Tuesday, 6 December 2011
Dáil Éireann Debate
|“(4A) Where the amount or value of the consideration for the sale is wholly or partly attributable to property which is not residential property ...||2 per cent of the consideration which is attributable to property which is not residential property but where the calculation results in an amount which is not a multiple of €1 the amount so calculated shall be rounded down to the nearest €.”,|
|“(b) 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 the amount or value of such consideration is wholly or partly attributable to property which is not residential property ...||2 per cent of the consideration which is attributable to property which is not residential property but where the calculation results in an amount which is not a multiple of €1 the amount so calculated shall be rounded down to the nearest €.”.|
This resolution provides for changes to the stamp duty payable on non-residential property. At present varying rates of stamp duty apply to such property and I am simplifying the system to provide for a low single rate of stamp duty at the rate of 2%. The new rate will apply to instruments executed from tomorrow onwards.
There will be few cases where additional duty would be payable after this change, but to cater for them I am including a transitional provision whereby, if a binding contract to purchase a non-residential property has been entered on or before today, 6 December 2011, and the transfer of the property is executed before 1 July 2012, the stamp duty payable will not increase.
Deputy Micheál Martin: I can understand the rationale for this proposal. I take it that the basic objective of the exercise is to try to kick-start the property industry. In this context the Budget Statement was interesting. At one level there was a good deal of criticism of the fact that the property bubble was a fundamental factor in the collapse of the economy but the more deeper underlying problems relate to the euro and its flawed design and the dramatic decrease in interest rates after the 9-11 attacks in the United States in 2001. A wall of cheap money was funnelled in to Europe and across the developed economies which fuelled much of the property bubbles across the eurozone, including in this country.
At the beginning of the Budget Statement there was criticism of the property market but by the end of it we heard of a range of incentives for the sector. Given the very poor state it is in, I do not have a difficulty with attempting to create a sustainable construction sector. However, it puts into sharp relief much of the rhetoric with which we had to put up on previous occasions from Deputies in the Labour Party in particular. It is ironic that a Labour Party Minister is promoting this resolution. It probably gives a calmer perspective to the debates we had in this House in previous times when extreme rhetoric was used in regard to the sector. We do not have a difficulty with the proposition.
Deputy Richard Boyd Barrett: I would like to know a little more about this resolution. Turning property into a commodity for speculation, trade and profiteering is the reason we are in the mess we are in now. Property-based tax reliefs particularly directed at developers fuelled the property bubble that has crashed our economy. I find it worrying that the Government’s approach to trying to restart economic activity in our economy, which we all want to see, is based on further tax reliefs specifically for commercial property. I wonder about that. The €64 million estimated cost involved is a good deal of money that we are giving away. I would like to hear the case as to why that €64 million might not have been used to mitigate some of the nasty measures the Government has inflicted on lone parents and other vulnerable sectors of society who have been hit and on measures such as the reduction in the fuel allowance season.
I do not know whether I should vote for or against this resolution but I am suspicious of it, given the history of such reliefs and the quantity of money involved. I ask the Minister to give us a convincing reason this is not just another property relief, albeit maybe of a smaller scale, of the sort that got us into the mess we are in.
Deputy Michael Healy-Rae: I would not liken this resolution with the incentives and the tax reliefs that were available in the past. I welcome the resolution. I hope that it will create a stimulus in the property market. None of us wants there to be a return to the crazy property bubble that we had and we know that will never happen. I believe that in a small way this is a helpful measure and that is why I will support it.
While there may be people wishing to purchase property, the elephant in the room is that nobody can get access to money because the banks are shut down in terms of lending money. While I appreciate this measure, people who might want to make a move and buy a property, be it a commercial or a private property, are unable to do so unless they have the money in their back pockets. No one can get money in this country at present to purchase any such property. That is a major challenge and difficulty facing the Government and all of us.
Deputy Billy Kelleher: As Deputy Martin outlined, there is a degree of irony or hypocrisy in the context of what was stated in recent times with regard to the difficulties the property sector brought about in this economy. A very simplistic argument was proffered for a very long time when Government members were on this side of the House. Now they realise it is important to have a stimulus to ensure there is activity in the commercial and residential property sector.
One of the key issues facing the economy is job creation. The Minister made great strides in promoting the idea that this was a jobs budget but at the very heart of a modern economy is the need to have access to credit. There are no proposals that have a definitive way of ensuring the release of credit into the broader economy. Everybody who represents small and medium-sized businesses and everybody who works in the system knows it is completely blocked and that there has been no freeing up of credit. Some of the surveys carried out would show that the opposite is the case, that there is now a tightening of credit again. All these incentives seek to stimulate a section of the economy, but it cannot move until there is an opening and freeing up of credit.
It is a positive step to introduce a stimulus in this area but until such time as genuine efforts — as opposed to the aspirational measures laid out in the context of the pillar banks, as they are now called, in terms of providing lending — are made, nothing will happen. That is the single biggest failure at the heart of this budget document, the failure to bring forward commitments to ensure that credit is made available to small and medium-sized businesses and potential mortgage holders.
Deputy Sean Fleming: Will the Minister provide us with clarification and additional information on this proposal? The information provided is sketchy with regard to the figure of €64 million. Perhaps the Minister might be able to answer a few questions. I respectfully state that if the answers are not available, we will want them by way of replies to parliamentary questions in the near future.
How much of the projected land bank is under NAMA’s control? It is the biggest landholder in the country which has loans within its jurisdiction. It is important to know whether this request is coming from NAMA to help release tied-up properties and earn cash. By definition, it must have a big stake in this issue. Therefore, we would like to know who initiated this proposal.
Given that this measure will generate sales of property, will there be a VAT gain on the transactions? How much extra VAT might be generated from them? While stamp duty levels may be reduced, there may be a gain in VAT for the Exchequer. I presume this applies to new buildings as well as to those already in use, including hotels and other commercial properties.
I particularly welcome one aspect of this measure, coming as I do from the rural constituency of Laois-Offaly. The reduction in stamp duty applies to farmland which will help the transfer of land from the older generation to the younger generation. My parish has only three full-time farmers under the age of 40 years. Everyone involved in farming must earn other income and this significant reduction in stamp duty on farming transactions will be a big help in allowing the older generation to transfer land.
Deputy Joe Higgins: This is not the way to go about regenerating an economy that is being destroyed by the Government’s austerity policy. Shortly after I entered the Dáil in 1997 a series of measures was begun by Fianna Fáil to cut taxes for property speculators and developers which led to the catastrophic property bubble which led to the blackmail prices young people were charged for the right to have a roof over their heads. It is highly ironic that a Labour Party Minister stood up to propose this measure considering that each year when in opposition his colleague, Deputy Joan Burton, religiously engaged in a rant against section 23 and other such scams.
We will have an economy in which buildings and homes can be bought and sold for realistic prices when the savage austerity measures and the pouring of billions into bad banks to save the European speculative system are stopped and people are at work. That is how we will go about it, not by this type of artificial measure.
Deputy Michael Colreavy: I have mixed views on this resolution. I understand the value and logic behind reducing stamp duty to make it easier for young people to get involved in farming and take over farming businesses. However, I have a deep terror of making it easy for the developers and financiers who have failed the country to do the same all over again. I believe it is by design that this measure is tied to agricultural land, to make it a selling point. I have concerns and would like clarification. What impact will this measure have on commercial properties held by NAMA? Was consideration given to extending this facility to domestic dwellings, as well as to commercial properties? Was consideration given to putting in place an end date for this resolution in order that if we find it is being abused by those who abused us previously, at least we would have a legal mechanism in place to shut it down?
Deputy Seamus Healy: The question of NAMA has been raised and I wish to address it briefly. The programme for Government promises that the secret society which is NAMA would be made transparent and that freedom of information legislation would be extended to ensure we would be able to obtain details on the transactions and operations of NAMA. We were promised this on numerous occasions in the Chamber. However, it has not yet happened. When will it happen?
The Taoiseach has asked whether developers involved in the debacle we went through, their friends or those working on their behalf might be able to get their hands on properties coming on the market through NAMA. This is a very significant concern and should be addressed.
I agree with Deputy Colreavy on the question of residential properties. Stamp duty is being decreased in the case of non-residential properties. What about residential properties? What about those with mortgages and in mortgage distress? There is no benefit in the budget for those who find themselves in very serious difficulty.
Deputy Jonathan O’Brien: I also have mixed views on this resolution. I have been thrown by the inclusion of farmland because I cannot take it in isolation. We must be very careful not to create a situation where another property bubble will be allowed to develop. I cannot take it in isolation because, taken together with the seven year holiday being given to property developers with regard to capital gains tax, it is a start towards encouraging developers to buy property and sit on it for a certain period of time. Anything that does this is very dangerous. That is why I am concerned.
Deputy Micheál Martin: Was advice received on this taxation measure and, if so, is it possible for it to be published? Was there any lobbying by interest groups in favour of the introduction of such a measure and, if so, is it possible for this information to be published?
How was the figure of €64 million calculated? It seems to indicate an expectation or anticipation of approximately €2 billion worth of sales and transactions. Will the Minister confirm this and give an indication of how the figure of €64 million was reached?
Deputy Ruairí Quinn: Many questions have been asked and many issues have been raised about property. These will be for another day. I will be more than happy to come to the Chamber to describe in detail how Fianna Fáil destroyed the original tax breaks.
Deputy Ruairí Quinn: Eight Deputies spoke about this matter. With regard to residential property, stamp duty is at the level of 1% up to a value of €1 million, at which point it increases to 2%. Therefore, to answer Deputy Healy, the issue of stamp duty is already covered with regard to residential property.
Deputy Boyd Barrett and others asked how the calculation of €64 million had been arrived at. I understand it was based on properties being sold with a stamp duty rate of 6% and an estimate of what the demand might be based on various representations made and an analysis received by the Department of Finance. It is an analysis, it is not a scientific figure. They have taken a median view on it. It may or may not occur but we now propose to charge 2% stamp duty on a volume of commercial property transactions for which, if the rate was 6%, the amount of €64 million would be the revenue foregone, dropping from 6% to 2%.
Why are we doing it? — because there is an overhang of commercial property that is preventing movement in the sector. Empty buildings are counterproductive in an array of different manners. They are a cost on whoever owns them. In many cases, I suspect — I do not know for definite, but it is a reasonable assumption that Deputy Fleming has made — that NAMA is directly or indirectly at the end of the ownership line of these properties. It is in everybody’s interest, and in particular in the taxpayer’s interest, that these properties are moved on. There are some indications to suggest that there is an interest among people who would be in a position to purchase these properties. There would be a VAT consequence in terms of the turnaround of the property or its upgrading or improvement. So there will be some degree of employment generation.
We have had NAMA for several years and there is a great deal of static, non-movement in the property sector. The Minister for Finance has convinced the Cabinet that by dropping the stamp duty rate from 6% to 2% we may get some movement. That would be positive for all concerned, including the taxpayers who are ultimately the owners of NAMA.
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|Maloney, Eamonn.||Martin, Micheál.|
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|Shortall, Róisín.||Smith, Brendan.|
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|Pringle, Thomas.||Ross, Shane.|
|Stanley, Brian.||Wallace, Mick.|
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