Boom years house buyers may get property tax break

PEOPLE WHO paid large amounts of stamp duty during the boom years could be exempt from the incoming property tax for a number of years, if proposals under consideration by Government are implemented.

Stamp duty from residential property brought about €1 billion annually into the exchequer during the so-called Celtic Tiger years, and peaked at more than €1.3 billion in 2006, according to Department of Finance estimates.

Minister of State for Finance Brian Hayes said it would be premature to speculate about the content of the anticipated report of the expert group which has been tasked with bringing recommendations to Government on implementing an “equitable” property tax to replace the contentious household charge.

However, Mr Hayes said there should be an acknowledgement that many people who bought houses and apartments in the middle of the last decade had generally paid very high stamp duty bills.

“There has to be some recognition of that in whatever system we arrive at, given the extraordinary, extortionate stamp duty that was paid into the State coffers,” he said.

In Budget 2011, stamp duty was lowered to 1 per cent of purchase price on properties up to €1 million. Prior to that, rates of up to 9 per cent were levied. For a then averagely priced house of €240,000 stamp duty was €8,050. For a €600,000 house stamp duty was €33,250.

The options due to be presented to Minister for the Environment Phil Hogan later this month in the report from the interdepartmental group, chaired by the former senior civil servant and chairman of the National Competitiveness Council Don Thornhill, should be subject to a vigorous public debate during the summer and autumn, Mr Hayes said.

“The old-fashioned way of Government producing a tax without public consultation will not work,” he added. “All options should be stress-tested. It won’t be good enough to arrive at budget day and say ‘here’s the tax’.”

A separate Government source confirmed that the possibility of exempting people who had paid large amounts of stamp duty from property tax for a period was being discussed, while stressing that nothing had been finalised.

Finance estimates show that in 2001, the exchequer collected stamp duty of €671 million on land and property, of which €265 million was on residential property. The respective figures in 2002 were €666m (€349m on residential property); 2003 – €1,075m (€528m); 2004 – €1,461m (€752m); 2005 – €2,002m (€945m); 2006 – €2,989m (€1,311m); 2007 – €2,381m (€1,018m); 2008 – €1,045m (€445m); 2009 – €329m (€150m) and 2010 – €198m (€107m).

A Government spokesman has suggested the publication of the Thornhill report, initially expected at the end of the month, was imminent.

“We weren’t in a position this year to introduce a progressive charge but will be next year,” he said. “The Thornhill report is due back in the middle of this month. You will have recommendations there as to how to proceed from here, in what we always said will be a more progressive manner, more graded way.”

He added: “Thornhill has something to say about how best to collect it in terms of who is liable and who is not.”

Some Ministers have suggested the Revenue Commissioners should take responsibility for the property tax in light of the difficulties with the household charge. But Labour TD Robert Dowds said it was “crucial” for local government reform that local authorities had “the ability to set and collect this charge locally”.