FG to reform tax on purchase of first home

The Fine Gael leader, Mr Enda Kenny, has pledged to abolish stamp duties for first-time home buyers and promised a special tax-free savings scheme to help first-time buyers save for the deposit on a house.

While the party estimates that such measures would cost some €121 million per year, it will ask the Department of Finance in the coming weeks to prepare detailed financial projections for its plan to fundamentally reform the tax on the purchase of a home.

With Fine Gael adopting "on your side" as its motto, the policy is seen as a cornerstone initiative in its efforts to increase the party's appeal to younger voters.

The package also includes a promise to allocate all of mortgage interest relief on home loans during the first seven years of a mortgage instead of spreading out the relief over the lifetime of a loan. The party said such ameasure would be revenue neutral over the lifetime of a mortgage but it did not quantify the loss of upfront tax revenue during the seven-year period.

Mr Kenny said in his televised speech that the housing market was a "cruel place" for first-time buyers. He also promised that Fine Gael would support families where one parent stayed at home to rear children "and not penalise them in their pockets".

But while Mr Kenny made a positive reference in his speech to the Labour leader, Mr Pat Rabbitte, Labour reserved its position on Fine Gael's property package when asked whether it would support such measures.

The party's environment spokesman, Mr Bernard Allen, described the initiative as an effort to end the social injustice facing young people who are unable to afford a home. The "huge increase" in Government revenues from the housing sector meant that the plan would be affordable, he said.

The party's chief spokesman said yesterday that the abolition of stamp duty for first-time buyers would cost about €21 million in a full year.

The party would cap annual expenditure on a savings scheme at €100 million. The winding down of the SSIA scheme in the next three years would ensure that money was available for such a measure, he said. Mr Allen said Fine Gael in government would give first-time buyers €1 for every €3 that they save in the plan. "That means young people who can save €20,000 will receive almost €7,000 to help with a deposit, tax-free," he said.

On the front-loading of mortgage interest relief, he said: "Mortgage interest relief should be given when it is most needed - at the start of a mortgage. That is why we call for all the interest relief to be received over the course of a mortgage to be given in the first seven years, thus offering to help young home-owners when they need it, not when they grow older and are more financially secure."

The president of Young Fine Gael, Mr William Lavelle, said young home buyers were being "fleeced" by the Government. He claimed that some 45 per cent of the price of a new house was paid to the State through VAT, development levies and other charges.