13.5% Vat for construction sector ‘should have been cut’

The Government has been criticised for failing to lower the Vat rate for the construction sector from 13.5%, but has been applauded for its near 50% reduction of the windfall tax on rezoned land, which is hoped to result in more land being freed up for development.

“The abolishing of the draconian 80% windfall tax — applying to chargeable gains on the disposal, or development, of land — will boost the supply of suitably zoned land and create the follow-on employment so desperately needed in the Irish property sector,” said Darragh Kilbride of accountancy body, ACCA Ireland.

While no Vat relief moves were introduced for construction, Michael Noonan said he would launch a public consultation on the viewpoint that owners of zoned and serviced land are waiting for prices to rise before developing their land or selling it on. The minister said he would examine what taxation measures might be taken to penalise landowners who don’t develop their land.

This prompted a guarded welcome and some concerns.

“I welcome that the minister did not introduce a site levy, but it remains to be seen what his proposed public consultation will lead to,” said Jonathan Hillyer, managing director of HWBC.

“My concern about its introduction is that there are some parts of the country where there simply isn’t the scope to bring that land into development profitably at this stage in the cycle, so it would hardly be fair to pay a levy for leaving it dormant.”

“The construction sector will be disappointed that the minister didn’t use this budget to cut the Vat rate from the current 13.5% level. It is a measure that worked well to help out the restaurant and hotel sector, and given the lack of quality office supply in Dublin anything that helps developers to get building would be welcome and would help keep rental growth under control.”


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