Finance Bill 2007 [Certified Money Bill]: Committee and Remaining Stages.

Thursday, 29 March 2007

Seanad Eireann Debate
Vol. 186 No. 18

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An Leas-Chathaoirleach: Information on Paddy Burke  Zoom on Paddy Burke  I welcome the Minister for Finance, Deputy Cowen, to the House.

Sections 1 to 8, inclusive, agreed to.

Question proposed: “That section 9 stand part of the Bill.”

Minister for Finance (Mr. Cowen): Information on Brian Cowen  Zoom on Brian Cowen  In accordance with Standing Order 121, I request the Leas-Chathaoirleach to direct the Clerk to make four minor corrections to the Bill which are of a formal or verbal nature. In section 9, page 16, line 26, the reference to “subsection (6)(c)” should read “subsection (6)(b)”. Corrections of a similar nature are required to be made in sections 18, 19 and 35.

Question put and agreed to.

Sections 10 to 101, inclusive, agreed to.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I move recommendation No. 1:

I welcome the Minister to the House. I will speak on behalf of Senator John Paul Phelan who is unable to attend the debate. This proposal is part of a number of stamp duty reforms Fine Gael is proposing. It would help families with day-to-day issues with regard to the cost of living. It would mark the end of stamp duty as we know it and make it much easier for the many young people who want to get onto the property ladder, as well as for older people who want to trade down. We know it is becoming increasingly difficult for young people to get their feet on the ladder. More and more people in professions such as nursing, the Garda Síochána and teaching do not have salaries that are sufficient to get them on the property ladder. Stamp duty is one of the areas in dire need of reform.

I deeply regret the Government’s attitude to reform in this area. It is preventing a large number of people from buying their first homes or from trading down. The latest interest rates [1766]from the European Central Bank are at a five-year high, which has highlighted the need for reform in this area. The interest rate hike highlights that the Government has failed to address the issues for many people.

The Minister had the opportunity in the budget to introduce reforms but he failed to take the opportunity. The mortgage interest relief measures in the budget were wiped out within 24 hours by an interest rate hike and, with the further increases, we now see how ineffectual his budget measures were. To reform stamp duty would have been far more beneficial for many people. It is a shame the Minister did not listen to the proposals put forward by Fine Gael, which I regret.

The comments made by Deputy Bruton, when he said the Minister’s proposals were ridiculous, show the commitment of Fine Gael to reform stamp duty. The Minister must live with the consequences of his failure to do so and this is being highlighted on the doorsteps. Our proposals for making the stamp duty regime fairer are simple and measured and will make it easier for people to buy their first homes. It is difficult to listen to the Minister and members of the Government criticise our proposals when they have failed abysmally to address the problem. The Minister had the opportunity in the budget but failed to grasp it. We now see the result, with many people unable to provide themselves with their own homes.

The Minister’s position in this area is contrary to that of those in the industry who have welcomed Fine Gael’s proposals. For example, the chief executive of the Irish Auctioneers and Valuers Institute expressed the view that the market is in a position to take “substantial adjustments to stamp duty at this time” and that the Fine Gael plan has “huge benefits”. The amendment would bring about a method by which people would be in a position to buy their first homes. I hope the Minister will consider it favourably.

Mr. B. Hayes: Information on Brian Hayes  Zoom on Brian Hayes  I welcome the Minister to the House. I support Senator Terry’s contribution. I wish to raise a related point which has been raised by some figures in the industry, and I would be grateful if the Minister would reply.

The current threshold for first-time buyers is €317,500 and no stamp duty applies to a home bought at that price or lower. The case I wish to raise involves a first-time buyer who purchased a house for €317,000, which was just under the threshold and no stamp duty applied. However, the buyer had to pay €3,000 for carpets and other fixtures attached to the house. When this was added to the sale price, it brought the total price to €320,000 and stamp duty applied.

Can we not put in place a buffer zone to ensure stamp duty does not apply when a first-time buyer is caught in such a situation? I have been reassured by the person who brought this to my attention that this is not an academic example but actually happened. A first-time buyer was caught in the stamp duty regime because the additional cost he had to pay for curtains, carpets and the like was added to the cost of the house and gave [1767]a combined sale price of €320,000. We need to ensure this does not happen.

I was asked to put the case on the record of the House and to get the response of the Minister. I want to know whether a more benign view could be taken in respect of the current regime in order that such first-time buyers are not caught with the duty, where the intention is they would not be caught. I appreciate some movement was made in this regard two budgets back, and more recently, but there are still examples of people being caught when they should not be.

Dr. Mansergh: Information on Dr Martin Mansergh  Zoom on Dr Martin Mansergh  I have every sympathy for the first-time buyer involved but he was very badly advised by his estate agent if he was not made aware this would be the consequence. Given that the parties were so close, it should have been a matter of negotiation to keep the price below the €317,500 threshold. While I am sure Senator Hayes is doing the public a service by warning people of the consequences, this happens whenever there is a threshold or limit for anything.

On the more general issue raised by the amendment, it needs to be stressed that in the majority of the country, the price of very good new and second-hand houses is well below the generous limit of €317,500. I accept there is an issue, particularly with regard to Dublin, where a proportion of houses would fall above the limit. I have a daughter who recently bought a house not too far from the centre of Dublin which was slightly above that price.

The questions that need to be asked about this proposal or any of the proposals relating to the housing market is where is the real incidence and who will be the real beneficiaries. If the effect of raising the limit is simply to raise the price of houses by an equivalent amount, the first-time buyer will not be any better off. Until recently, the market was so heated this would be the consequence. The €317,000 threshold is pretty generous considering the system operating in other countries where the thresholds for stamp duty are significantly lower. Senator Terry’s proposal would be a very expensive measure. The State must collect revenue from somewhere because there are constant demands for improvements to infrastructure for schools, roads, etc. We do not have a property tax, but almost every other country has an annual one. Seriously diluting stamp duty taxes would not be in the long-term interest. If there are tax concessions to be made, should they be made in the area of stamp duty?

What I least understand about the Fine Gael proposal is its stance on older people selling houses. Older people have seen an enormous increase in the value of their houses, often 1,000% or more over the past 20 to 30 years. I find it hard to accept the idea that the stamp duty paid by the buyer will somehow deter older people from selling or transferring their houses. The area about which I have moral reservations is something about which few of us have any control, namely, the redistribution of wealth to the older generation because of the enormous increase in the value of property, especially since [1768]approximately 1970 but very much accelerated since the mid 1990s. I do not even begin to understand the idea that one should make any tax concessions to people who have already gained enormously or what moral basis there is for that suggestion.

Mr. Cowen: Information on Brian Cowen  Zoom on Brian Cowen  I am glad to have the opportunity to say a few words on this issue. Senator Terry’s amendment gives her an opportunity to discuss the Fine Gael proposals in this area, in particular the suggestion that we increase the threshold for first-time buyers of second-hand houses from €317,500 to €450,000.

There is a duty on all of us, in view of the speculation being caused by reason of the fact we are in an election situation and people are setting out their stalls on the merits of such proposals, to be careful of how such measures impact on the property market. I do not believe anyone in this Chamber has poor intentions in this respect, but the measure has not been thought through sufficiently by the main Opposition party. The reason I make such forceful comment on the proposal is that Fine Gael is, prospectively, the majority partner in any alternative Administration. The impact of what has been suggested must be thought about deeply.

One of the reasons one must calibrate carefully what one does in respect of any intervention in the property market is to ensure it does not have wider implications, whether connected or unconnected with the initiative suggested. We must also recognise that at the current stage of our economic and social development, this is an area of economic activity that retains, in direct terms, more than 270,000 jobs. Some 270,000 families depend on the health or otherwise of the sector. Tens of thousands of others in allied industries that support and supply the sector are also equally dependent on it.

What we must do is develop stable housing market conditions. In the past 12 months we have seen a correction take place where the unsustainable level of house price rises has started to decrease. The continual increase in prices was never a scenario that would be maintained ad infinitum. One of the reasons for the change, mentioned by Senator Terry, is the fact there have been six European Central Bank interest rate rises in the past 12 to 18 months. These have caused an increase of 1.5% in our historically low interest rates. These have had a dampening effect and were introduced to cool a heating property market.

Another reason for the change is that supply is beginning to meet demand. We have begun to build the capacity of the housing construction sector annually to 93,000 units, compared with 53,000 a short time ago. In the past, one of the reasons for rising house prices was that demand exceeded supply. At the same time, people were on better incomes and were in a position to pay more for houses that were scarcer in relative terms. Also, as a result of our historically low interest rates, we had greater competition in the mortgage market and this made mortgage finance more widely available on better terms and con[1769]ditions than previously. In the past 12 months, supply and demand started to even out, which was important in terms of moving towards a soft landing for the market.

The Fine Gael proposal would cost €460 million. Approximately 50,000 residential transactions take place in the housing market annually and we have more than 1.6 million householders. All the country’s housing stock has seen rising equity because of the buoyant market conditions over the past decade and more as a result of the low interest rate climate and the availability of finance, etc.

Let us look at what is involved when talking about tax revenue and how to give more money back to ordinary workers. There has been mention of the 2% drop in the standard tax rate. The reduction from 20% to 18% will benefit more than 2 million people, PAYE workers, and cost €1.1 billion. The Fine Gael initiative would perhaps cost 40% of that, but it would only benefit 5% of the number of people.

There is one simple reason we must be careful when dealing with the property market. The people we should try to help are those who have little or no equity coming into the market. The Fine Gael proposal, however, provides benefits for everybody, whether first-time buyers, people buying for the second or third time or investors. This is because Fine Gael has concentrated on currying favour with the 50,000 involved in residential transactions. Its proposal has been made without any reference to the wider implications for the other 1.6 million. This is a serious problem with regard to the proposal.

Senator Terry quoted the chief executive of the Irish Auctioneers and Valuers Institute. It is not surprising that a person who depends on sellers comes out in favour of an initiative that would benefit sellers. Other Fine Gael Deputies and Senators have quoted the same valuer in their effort to advance this proposal. He is the only valuer I know of who supports it.

Mr. Norris: Information on David P.B. Norris  Zoom on David P.B. Norris  Perhaps it is the well known auctioneer and valuer Senator Ross.

Mr. Cowen: Information on Brian Cowen  Zoom on Brian Cowen  I look forward to hearing from him.

Mr. Kenneally: Information on Brendan Kenneally  Zoom on Brendan Kenneally  Seán de Rossa.

Mr. Cowen: Information on Brian Cowen  Zoom on Brian Cowen  He will have to reconcile his distance from Fine Gael with his new profession.

  2 o’clock

The argument put forward on radio by the gentleman in question is that the Fine Gael proposal is a great idea because stamp duty stops sellers from getting more money for their houses and that the houses would be worth €50,000 or more extra if the stamp duty did not have to be paid. His client would win but the poor devils at the bottom of the ladder trying to get into the housing market would not win. I do not expect them to be his concern because they are not his clients. He gets his commission from the seller, not the buyer and has no brief to see whether the pur[1770]chaser thinks it is a good idea. Few auctioneers would do business if their reputation was built on being good for the buyers. One employs them to get the most money they can for one’s house.

If that is all Fine Gael can point to as suggesting that there is support in the industry, with all due respect, it is not a very broad recommendation for the initiative. The industry does not support this provision. As I pointed out at our Ard-Fheis — and I wish Fine Gael well at its Ard-Fheis this weekend — the idea of three-year rolling reform of stamp duty has not been thought out. The Fine Gael Members do not lack intelligence, quite the contrary, but how can one attract a buyer into the market if by staying out he or she can benefit from a better stamp duty regime? If I were an intending purchaser, why would I enter the market in year one when I could have lower rate of stamp duty in years two and three?

More important is the effect of this on the market. The Chairman of the Irish Auctioneers and Valuers Institute is not laying bricks but taking the jam when the house is built and getting commission when there are ten people queueing to buy it, which does not take a great deal of skill. The people building the houses will ask whether they can be sure of a market if there is a better regime coming in the next two years. It does not make any sense but has obvious adverse effects on the market.

This is a labour-intensive industry and when activity slows down, as it is doing already on foot of this idea, more people will lose work and fewer people will be employed. People who come to work in the construction sector in this country rent accommodation, but when the jobs go, they return home. Investors who have acquired the property that is rented out will put them on the market because there is no one to rent them. That has an impact on the sale price because of the number of units coming on the market at any one time. If asked, anyone involved in the auctioneering business in this city will say there are up to 150% more houses on their books than there were six months ago. They will also say what the level of activity has been in the past two weeks since this proposal came out. Let us be sensible, these proposals are having an adverse impact on the sector for the obvious reasons I have outlined.

Taking it that this is the full measure of the Fine Gael proposal, Senator Terry will excuse me if I do not take advice from that quarter. The carefully calibrated initiative we took in the last budget went exclusively to the benefit of purchasers, not only prospective but also those who had taken out a mortgage in the past six years. A total of 125,000 people benefited. Under the present system, first-time buyers are exempt from stamp duty if they buy a new house under 125 sq. m. We do not emphasise this enough and it is assumed that everyone knows it, but they do not necessarily know it. I have met some first-time buyers who did not realise this.

In respect of the stamp duty threshold of €317,500 on the purchase of a second-hand house, the latest figures from the Department of the Environment, Heritage and Local Government show that 50% of first-time buyers in the greater [1771]Dublin area were able to get the benefit of the exemption. These are more likely to be apartments than houses but include some houses. All first-time purchasers of new houses in normal estates of semi-detached houses are exempt from stamp duty. The percentages, as Senator Mansergh said, would be higher further from Dublin because of the relative difference in property values.

That is the present level of support for the measure against a background of a significant rise in equity values in the housing market because of the buoyancy of the market. The proposal from Fine Gael is that as one goes up, the better it gets. People talk about the expense of houses and we need to consider this, but we also need to be careful about how we react and come up with so-called solutions.

In the first ten months of last year, 44,500 residential units attracted stamp duty. Only 3,700 of those were in excess of the highest threshold of €635,000 which attracts the highest rate of duty at 9%. We need targeted, affordable initiatives that avoid adverse effects on the market and benefit purchasers, not auctioneers. The scope and implementation of this Fine Gael proposal is not a good idea compared with Senator Mansergh’s proposals about where to use tax resources. There is no guarantee that revenue in this area will continue to rise. The sort of dislocation caused in market conditions by the idea that this would become part of a future regime certainly ensures that the increasing level of stamp duty take will not continue. This has continued, thankfully, because more people have been able to invest in the residential market and move into their own homes than would have been the case in less benign economic conditions.

For those reasons it is not possible to accept the recommendation. Its context is only part of a wider panoply of measures which are almost guaranteed to have adverse effects on the market. While Fine Gael is not setting out to wreck the market but because it has not thought through its position, it could have that effect.

The dynamics of the Fine Gael proposal could well be such that because people are being offered a better stamp duty deal year on year for three years running, intending purchasers will undoubtedly absent themselves from the market for as long as possible. It is more likely that sales would not close and the prices of houses would not continue to rise as they have done up to now. It would also result in serious job losses in the construction sector and, among other effects, have a negative impact on the rental market, with little or no prospect of recovery while the uncertain conditions continued. It could have a major detrimental impact on one of the economy’s most important sources of employment and one of the largest contributors to Exchequer revenue. One should remember there are 260,000 workers, and their families, whose livelihoods depend directly on a strong construction sector and an orderly housing market, not to mention the many tens of thousands more workers in allied industries. Any changes made in stable market conditions must [1772]be thought through very carefully in view of the great importance of the sector for jobs in every community in the country.

Building adequate numbers of new houses has been a key priority of the Government and in the past five years alone the number of new homes being built per annum has increased from 52,000 to 93,000. We are now at the stage where housing demand is levelling with supply and this is reflected in the slowing down of house price increases to sustainable levels. There is clear evidence that our policy has been working and that a soft landing is in prospect for the market. The changes I made were to help those entering the market with little or no equity. It is therefore not possible to accept the Senator’s amendment. I thank her for tabling it, however, as it presented an opportunity to discuss this subject.

The proposal of the Senator incurs only 10% of the cost of her party’s full policy proposal. The Government’s intervention in the past has been to assist those who require assistance in certain conditions. The system is evaluated and monitored constantly. The uncertainty in implementing what the Senator proposes, quite apart from the great cost of the overall proposal and the context in which it is set, are such that I am not in a position to accept the amendment.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I thank the Minister for his response. This is obviously not my area of expertise but I will attempt to formulate an answer for him. The uncertainty in the market has not been created in recent weeks by the Fine Gael proposals because it began earlier when the Progressive Democrats announced their proposals.

Speculation on reductions in house prices following the implementation of policy by the party or parties that might be in Government after the general election is bound to cause some uncertainty. People will wait to see whether they will benefit. I agree with the Minister that it is a question of supply meeting demand. We are reaching this point and it will have its own stabilising effect on the cost of property. When supply did not meet demand, prices increased and made matters impossible for first-time buyers. There was an increase in house prices every month but when supply meets demand, as I believe will occur, it will stabilise them. It is at this point that we will require stamp duty reform and the abolition of stamp duty will lower house prices for first-time buyers. This has not occurred in recent years because the increases negated any benefits that accrued from the reduction in stamp duty.

As supply meets demand, we should realise the benefits of a reduction in stamp duty. We are reaching this point and need to address how to get young people into the property market. My proposal is a prudent way of doing so. The Minister may be critical of Fine Gael’s policy but he should note that the interest reliefs he introduced in the budget were wiped out within 24 hours by increases levied by the financial institutions. Perhaps he did not think about this very carefully either. When he claims his measures are to benefit those who need relief most, I agree this is necessary.

[1773]We should all try to benefit those who most need our help but I wish the Minister would apply this criterion in the area of pensions. If he is consistent in his views, he should be consistent in implementing policy across the board. Our taxation system in the pensions area certainly is not benefiting those who need help most. The tax relief on pension contributions is benefiting those on high incomes and the system does not benefit those on the lower rate of tax in this regard. There should be greater equity in the system of tax reliefs for pension contributions so everybody will benefit. I am not opposed to offering benefits to those on high incomes but we should be realistic and realise those on low incomes do not benefit. Consistency is therefore required. I take on board the Minister’s commitment to apply a taxation policy that will benefit those most in need. I must stand over what I have said and the Fine Gael amendment stands. The Minister will obviously not accept it today, but I hope he will consider it further.

I agree with Senator Mansergh that older people or those who have had properties for ten to 30 years, or more, have enjoyed enormous increases in their value. These same people are parents and, as we know, many of them must help out their sons and daughters to buy their first homes. The sons and daughters whose parents are in a position to help are the lucky ones. While parents are realising enormous profits from their properties, many are trading down so they can disperse some of this profit to their children to enable them to get their feet on the ladder. However, many are not in a position to do this. We have an unequal society and there is great inequity in the property market.

Dr. Mansergh: Information on Dr Martin Mansergh  Zoom on Dr Martin Mansergh  Interest rate rises are almost entirely outside the control of the Government and are decided by the European Central Bank in response to pan-EU conditions. The measures introduced by the Minister effectively cushioned buyers from the effects of some of the interest rate rises. If he had not introduced these measures, house buyers would have been much worse off after the budget rather than better off or in a similar position.

My having listened to the Minister’s very full exposition and my having had the privilege of listening to him at the Ard-Fheis raised in my mind the question whether stamp duty is the sort of tax on which it is suitable to make any election manifesto promises whatever. This is because of the dynamic effects. No party would put in its manifesto that it would radically alter mainstream excise duties on petrol, beer or cigarettes. Flagging such measures long in advance would allow people to take various counter-measures to mitigate the impact or, if it were going to be beneficial to them, they would hold off. This gives rise to serious questions about whether it is responsible for a party to suggest in any detail what it intends to do in regard to stamp duty because of unintended effects. One must distinguish between intention and effect. Those can be very different. The Minister has done this and I will try to do so also.

[1774]As Senator Terry stated, some parents try to help their children get on the housing ladder but I suspect this is only a limited number. Most parents would not be in a position to do so or their children are able to look after themselves reasonably well. The redistributive impact of the Fine Gael proposals are at the top end of the market. They would affect people with properties worth €1 million. The figures were not worked out for properties worth in excess of that figure. The measure was presented as being for the benefit of first-time buyers, who are a relatively limited number of people. In large tracts of the country, the stamp duty thresholds are more than adequate. The impact would be to confer a large benefit on people who have already received significant benefits.

I respect Senator Terry. She has a deep social conscience. I appreciate she is not the spokesperson for finance but she finds herself in the position of having to champion proposals which at any rate, in theory and in intention, are not merely to the benefit of the coping classes but of the classes that are coping extremely well. As the Minister stated, the effect may be different. If one destabilises the market, by causing unintended speculative effects, instead of a soft landing in the market, this can have the effect of being conducive to a hard landing. The people who are the intended beneficiaries of the Fine Gael proposals might find themselves losing quite a lot of equity. My basic point is whether this type of discussion is responsible. I will leave the question hang.

Mr. Cowen: Information on Brian Cowen  Zoom on Brian Cowen  To pick up on what Senator Mansergh stated, I have sought to be circumspect and I have not engaged in any speculation regarding the future of stamp duty and the role it plays in our taxation system for the obvious and valid reasons outlined by him in terms of the budgetary context of how all these matters are handled.

Now that it has been decided to put out this as a centrepiece of Fine Gael’s taxation proposals in the next general election, I have no option but to respond on the merits or otherwise of these proposals. It is easy to identify the problem with it; the measures have not been thought through at all. People have built up significant equity. I will refer to pensions in due course. Many people have invested in property as part of their efforts to have pensions or increase their assets base. This proposal does not do anything to secure that. Quite the opposite is the case.

I contend that the ESRI will refer in its quarterly review, due out this week, to the fact that there is an issue here that is in the process of taking place through market conditions in an orderly market that needs to be settled on and to feed its way through in a manner conducive to a continued orderly and buoyant market. This is why I say intervening in this market in the way suggested in this proposal has all of the potential to destabilise the market. I do not suggest that is the intention of Fine Gael but that is the effect the measure would have. Many people at the forefront of this market who understand how it works, both in the economic field and in the industry itself, would confirm this.

[1775]If one puts oneself in the position of a person at whom this policy is directed, especially first-time buyers, one can understand why one would hold back. As has been said, these people are coming to the market with little or no equity and are depending on the financial institutions to enable them to get their first step on the property ladder. As has also been stated, the proposal seeks not only to reform the rates of stamp duty but the whole methodology by which it is calculated. Fine Gael has taken an expensive route and it is one which must be seriously examined.

The issue of pensions was raised, and I wish to comment on it although it is not germane to the amendment. We have decided to use the social partnership context as a means of resolving this issue. We must encourage people who in the past would not have made pension provisions because they did not have sufficient disposable income and who, having paid their social insurance, on retirement were dependent on a State pension that gave them some modicum of dignity and allowed them to hold body and soul together. A significant group of people were on such low incomes that supplementary provisions meant nothing to them because they did not have the disposable income to defer spending on essentials and to invest it in a pension for the future. We must address this.

Under the auspices of social partnership, we suggested we are prepared to develop an SSIA-type arrangement that might encourage people to invest in pensions. I refer to people who in the past did not consider supplementary pension provisions as being for them. We need to create a sufficiently attractive incentive so that people see the benefits of saving, in the same way the SSIA scheme brought home to hundreds of thousands of people the benefit of avoiding consumption of all one’s resources in good times to provide for one’s retirement years.

I have been proactive in this area in an attempt to be careful and calibrated and not give rise to adverse effects. It is a little unfair to suggest the doubling of the mortgage interest relief for first-time buyers was a minimalist move. Approximately 125,000 first-time buyers benefited from the improvements to mortgage interest relief in the budget. There is no specific information on the exact number of individuals who benefitted from the relieving changes in the 2005 budget. At that time, I increased the threshold from €127,000 to €317,500 to exempt first-time buyers from stamp duty in the second-hand market and to give them that choice. As far as one can gather, the number of first-time buyers who bought second-hand homes in 2005 was no greater than 16,000. My approach in the 2007 budget brought a benefit to ten times more people than simply changing the thresholds. When one changes the threshold, the impact will be felt by prospective buyers. It does not do anything for those already in the market having to buy at those buoyant prices. That was the wider social justice argument in favour of the doubling of the mortgage interest subsidy and that is the reason I went with it, although there were many campaigns going on in [1776]the media and elsewhere at the time suggesting I would do something else.

We must be careful about the best course of action in this case. I doubled the mortgage interest relief to ensure that in the first seven years first-time buyers are in the marketplace, that would cover the interest on a 33 year mortgage, at 4.75% for a mortgage in the region of approximately €320,000. That is a significant assistance to the payment of the interest. We are not paying back the principal also. That remains the responsibility of the purchaser but we are making a significant contribution. In that first seven years the interest on such a mortgage for a married couple would be covered up to €16,000 per year. That is significant. It was suggested that we had subsequent interest rate rises but the measure had a cushioning effect. I also increased the thresholds somewhat for those non first-time buyers in receipt of mortgage interest relief, and that too had a cushioning effect. One has to be careful as to how one intervenes, and these are the considerations and criteria one has to apply.

Regarding Senator Hayes’s question, as Senator Mansergh said, the couple concerned appear to have been poorly advised. In determining the applicable rate of stamp duty, both the price of the house and its contents must be taken into account. Normally, price negotiations would address from the outset what was to be included in the price. It would be unusual for an add-on to the price to be introduced after a price has been agreed.

If the law did not require the full proceeds, including payment for contents to be taken into account in determining the stamp duty rate, there would be a strong incentive to over-value the contents to stay within a lower stamp duty rate. In determining the applicable rate of stamp duty, both the price of the house and the sale of contents are taken into account. That rate is then charged on the price paid in respect of the house only. The contents are excluded. What would happen is that they would pay the rate of the next threshold on €317,000, not on €320,000. It does not change the actual payment by much; that is just to be technically accurate about it. The contents are taken into account, therefore, in terms of whether the stamp duty is applicable but then one charges within the threshold value in respect of house only. The contents are not included in the computation of the tax.

Recommendation, by leave, withdrawn.

Sections 102 to 130, inclusive, agreed to.

Schedules 1 to 4, inclusive, agreed to.

Title agreed to.

Bill reported without recommendation and received for final consideration.

Question proposed: “That the Bill be returned to the Dáil.”

[1777]Dr. Mansergh: Information on Dr Martin Mansergh  Zoom on Dr Martin Mansergh  I thank the Minister for bringing the Bill expeditiously through the Seanad and giving us the benefit of his thoughts, not least this morning on the stamp duty debate. Perhaps if the proposals were not pressed in the House, this would be a benefit. I congratulate the Minister and his officials on the Bill, which will help to underpin future economic progress.

Ms Terry: Information on Sheila Terry  Zoom on Sheila Terry  I, too, thank the Minister and his officials for the work done on the Bill. Not having been involved from the outset I am not familiar with many aspects of it but I appreciate the effort put in by the Minister and the officials. On behalf of Senator John Phelan and myself, I thank them for all their work.

Mr. Cowen: Information on Brian Cowen  Zoom on Brian Cowen  I thank the Seanad for the good debate we had on the Bill. I always enjoy the nice contrast in the approach to the Bill in this House compared to that in the upper House.

Question put and agreed to.


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