40% of cost of new houses paid in tax

THE Government’s 40% take in taxes on every house built is far too much, the Irish House Builders Association said last night.

The house building industry has become a major source of revenue for the Exchequer according to the Irish House Builders Association. In its pre-Budget submission the IHBA, part of the Construction Industry Federation, said that in the case of houses in Dublin 41% of the total cost goes to the state in various taxes.

In the case of the rest of the country the amount sequestered by the variety of tax penalties is 39% said the IHBA. In its pre-Budget submission, the association said the total revenue raised from the new private house building had shot up dramatically in recent years.

It now represented 9% of total Exchequer revenues raised in 2002. That compared with a much more modest 3% in 1995.

There has been much discussion in the media about the proportion of an average house price that goes to the Exchequer.

It pointed out the average new house price was made up of site costs, building costs including labour and materials, other marketing costs, taxation, and profit.

In order to ascertain the typical proportion of the average house price which goes in taxation, the IHBA has estimated the composition of the total house price for an “average” house in Dublin and for an “average house across the country as a whole”.

Its analysis assumed an average house price of 295,000 in Dublin and 225,000 for the country as a whole, based on the latest house price data for July, 2003, from the tsb-permanent.

The results are tabulated below. It is stressed that this exercise is based on "averages" and individual properties may provide much lower or much higher amounts of taxation.

On the basis of the above figures the IHBA said that, at the end of every house transaction at the above prices, the State took 105,319 on the 295,000 house in Dublin or 41% of the total cost price against 39% or 77,380 from the average house price for the rest of the country.

In its pre-Budget submission the IHBA warned the Minister for Finance Charlie McCreevy to desist from putting any further penalties on the purchase of a house.

To do so could cause serious problems for the state now under pressure to garner as much taxation as it can from its various revenue sources.

If the minister wishes to gain the same huge tax take from the housing sector next year then he had better think twice about putting any further penal taxes on the housing market, warned the IHBA.