Mica redress should not require concrete levy, ESRI says

Building-defect redress scheme costs, which could hit €6bn, could be ‘socialised’ and drawn from windfall corporation taxes, Barra Roantree claims

The Government should scrap the €80 million concrete block levy announced in this week’s budget and instead use windfall corporation taxes to pay for building defect redress schemes, such as the estimated €3.5 billion mica scheme, according to the Economic and Social Research Institute (ESRI).

ESRI economist Barra Roantree told a post-budget briefing in Dublin on Friday that he “does not understand why there needs to be a dedicated levy” on concrete to pay for redress schemes, where the State has stepped in to compensate homeowners hit by building defects.

“It seems like the kind of thing we should be using windfall corporate taxes to pay for, if we are going to socialise the cost of these redress schemes,” said Mr Roantree, who is also a member of the State’s Commission on Taxation and Welfare which recently called for an overhaul of the tax system.

He said the burden of the proposed 10 per cent levy on concrete blocks and similar products was “likely to fall on the residents of newly built homes, rather than the industry” whose negligence had led to defects with mica, pyrite and other issues. He said the cost would ultimately fall on buyers of new homes or on tenants, if the homes were let out by landlords who had shouldered the cost in the price of the house.

“It is not clear why these people [residents] should fund mica redress. It is a big one-off cost. We have big one-off corporation tax revenues. They seem to match,” said Mr Roantree.

Estimates circulating within Government say the mica, pyrite and defective apartment redress schemes could eventually cost the State up to €6 billion. The concrete levy is meant to recoup some of the outlay for taxpayers but the building industry has warned it could add €3,000-€4,000 to the price of a house. The Department of Finance says the figure is closer to €1,600.

Corporate tax revenues are expected to top €20 billion this year and were up 68 per cent in the first eight months of the year. The Government and various independent analysts have warned that such high corporation tax revenues will not last and should not be used to fuel permanent expenditure.

The State is using the corporation tax windfall to fund one-off measures such as energy supports announced in the budget, while a further €6 billion will be put away in a “rainy day fund” by the end of next year.

Mark Paul

Mark Paul

Mark Paul is Business Affairs Correspondent of The Irish Times. He also writes the Caveat column