Finance minister ignored advice over new stamp duty rules for cuckoo funds

Senior civil servant warned Paschal Donohoe that exempting cuckoo funds from new stamp duty rules would make it impossible for first-time buyers to enter the market

Finance Minister Paschal Donohoe introduced the new rules on bulk-buying last month. File Picture: Colin Keegan

A senior official at the Department of Finance warned the Government that exempting apartments bought by cuckoo funds from a tax increase would make it impossible for first-time buyers to enter the market.

Calls have been made for Finance Minister Paschal Donohoe to explain why he went against the advice of one of his top officials in drafting new stamp duty measures.

The Government last month agreed to increase stamp duty to 10% on purchases of more than 10 houses in a bid to stop investor funds from blocking first-time buyers from securing a home. 

However, the increased stamp duty was not applied to blocks of apartments.

At the time, Mr Donohoe said increasing stamp duty for investor bulk-buying of apartments would stall building.

Documents released under the Freedom of Information Act show that ahead of the Government announcement, concerns around this strategy were raised by Cathal Sheridan, who has responsibility over capital taxes and stamp duty in the Department of Finance.

Mr Sheridan advised that measures should be introduced to stop cuckoo funds from buying up entire apartment complexes. This suggestion was not adopted.

Writing to Department of Finance secretary general John Hogan, Mr Sheridan suggested an "additional stamp duty charge for the bulk purchase of houses and apartments, but a lessor rate for apartments combined with a rule that an apartment complex cannot be owned by one entity".

He said: "In that way, you provide an incentive for funds to focus their money on apartments over houses and at the same time keep the apartment model open for people who wish to buy and live in them. 

"My concern is that by having no extra stamp duty on the bulk purchase of apartments, you potentially drive the individual home purchaser out of that market, due to a lack of availability.

"I just feel because of the direction of travel, it is important to put forward an alternative perspective before a decision is made on the matter," said Mr Sheridan.

Responding, Mr Hogan said he would send a note to Mr Donohoe on the matter with "an open question on the properties to be targeted which allows your point to be developed next week if the Minister wishes to proceed".

Sinn Féin finance spokesman Pearse Doherty said Mr Donohoe has further questions to answer. 

He said the documents make it clear that the concerns about the plan were not coming just from opposition politicians, but also internally.

"This shows that one of the more senior officials within the department charged with this was making the argument that you shouldn't allow apartments to go free without the stamp duty and that you should bring in rules that would protect from the funds buying up entire apartment complexes. And that was ignored at the political level."