An Oireachtas report has raised concerns about predictions that increased commercial stamp duty rates will help prop up Government funding in years to come.
The report for the Oireachtas Budget Oversight Committee says it could not get sufficient evidence or data to conclude that the stamp duties were sustainable over a long period. The high-profile committee, as part of its budget scrutiny role, is now to recommend that Finance Minister Paschal Donohoe provide details on the duty changes introduced last year.
Commercial stamp duty was increased from 2% to 6% in the last budget, with estimates that it would provide increased revenue of €376m this year, implying total property transactions of €9.5bn. It was also tweaked by the minister to encourage development towards the residential sector.
The committee notes that the Irish Fiscal Advisory Council has identified a reliance on transaction-based taxes such as stamp duty as a medium budget risk which could “reduce the stability of tax revenues”.
It also notes that the European Commission highlighted the dependence on commercial stamp duty as a budgetary risk. Its confidential report says the calculation of short-term revenue yield from commercial stamp duty budget measures is generally based on “reasonable analysis”.
However, the committee adds that it was not provided with sufficient evidence or data to allow it to conclude that commercial stamp duties are sustainable over a longer (three- to five-year) horizon.
Nonetheless, the report, which has yet to be published, notes that the Parliamentary Budget Office assessment was that revenue estimates for the increased money from the stamp duty were “static” and based on “historic data”.
TDs and senators are to recommend that, in future, revenue projections for significant budget measures should provide estimates over a longer time period.
The committee is also recommending that the Department of Finance “takes steps to improve the quality of costing information and modelling for significant budget measures”. It wants those steps taken in advance of Budget 2019, due to be delivered in October, the last budget at this stage proposed between Fine Gael and Fianna Fáil in the confidence and supply agreement.
The conclusions come as Mr Donohoe is this week set to brief Cabinet on Ireland’s macroeconomic outlook for the coming months, starting the lead into preparations and talks for Budget 2019.
Mr Donohoe’s officials say the Stability Programme Update (SPU) for 2018 will include an update of the economic and fiscal outlook. This will incorporate the 2018 tax and voted spending projections following last year’s budget. It is intended to publish the draft SPU tomorrow and submit a finalised document to the European Commission and European Council on April 30.
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