The trebling of commercial stamp duty to help foot the budget was necessary or personal taxes instead would be hiked up in future crises, Finance Minister Paschal Donohoe has warned.
The fallout over the key revenue raiser for the budget — projected to raise some €376m — continues amid concerns billions of euro in commercial building deals will be needed next year to collect the amounts.
Revenue said the estimated tax gain was based on projections, previous tax receipts taken in, and a special model to assess the increase while the Department of Finance gave some details of where the amounts would come from.
The increased duty — from 2% to 6% — was a key part of Mr Donohoe’s first budget as finance minister, in order to help pay for welfare increases and tax cuts.
But a number of key questions remain such as when the higher duty will apply, to whom, what exemptions will be in place and whether it will impact on land deals already under way. Developers also claim they cannot borrow in order to complete projects, and therefor avoid the higher stamp duty.
Mr Donohoe confirmed to the Irish Examiner attempts had been made in recent days to stop the new stamp duty level. Asked whether he or his department were contacted, he said:
“When these things became public, there was opposition articulated to it by interests that would be involved in the commercial sector.
"They did not approach me directly, if they had tried to I wouldn’t have met them. Because when I get to a point where I’m going to be making budget decisions, I deal with that within my own department.
There were reports that fears of a lobbying campaign by the property industry could have derailed the funding move and that is why the tax move was passed so quickly in the Dáil.
The minister, speaking after RTÉ Radio One’s Today programme, also warned that personal taxes would instead be hiked up in tough economic times — if the commercial stamp duty was not increased.
“If we don’t use periods of economic growth to undo tax concessions that we put in place in the past to allow sectors to recover, we’ll find ourselves back in a situation where personal tax and income tax is going up, will go up even quicker at times of difficulty for our economy. And that’s not in a situation that I believe we should be in again.”
In the Dáil, Labour Cork East TD Sean Sherlock said the extra revenue measure was built on “volatile property transactions”.
“That 2015 and 2016 commercial property stamp duty receipts were inflated in that year. There are serious questions about the fiscal sustainability of how the minister for finance funded his budget,” said Mr Sherlock.
Fianna Fáil leader Micheál Martin also questioned the projected €376m tax take.
“Independent commentators have suggested that the revenue projection for stamp duty is not much better than sticking a finger in the air.”
One estate agency, CBRE, projected that up to €10bn in commercial building deals would be needed to raise this next year.
But Revenue, whom Taoiseach Leo Varadkar told TV3 were consulted on the extra duty and would collect it, outlined its method of calculation.
“Our publicly available Ready Reckoner shows the effect of 0.5% increase in the rate on non-residential property, a €47m increase — this is multiplied up to €94m for 1% increase, or €376m, for a 4% increase.”
Mr Donohoe’s department also gave some details of deals that would contribute to the increased tax.
It said they would include land (agricultural and non-agricultural), commercial or business premises, including offices, factories, shops and public houses, options over land, interests in land (such as wayleaves or other rights to property), easements and business assets.
It said the projected future yield had been provided by Revenue and was based on current trends.
Mr Donohoe also reiterated yesterday that farm sales between relatives would be subject to a 1% tax while young trainee farmers would remain exempt.
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