Market View

Stamp duty will be reformed before election day, says Marc Coleman

TWO weeks ago I promised not to write again about stamp duty for some time. Now that was totally stupid of me: the property market is presently stalled because of stamp duty and we are about to have an election campaign in which stamp duty is shaping up to be a major issue. My stupidity aside, there is a new extenuating circumstance that justifies my writing about this topic once more.

Unless I am very much mistaken, Fianna Fáil is shaping up to reform the tax. Stamp duty will be reformed at the latest by September but possibly as early as next month. Has my obsession with this topic finally turned into a case of DTs, you might fairly ask, or do I have grounds for this prediction? Read on and decide for yourself. On Monday three things happened that make me believe reform is inevitable. That morning, I attended the unveiling of Fianna Fail's economic policy platform for the election. Despite persistent questioning from political journalists, the Minister for Finance Brian Cowen refused to confirm that he would reform stamp duty. Not very encouraging so far, but the very manner in which he refused to rule it in makes me believe that not only is he not ruling it out, but has already conceded that stamp duty will have to be reformed: "We will do nothing that will disrupt the market," said the Minister.

But was that "nothing" a reference to the actual act of reforming stamp duty, or was it a reference to the act of talking about such reform prematurely? Thus spoke the Minister further: "I take that position because of my position as Minister for Finance." If my reading of Cowen's remark is correct, he is not against reforming stamp duty. What he is against - as any good finance minister should be - is announcing any reform in a sensitive market too long before that reform can be implemented. A further remark he makes backs this interpretation up: "Stability in the market is extremely important. There are hundreds of thousands of people whose livelihoods depend on stability in the market."

By this point, I couldn't stand it any longer. Raising my hand to grab the attention of Séamus Kirk, Fianna Fáil parliamentary party chairman, who was chairing the press conference in question, I managed to get in a point of order. "On a point of information," I said "Reforming stamp duty needn't destabilise the market because you don't need to wait until budget day to implement it. It could be announced and implemented by an Act of the Oireachtas within a week." As I finished, I heard a giggling from a row of Fianna Fáilers behind me. From in front of me, Brian Cowen responded "I'm very well aware of that."

Among the gigglers at the press conference was one Jim O'Callaghan. O'Callaghan is a Fianna Fáil candidate for Dublin South East, a constituency where stamp duty bills are perhaps the highest in the country. Later that day on Questions and Answers O'Callaghan was asked what he would do about stamp duty. His response was that he would announce that it was being reformed and do the deed within a week.

The final piece of evidence for my thesis comes from the Taoiseach: "If the rate of increase over the next few years was in modest single figures I would be very happy because it would make it easier for everybody. We don't want to see declining prices because that would lead to negative equity." The Taoiseach is more than right. Not only would declining prices lead to negative equity, it will also lead to declining tax revenues from the property market. For reasons of self interest - buying votes and having enough taxes to fund Monday's generous election promises - the Taoiseach knows that stamp duty must be reformed. Fianna Fáil will wait until Labour and Fine Gael have shot their bolt on the issue next Thursday. That will give them three weeks to announce reforms. As some limited stasis in the market could be tolerated, they will have until September to implement whatever they promise. Just remember: you heard it here first.

Marc Coleman is Economics Editor of The Irish Times ... mcoleman@irish-times.ie