Scepticism over target from increase in commercial stamp duty
Revenue’s target still looks overambitious, says director of CBRE Ireland
Pearse Doherty of Sinn Féin: said he had raised the danger of avoidance schemes emerging with the Minister for Finance
Property and tax specialists remain sceptical the Government can reach its revenue target from the budget increase in commercial stamp duty, despite a late move to close off tax avoidance schemes that could have cut the yield sharply.
A change introduced in the Seanad this week will ensure that people selling commercial property cannot put the property into a company and sell on the shares, potentially cutting the rate from 6 per cent to just 1 per cent.
The stamp duty increase from the previous rate of 2 per cent was the main revenue-raising item in the budget and is due to yield an additional €376 million next year, a target that met initial scepticism from the industry.
Marie Hunt, director of CBRE Ireland, said that even with the latest change to the Finance Bill the target still looked overambitious, given the likely fall-off in commercial property transactions next year and the fact that these account for the bulk of revenues are covered by the tax hike.
The Government took the unusual step of introducing the change in the Seanad. The Dáil is expected to vote it into law next Wednesday, but the change became effective this week, on Wednesday, December 6th. It stops people moving properties into companies, partnerships or special purpose vehicles and selling on the shares to a purchaser in an attempt to cut the stamp duty rate.
Tax experts say the change is designed to catch transactions established purely to avoid stamp duty, though it remains to be seen how it will be interpreted in practice.
“While it brings in shares, units and partnership interests deriving the greater part of their value from immovable non-residential property, it is only in certain very particular circumstances that the section has application,” said Amanda-Jayne Comyn, tax director at Grant Thornton. While the extra revenue would come from all non-residential areas – and not purely commercial property – she said the revenue target was arguably still high, given likely market trends.
The move to introduce a Government amendment in the Seanad is unusual. Sinn Féin finance spokesman Pearse Doherty said in a statement that he had raised the danger of avoidance schemes emerging with the Minister for Finance and the proposed amendment was “ better later than never”. He also said he had concerns about whether the forecast revenue could be raised.