worth up to £150,000. This is an unfair form of taxation. In removing the unfair residential property tax, the Government should not have replaced it with an equally unfair system, as it has on this occasion.

Mr. Shatter: Information on Alan Shatter  Zoom on Alan Shatter  I listened with interest to what Deputy Ray Burke said. I would take it seriously if his party in Government had not dramatically extended residential property tax, lowered the income threshold and extended it to apply to tens of thousands of houses which were previously [1038] exempt from the tax. It goes against the grain to take seriously Deputy Burke's comment that residential property tax is an unjust tax which should never have been imposed.

I wonder where Fianna Fáil was from 1987 to 1994? Did anyone notice and does Deputy Burke remember that it was in a variety of Governments: a minority one and a coalition one with the Progressive Democrats and latterly with the Labour Party. During the life of the Fianna Fáil minority Government, there was no suggestion that residential property tax would be abolished.

As people got the exciting whiff of a general election, we have had the spectacle in recent months of various members of the Fianna Fáil and Progressive Democrats parties running an “abolish residential property tax” campaign. Public meetings were held. Trees were demolished to generate the paper required for the glossy leaflets put in people's doors. “Vote for us at the next election”, they said, “and we will abolish residential property tax”.

What Deputy Burke forgot in his speech tonight and what Deputy Michael McDowell and Deputy O'Donnell in my constituency forget is that the nation has not been struck by collective amnesia and there are quite a number, if not the vast majority, of people who remember that Fianna Fáil was in Government for the period I mentioned. They can even recall the brief but unhappy sojourn of the Fianna Fáil and Progressive Democrats parties together. During that Government, did anyone suggest abolishing residential property tax? What did they do about it? We were told by Deputy Burke tonight that it is an unjust tax which should not have been imposed. It was not only imposed but maintained and extended by Fianna Fáil in Government.

I know it is usual that late on budget night people lose the run of themselves to some extent and try and think of something to say so they can stand up and be noticed. I have a great deal of respect for Deputy Burke and for the issues he sometimes raises but his contribution on this issue is the caricature example of playground politics. It is the sort of thing that brings politics into disrepute. He said that, if the Government was doing its business properly, it could have abolished residential property tax without imposing any increase in stamp duty. Is he suggesting his Government when he was Minister did not do its business properly because it failed to abolish it?

As someone who represents the Dublin South constituency, residential property tax has been seen by many of my constituents as an unjust and unfair tax and a great burden. People whose houses did not fall into the tax net some years ago watched the value of their houses increase notionally and suddenly found themselves falling into the net and being discriminated against, effectively because they lived in Dublin. It was an anti-Dublin tax which affected many middle income families in Dublin who had large mortgages in that they struggled to meet the demands of the tax. I welcome the Government's abolition [1039] of the residential property tax. It has behaved correctly in abolishing it. I would have liked to have seen it abolished a long time ago and regret that other parties in Government did not have the wit to take that action. The Government deserves to be congratulated for doing so.

As regards the increase in stamp duty, we should, in some future budget, seek a general review of stamp duties on all types of properties, how they apply and the rates of the duties. I am pleased there has been a modification of the original proposal for the increase in stamp duty which seemed to suggest that, once a house was sold for a sum in excess of £150,000, it was immediately liable for the 9 per cent rate. That would have been unjust and would have created the possibility that, if a house was bought for £149,500, stamp duty would be 6 per cent and, if it was sold for £150,500, £4,500 more stamp duty would have to be paid. The Government was right to modify its original proposal and to introduce a graduated scale. I would have preferred the graduation to be of a somewhat greater degree.

However, Deputy Burke cannot have it both ways. In the context of abolishing residential property tax, the Government has sought an alternative or replacement source of income to meet essential outgoings and to allow the Government give in a responsible way to a great many people as a result of this budget the various other reliefs and benefits which will derive. I have no doubt that, if residential property tax had been abolished with no alternative source for raising finances, the Government would have been accused by the other side of irresponsibility for not producing some alternative revenue source.

We should take with a grain of salt Deputy Burke's strictures. If he and members of his party, or any member of the Progressive Democrats who may wish to contribute on this issue, had sufficient good grace and acknowledged the problems of their periods in Government, they would rapidly congratulate the Government on abolishing residential property tax. For the sake of avoiding embarrassment, it should move on to other budgetary issues rather than focus on this issue. I have no difficulty with the Government directing the spotlight on the reality that it has got rid of residential property tax, which is welcomed by thousands of people throughout the country, many of whom are my constituents.

Mr. D. Ahern: Information on Dermot Ahern  Zoom on Dermot Ahern  As regards Fianna Fáil's attitude to residential property tax, I very much welcome the Government's decision to abolish that tax. The Government has done a U-turn because it was a Fine Gael-Labour Government that introduced that tax, which was a draconian measure. When we were in Government with Labour that party insisted, as part of the budgetary negotiations, that residential property tax should be increased and broadened, but our party was reluctant to do that.

Deputy Shatter has left the Chamber, but being involved in the legal profession he knows probably better than anyone that stamp duty is a penal taxation. It is one of the most draconian taxes in [1040] our system. People buying second hand houses cannot believe the amount of money they have to fork out on stamp duty. If there was so much largesse — this goes back to the earlier debate on petrol increases — why did the Government introduce this measure, which will yield £13.5 million in a full year? People living in Dublin know that an ordinary house on the north side of the city costs in the region of £150,000.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  People should go to the west side of Dublin. That is where the boom is.

Mr. D. Ahern: Information on Dermot Ahern  Zoom on Dermot Ahern  Houses in Drumcondra, Phibsboro and other places which cost £80,000 a couple of years ago now cost £140,000 to £150,000. I remarked recently that one would buy two houses in my town for the price of one that was for sale in Drumcondra. This is another Dublin tax, and that is one of the reasons I live in Dundalk.

Stamp duty affects couples, particularly in Dublin, who are not necessarily wealthy but who try to better themselves by moving to another house. Those people do not have money to burn. A person buying a house in Drumcondra for £150,000 will have to pay £10,500 in stamp duty while stamp duty on a house worth £160,000 will be £12,800 and on a house worth £170,000 it will be £15,300. That is an incredible tax.

Deputy Shatter alluded to the fact that when the Government announced this measure it said that stamp duty on houses worth more than £150,000 would be 9 per cent, but there has been a change of heart and I wonder why. As Deputy Shatter said, there has been a very meagre tapering of the figure. The measure should have been introduced more equitably, with a broader band. There is a huge gap between the 4 per cent rate and the 6 per cent rate for houses worth less than £150,000 — most houses are in the 4 to 6 per cent bracket.

I put down a parliamentary question today to the Minister for Finance about the implications for inflation of house prices and I received a very interesting reply. It stated that the annual rates of increase for new and second hand houses for the first quarter of 1994 and the third quarter of 1996 show that house prices have risen significantly in the past two years. I question the figure produced tonight for the yield from this tax, which will not only increase the price of first hand houses but will make it more difficult to sell second hand houses. The tax take will be greatly increased because of the huge demand for second hand houses in some of the better areas in Dublin where prices are significant. A person buying a house in Drumcondra for £150,000 will need money to renovate the house, but they will have to pay £10,500 on stamp duty.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  Does the Deputy know somebody who owns a house in Drumcondra?

Mr. D. Ahern: Information on Dermot Ahern  Zoom on Dermot Ahern  The Minister might know more than I do. The reply to my parliamentary question gave the year on year percentage increases in the [1041] price of second hand houses. In the first quarter of 1994 the increase was 6.8 per cent while in the last quarter it was minus 0.3 per cent. In the first quarter of 1995 the increase was 0.5 per cent while in the last quarter of 1995 it was 13.1 per cent. In the first quarter of 1996 the increase was 10 per cent while in the third quarter of 1996, the latest figures available, it was 18.2 per cent. There has been a huge increase in the price of second hand houses with the result that many ordinary houses will be liable for this punitive tax.

As with petrol, the Government has made a mistake with stamp duty. As Deputy McCreevy often says, Governments make mistakes — I think the Taoiseach is well aware of mistakes made in budgets, but we will not remind him of that. As opposed to tax increases, the increase of 11.5p on a gallon of petrol sticks out like a sore thumb to people looking at the 9 o'clock news tonight. People buying a second-hand house, particularly in Dublin, will look at this decision with a jaundiced eye. What the Government is doing is replacing one Dublin tax with another. It would have been cuter to bury in the overall figure for give-aways in the budget the £16 million which it cost to abolish residential property tax. That would have been much more equitable, but the Government will have to live with the consequences. There has been a dramatic increase in house prices in the past two years and the Government is adding to that a penal tax.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  My party will oppose the proposal to impose a 9 per cent stamp duty on second-hand houses, which seems incredible.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  The Deputy was opposed to residential property tax too.

Mr. D. Ahern: Information on Dermot Ahern  Zoom on Dermot Ahern  That is not the proposal before us tonight.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  I cannot help contrasting the stamp duty proposed here with that in Britain and Northern Ireland. It used to be 50 per cent in Britain, but that has increased to 100 per cent at zero and it is 1 per cent above that. One per cent is a figure that will be familiar to Deputy Rabbitte who is in such a skittish mood tonight.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  We should rejoin the Commonwealth.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  This is an Irish budget.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  It represents the support for his party in this country. I am delighted he has been able to impose his will in respect of this matter——

The Taoiseach: Information on John Bruton  Zoom on John Bruton  I thought the Deputy would welcome the abolition of residential property tax and would not speak in such a churlish tone.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  ——and that those who once marched to Pyongyang to hold up the banner of [1042] Kim II Sung are now boasting proudly in this House tonight that they have abolished residential property tax.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  My goodness, such heavy irony.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  No longer will the capitalists of this country have to pay that iniquitous tax but Kim II Sung will rise in his grave in Pyongyang tonight to celebrate the success of his investment in these people that they have succeeded in abolishing a tax on property.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  Let us come back to Limerick. I know the Deputy does not go there often.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  Deputy O'Malley is a cross between Jimmy O'Dea and Laurence Olivier.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  I have looked at financial resolutions in 33 or 34 budgets as we had two in some years.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  We will have two this year too.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  I have never seen a financial resolution that ran to 14 pages as does Financial Resolution No. 4.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  It is like Deputy McDowell's leaflets on RPT.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  I cannot confess to understanding all the intricacies of it even though I felt at one time in my distant past I used to understand a good deal about stamp duty.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  That is not the type of confession the Deputy frequently makes.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  It is beyond me to take in the 14 pages of this resolution in an hour or two. I hope the Revenue Commissioners spend a long time on it. Apart from its length, one aspect of it strikes me as rather unfair, that the resolution shall have effect as regards instruments executed on or after 23 January provided that it will not apply in regard to an instrument executed prior to 1 April in pursuance of a contract evidenced in writing prior to 23 January. In other words, one could have a contract signed tonight provided one's conveyance is dated prior to 1 April. Not every sale is closed in that timescale and it is not anybody's fault that many sales do not do so. Any contract entered into on or before today should be stamped at the existing rate irrespective of the date of conveyance. The level of stamp duty here is so incredibly penal that it is something of an incentive to resort to all the sorts of devices used in relation to stamp duty. It is incredibly penal that we have a rate of tax, however one might seek to justify it in domestic terms, that is nine times greater than the corresponding tax elsewhere.

[1043]The Taoiseach: Information on John Bruton  Zoom on John Bruton  Britain is the only country to which the Deputy ever refers.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  I am constantly reprimanded for referring to New Zealand——

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  If one were a former President of Europe, that would be annoying.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  ...which is a splendid country to refer to. I have extended my references this afternoon to the United States and even to Germany.

Mr. Rabbitte: Information on Pat Rabbitte  Zoom on Pat Rabbitte  Not to mention Hong Kong.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  And the former Soviet Union.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  The fact that the Taoiseach and the Minister of State for everything should find it a matter of great amusement that they should impose a stamp duty of 9 per cent on residential property transactions is indicative of something.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  It is the Deputy's speech that is the cause of the amusement.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  At least there is some merit in the removal of the residential property tax, which I acknowledge, but it is interesting that the two parties which are represented here tonight and the Labour Party, which is never represented here when these types of topics are up for discussion, should have decided that they were not prepared to fight the next general election on the basis of the residential property tax. However, what they claim to have substituted may, in the long-term, cause at least as many difficulties and injustices as the residential property tax ever created. I am not sure this is the right way to approach it. I do not believe that I or anyone else in this House can claim to understand the full meaning and nuances of this 14 page financial resolution. Certainly at short notice and without the benefit of advice from people who have had days to go over it, I cannot understand all the nuances. They may be more considerable than we believe. I am particularly mystified by the references to the vendor's estimate of the amount and vendee's estimate of the amount. I have never heard of a vendee. He is normally called the purchaser and I do not know why he cannot be called that here, if he is a purchaser or he may be something else.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  It is a royalist expression.

Mr. O'Malley: Information on Desmond J. O'Malley  Zoom on Desmond J. O'Malley  I find it particularly difficult that transfers inter vivos, for no consideration, within a family are subject to half this rate. That may not be fully realised, but it is the case under the terms of this financial resolution. This means that a family house being transferred from, say, a father to a son or to a daughter, if valued at £170,000, is subject to 4.5 per cent stamp duty, which is a penal rate for a voluntary disposition within a family. It is rather unfair because it is [1044] not something someone voluntarily undertakes as one does when one purchases a property. It is something that one feels one has no option but to be involved in. That is regrettable and it should be drawn to people's attention that an inter vivos transaction is liable to half the level of duty imposed here on a conveyance for value. There was a time when virtually all inter vivos transactions were subject to a fixed stamp duty of 50p, ten shillings or at a maximum of 1 per cent, we have come a long way from that. That such a voluntary disposition within a family is now being taxed at the rate of 4.5 per cent is a great discouragement to people to pass on property.

Dr. Woods: Information on Michael J. Woods  Zoom on Michael J. Woods  My colleague, Deputy Dermot Ahern, raised an important point, that is, that the increase in stamp duty will have an effect even on the north side of Dublin. The position has changed dramatically in recent years and the value of many homes has increased substantially. Those looking forward to selling their home on retirement and buying a smaller house or apartment or moving to a nursing home will regard this change as a particularly onerous imposition.

The rate of home ownership is approximately 80 per cent. There is, however, a change in the Government's philosophy and thinking. Mortgage interest relief has been whittled away and is now allowable only at the standard rate of 26 per cent. I fear for young people in terms of their ability to own a home in parts of Dublin.

The Taoiseach mentioned a figure of £13.5 million. How much of this will be collected in Dublin and how many homes will be affected? Although not directly affected, I welcome the abolition of residential property tax because of its adverse effects, particularly in Dublin. It is an inequitable tax.

The increase in stamp duty will have a severe impact on old people in particular. It will give rise to difficulties and problems which will have to be addressed by future Governments. I fail to see why the burden should be shifted to middle income earners. The rate in Northern Ireland and Britain is 1 per cent on houses worth over £60,000. On family transfers, the increase will be regarded as particularly savage and will have a deleterious effect. We are, therefore, opposed to its imposition on middle income earners.

Mr. Ring: Information on Michael Ring  Zoom on Michael Ring  Although there are not many houses worth £150,000 or more in the west, I am glad, as an auctioneer, that residential property tax is to be abolished because home owners who work hard and pay their taxes should not be penalised. Couples whose first home is a new house under 1,400 sq. ft. receive the first time buyer's grant of £3,000. Couples whose first home is a second hand house under 1,400 sq. ft. should be exempt from stamp duty, the payment of which causes many problems. I hope the Government will consider this suggestion.

[1045]Mr. Hughes: Information on Séamus Hughes  Zoom on Séamus Hughes  I classify the increased rate of stamp duty as a super rate of tax which will not apply solely to larger houses but to ordinary houses. Where a father or mother wishes to transfer a house to their son or daughter there will be an increase of 50 per cent in the level of taxation where the value of the property exceeds £150,000.

I reject the assertion that residential property tax affects only those living in Dublin. There is widespread non-compliance throughout the rest of the country. Whenever a house in Dublin is sold at public auction the work of the Revenue Commissioners is done in that they have an accurate comparative value which can be applied to similar houses. Throughout the rest of the country no such easy comparisons can be drawn. As residential property tax is payable only by those on salaries of £30,000 or more per year, it does not apply to a substantial number of people with properties worth considerably more than £150,000. People in Dublin are more likely to be on a higher salary scale.

I welcome the abolition of this tax. It is beyond me why any party would wish to place a tax on private homes. In recent years further tax relief has been granted to architects, solicitors, doctors and other professionals and now successful tradesmen and others. They can claim not only capital allowances but income tax relief on rental income on second homes which would be regarded as an investment property.

The Taoiseach stated that the new rates of stamp duty will not apply to registered guesthouses. Will he clarify that they will not apply also to registered bed and breakfast accommodation? There is a subtle difference in the registration requirements.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  Yes.

Mr. Hughes: Information on Séamus Hughes  Zoom on Séamus Hughes  That is welcome. Successive Governments have encouraged people to enter the business to improve the standard of accommodation available to tourists.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  I welcome the abolition of residential property tax. I drew the attention of successive Ministers for Finance to my concerns. I consider it anti-Dublin and anti-family and, as such, unfair. I ask the Taoiseach to review the proposal to increase stamp duty from 6 per cent to 9 per cent. If he believes it to be unfair or unbalanced or that it has the potential to act as an anti-Dublin tax, he should introduce measures in the Finance Bill to deal appropriately with that.

I will offer the Taoiseach an example of the problem that will arise, which is a fair one. Take a family home which was inhabited by an elderly person who died recently. The house is a three bedroomed semi-detached residence which has not been modernised for over 30 years. It would, therefore, require replacement windows, central heating, rewiring and complete refurbishment. The garden of this house would be probably smaller than the Taoiseach's side garden, not to [1046] mind the acreage of land that usually surrounds houses in the country.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  I must bring the Deputy down there sometime.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  I am talking about a simple town house with a small garden. The value on that property, which is located in Dublin 3, has been established by auctioneers who are seeking offers in excess of £180,000, notwithstanding the need to replace the windows and install central heating. The people who will attempt to purchase that property will be probably a young couple who had to move out of the area because of house prices and who now, having paid a mortgage for a number of years on a home in the suburbs and being in a better financial position, wish to move back to the area in which they were born and reared and where their families reside. The other type of buyers who will be interested in the property are families who might require better accommodation or wish to improve their quality of life. What are we saying to such people? We intend to penalise them because they wish to improve their family's accommodation. On a property valued in excess of £175,000 they will pay about £20,000 in stamp duty and other fees.

The Taoiseach is a fair man and I simply ask——

The Taoiseach: Information on John Bruton  Zoom on John Bruton  The Deputy is winning me over already.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  It is not unfair to ask——

Dr. Woods: Information on Michael J. Woods  Zoom on Michael J. Woods  It was not the Taoiseach's idea.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  He does not like it any more than Deputy Callely.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  There are elderly people who may have——

The Taoiseach: Information on John Bruton  Zoom on John Bruton  This is a very good move, Deputies.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  ——a family home——

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  It is a good move to keep the Government together.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  ——and wish to use it as a nest egg. This measure will affect their desire to provide a safety net or nest egg for themselves. It will also lead to under the counter deals in which it will be agreed that certain amounts of money will not be recorded or the house property value will be assessed at a certain amount and furniture and effects will make up the remainder of the value.

This measure is most unfair and I ask the Taoiseach to reconsider it.

Mr. O'Dea: Information on Willie O'Dea  Zoom on Willie O'Dea  With regard to mixed property, the Taoiseach said the new regime will apply only to the residential part. Is there a method of calculating [1047] the residential part because sometimes it is impossible to value part of a property?

The Taoiseach: Information on John Bruton  Zoom on John Bruton  Floor area and whether it is rated.

Mr. O'Dea: Information on Willie O'Dea  Zoom on Willie O'Dea  I listened to Deputy Shatter's impassioned plea. I was most impressed and I agree with much of what he said. However, it suffered from the same fundamental flaw as the Taoiseach's earlier contribution in support of this imposition, in that both were about residential property tax. This measure has nothing to do with residential property tax. That tax was iniquitous, unjust and discriminatory. The Government recognised that by abolishing it, although it was retained in the last two budgets. Omitting the history of the tax, who imposed it and who maintained it, it was wrong and has been abolished. All parties maintained it and the Taoiseach's party introduced it.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  Who extended it?

Mr. O'Dea: Information on Willie O'Dea  Zoom on Willie O'Dea  It has been abolished because the Government accepted the argument that it was unjust. However, where is the logic in replacing one unjust imposition with another unjust imposition? Deputy Shatter said that if the Government accepted our case the tax would be simply buried in the general figures and we would accuse the Government of irresponsibility. I cannot accept that logic. The Government says it is giving away £490 million in tax reductions. Why not give away £477 million instead of replacing one unjust tax with another?

Stamp duty, as anybody who is involved with property transactions is aware, is penal. I recently witnessed a property transaction in the United Kingdom. A house in Twickenham, London, which is a good area, was sold for £170,000 and the stamp duty on the transaction was £1,700. When this financial resolution is passed the stamp duty on a similar property in Dublin will be £15,300, nine times as much. There is no logic in or justification for that.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  What about the council tax paid in the UK?

Mr. O'Dea: Information on Willie O'Dea  Zoom on Willie O'Dea  The council tax applicable in London does not apply here. However, the income tax rates in the UK are lower than ours. Look at the different VAT regimes and the tax impositions on petrol and other commodities. There is no reality in that argument.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  Look at their old age pensions. Ours are better.

Mr. O'Dea: Information on Willie O'Dea  Zoom on Willie O'Dea  We are comparing the stamp duty regime in this country with that of our nearest neighbour whose tax regime closely resembles ours. Stamp duty on a house worth £170,000 in London is £1,700 but the stamp duty on a property [1048] of the same value in Dublin, Limerick, Waterford, Galway or County Meath will be £15,300. Is there logic or justice in that?

I agree with the abolition of residential property tax. However, there is no argument for the replacement of one unjust tax with another unjust and penal imposition. I ask the Taoiseach to reconsider this resolution.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I congratulate the Government on abolishing residential property tax. We have been calling for its abolition for three years and the message has got through. That is appreciated. I wish to put on record what I believe has taken place. The Taoiseach's party wisely decided residential property tax should be abolished. Democratic Left and the Labour Party agreed on condition the Taoiseach agreed to raise the same amount of money from family homes. That was the political deal to square the ideological problem the Taoiseach faced in keeping his Government together.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  That might be how the Deputy's party did business but it is not how we do business.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  I am glad the Taoiseach has confirmed that Democratic Left did not demand that the residential property tax be maintained. My allegation is that Democratic Left demanded that a tax be maintained on property. What is this fixation on taxing the family home? It happened through the residential property tax and will now happen through this 9 per cent stamp duty on homes worth £170,000. As my colleagues have pointed out, the average price of a family home is rapidly approaching that figure in the current property market.

This is an outrageous decision. I do not believe the Taoiseach's instincts lean in this direction. I am certain that if his hands were not tied he would express the same sentiments as myself and my colleagues. A 9 per cent tax on a home worth £170,000 is an outrageous measure by any stretch of the imagination. It has been imposed because the Taoiseach was told by his colleagues that he must raise money from family homes. Please stop attacking people's homes. A tax on homes is not necessary. It existed previously in the residential property tax and was removed. Do not compound the problem by imposing this iniquitous tax on people's homes.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  There is no such thing as a good tax. There is always a good objection to a tax because tax involves taking money from people by compulsion. There is no perfect tax and an Opposition can oppose every tax. Having accepted that, let us compare what will now be in place to what was there before. What standards would one use to compare stamp duty with the residential property tax? First, is the tax expensive to administer both for the tax collecting authority and the taxpayer? Second, is the tax certain or uncertain in its effects? Third, is the tax [1049] convenient or inconvenient to pay? On those three criteria this is a far better tax than the tax it replaces.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  It is still a tax on homes.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  The residential property tax was administratively costly both from the point of view of the Revenue because of the complexity of the calculations that had to be made and from the point of view of the taxpayer because he or she had to go to the expense of filing a return, making revaluations and getting tax advice every year in some cases in order to ensure they were not in a situation of moral hazard as a result of the possible allegation of paying less than they ought to pay.

In terms of convenience the residential property tax had to be paid every year which is an inconvenient, recurrent liability in terms of people having to make provision each year, whereas this tax is convenient because it only occurs at a time of the choosing of the taxpayer. It is only when the taxpayer chooses to buy or sell a house that this tax falls to be paid. In regard to certainty and equity, this tax is certain because it is levied on a known value, the value of the house as sold between a willing seller and a willing purchaser on a fixed known price. The residential property tax was uncertain because the level of residential property tax to be paid was levied in an arbitrary way on a valuation chosen by the taxpayers which, in the case of one house on a road, could be different from that chosen by another resident of a similar house on the same road without the two having any opportunity of consulting to discuss the issue.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  They are both anti-Dublin.

An Ceann Comhairle: Information on Seán Treacy  Zoom on Seán Treacy  Let us hear the Taoiseach without interruption.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  Given that all taxes can be objected to, and one would not have to extend unduly the oratorical capacities of any of the Deputies in Opposition at any time to find some reasons to object to every tax——

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  Not family home tax.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  The Taoiseach should be fair.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  ——it is certainly the case that this tax is a distinct and dramatic improvement on the tax it replaces.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  It is a family home tax.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  It is anti-Dublin.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  I want to deal with the Opposition's approach to the general question of replacing residential property tax. Listening to some of the Deputies opposite one would think they would like us to simply abolish this tax and not replace it.

[1050]Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  There will be a £52 million take from petrol.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  That is not what we are saying.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  That is not a responsible approach to take. If a tax is to be abolished, given our requirements under the Maastricht Treaty to maintain our borrowing within a strictly defined limit, there is a requirement when removing one revenue source to replace it with another.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  But it must be fair.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  That is what we are doing in this case. We are not repeating the approach adopted in 1977 by the party opposite when it simply abolished rates.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  I do not remember that. I am one of the younger Members of the House and that was a long time ago.

An Ceann Comhairle: Information on Seán Treacy  Zoom on Seán Treacy  Deputy Callely should cease interrupting.

Mr. M. Smith: Information on Michael Smith  Zoom on Michael Smith  The Taoiseach agreed with that at the time. He issued a concurrent statement.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  As a result of that decision we found ourselves in great difficulties throughout the 1980s.

A number of questions were asked about this matter. In regard to the number of houses to which this is likely to apply, approximately 1,500 houses change hands every year at or above £150,000.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  Where will they be located?

An Ceann Comhairle: Information on Seán Treacy  Zoom on Seán Treacy  I have asked Deputy Callely to desist. He ought to abide by the Chair's ruling.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  These houses are located wherever house values are at that level. If house values are at a certain level in a particular area it is because people want to buy houses there since it has amenities which do not exist in other areas.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  It is a socialist tax.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  In this instance it will only be where people willingly buy or sell a house in that particular area that the tax will fall to be paid.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  It is a left wing tax and the Taoiseach knows it.

An Ceann Comhairle: Information on Seán Treacy  Zoom on Seán Treacy  Let us hear the Taoiseach without interruption.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  The objection to the residential property tax was that it applied whether people wanted to sell their house or whether they had the capacity——

[1051]Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  The Taoiseach should check with Richard.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  ——for realising the value of their houses.

Mr. B. Ahern: Information on Bertie Ahern  Zoom on Bertie Ahern  All move out of Clontarf.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  It is a Proinsias De Rossa tax.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  In this instance the tax will apply only where the house is being sold.

Deputies opposite are concerned about the rate of the tax which they consider to be very high but in France, for example, a country in which the Fianna Fáil Party's allies are in office, the equivalent house stamp duty tax is 18.2 per cent——

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  After years of socialism.

Dr. Woods: Information on Michael J. Woods  Zoom on Michael J. Woods  The Taoiseach will have to stop going on French holidays.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  ——in Italy it is up to 17 per cent, in Belgium it is 12.5 per cent and in Portugal it is over 10 per cent.

Mr. O'Dea: Information on Willie O'Dea  Zoom on Willie O'Dea  And the UK?

The Taoiseach: Information on John Bruton  Zoom on John Bruton  The Deputies opposite who complained about others being absent — they are now absent — extolled the virtues of the British system where we are told stamp duty is charged at the rate of only 1 per cent. However, if a person pays stamp duty at the rate of 1 per cent on a house in London valued at £150,000, he or she also pays approximately £1,000 a year in council tax. Tax of that kind is not paid on a house in Ireland.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  Because it was removed in 1977.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  I do not want to swop our system of stamp duty on houses, no residential property tax, rates or council tax for the British system where people pay 1 per cent stamp duty on houses and a £1,000 a year council tax bill.

Mr. O'Dea: Information on Willie O'Dea  Zoom on Willie O'Dea  Fifteen years' tax in one year.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  Householders in Ireland are getting a far better deal from the Government than householders in Britain are getting from their Government.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  This is a family home tax.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  Those Deputies who wish to selectively quote what is good about the United Kingdom might well undertake more exhaustive research and they would find that the system of taxation is better in this country in many respects than the one in Britain. It is certainly a more progressive system of taxation where tax is levied in [1052] accordance more with ability to pay, whereas the priority in Britain has been simply to reduce the top rate of tax to a point where people earning huge incomes are paying comparatively little tax. I do not believe in the British social model. The Deputies opposite may selectively want to pick and choose bits from the British social model that suit them and then reject others. I do not believe that model is one we should seek to emulate.

The balance we have struck in this budget with this particular tax and the priority we have given to the low and middle income groups in regard to income taxation is the correct one. I listened to Deputy O'Dea and others who said we had lost an opportunity by spreading the benefit too thinly. The strength of this budget is precisely in that regard. What he described as spreading the benefit too thinly was in fact giving the benefit right across the board, particularly to the large mass of taxpayers on comparatively low incomes.

Mr. S. Brennan: Information on Seamus Brennan  Zoom on Seamus Brennan  One for everyone in the audience.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  There are other Deputies in this House who would prefer — this may represent the views of other Deputies in Limerick but I am not so sure about Deputy O'Dea — if we concentrated more on reducing the 48 per cent income tax rate. That would not be a good idea.

Mr. O'Dea: Information on Willie O'Dea  Zoom on Willie O'Dea  The Taoiseach should concentrate on something.

The Taoiseach: Information on John Bruton  Zoom on John Bruton  Irrespective of whether the lower and middle income groups and those on the margin of the poverty trap argue they are better off not working, it is right that we should target those groups, reduce tax in that area and increase allowances under the family income supplement. That spreads the benefits considerably. It is also consistent with an enterprise approach to the economy because enterprise is for everybody, not just those who are already well off. Access to enterprise should be available to everybody. The philosophy of the Government of opening up access to enterprise to everybody, including the long-term unemployed, is the right approach to building a free, robust and fair economy. This is what we are building as a result of the budget.

Mr. Callely: Information on Ivor Callely  Zoom on Ivor Callely  The Taoiseach is talking about an anti-Dublin family home tax.

Dr. Woods: Information on Michael J. Woods  Zoom on Michael J. Woods  The Taoiseach did not say how many were in Dublin.

An Ceann Comhairle: Information on Seán Treacy  Zoom on Seán Treacy  As it is now 10.30 p.m. I am required to put the following question in accordance with an Order of the Dáil of this day: “That Financial Resolution No. 4 is hereby agreed to.”

Question put.

Ahearn, Theresa.
Allen, Bernard.
Barrett, Seán.
Bell, Michael.
Bhamjee, Moosajee.
Bhreathnach, Niamh.
Boylan, Andrew.
Bradford, Paul.
Bree, Declan.
Broughan, Thomas.
Browne, John (Carlow-Kilkenny).
Bruton, John.
Bruton, Richard.
Burke, Liam.
Burton, Joan.
Byrne, Eric.
Carey, Donal.
Connaughton, Paul.
Connor, John.
Crawford, Seymour.
Creed, Michael.
Crowley, Frank.
Currie, Austin.
Deasy, Austin.
Deenihan, Jimmy.
Doyle, Avril.
Dukes, Alan.
Durkan, Bernard.
Ferris, Michael.
Finucane, Michael.
Fitzgerald, Brian.
Fitzgerald, Eithne.
Fitzgerald, Frances.
Flaherty, Mary.
Flanagan, Charles.
Gallagher, Pat (Laoighis-Offaly).
Gilmore, Eamon.
Harte, Paddy.
Higgins, Jim.
Higgins, Michael.
Hogan, Philip.
Howlin, Brendan.
Kavanagh, Liam.
Kemmy, Jim.
Kenny, Enda.
Kenny, Seán.
Lowry, Michael.
Lynch, Kathleen.
McCormack, Pádraic.
McDowell, Derek.
McGahon, Brendan.
McGinley, Dinny.
McGrath, Paul.
McManus, Liz.
Mitchell, Gay.
Moynihan-Cronin, Breeda.
Mulvihill, John.
Nealon, Ted.
Noonan, Michael (Limerick East).
O'Keeffe, Jim.
O'Shea, Brian.
O'Sullivan, Toddy.
Pattison, Séamus.
Penrose, William.
Rabbitte, Pat.
Ring, Michael.
Ryan, John.
Ryan, Seán.
Shatter, Alan.
Sheehan, P.J.
Shortall, Róisín.
Spring, Dick.
Stagg, Emmet.
Taylor, Mervyn.
Timmins, Godfrey.
Upton, Pat.
Walsh, Éamon.
Yates, Ivan.

Ahern, Bertie.
Ahern, Dermot.
Ahern, Michael.
Ahern, Noel.
Andrews, David.
Aylward, Liam.
Brennan, Matt.
Brennan, Séamus.
Briscoe, Ben.
Browne, John (Wexford).
Burke, Raphael.
Byrne, Hugh.
Callely, Ivor.
Clohessy, Peadar.
Connolly, Ger.
Coughlan, Mary.
Cowen, Brian.
Cullen, Martin.
Davern, Noel.
de Valera, Síle.
Dempsey, Noel.
Doherty, Seán.
Ellis, John.
Fitzgerald, Liam.
Flood, Chris.
Foley, Denis.
Fox, Mildred.
Geoghegan-Quinn, Máire.
Harney, Mary. [1055]Power, Seán.
Quill, Máirín.
Ryan, Eoin.
Smith, Brendan.
Smith, Michael.
Haughey, Seán.
Hughes, Séamus.
Jacob, Joe.
Keaveney, Cecilia.
Kenneally, Brendan.
Keogh, Helen.
Killeen, Tony.
Kirk, Séamus.
Kitt, Michael.
Lawlor, Liam.
Lenihan, Brian.
Leonard, Jimmy.
Martin, Micheál.
McDaid, James.
McDowell, Michael.
Moffatt, Tom.
Molloy, Robert.
Morley, P.J.
Moynihan, Donal.
Nolan, M.J.
Ó Cuív, Éamon.
O'Dea, Willie.
O'Donnell, Liz.
O'Donoghue, John.
O'Hanlon, Rory.
O'Keeffe, Batt.
O'Keeffe, Ned.
O'Leary, John.
O'Rourke, Mary. [1056]Treacy, Noel.
Wallace, Dan.
Wallace, Mary.
Walsh, Joe.
Woods, Michael.

Question declared carried.


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