Government gets 40% of house price

UP to 40% of the price of a house goes to the Government in the form of taxes and levies, according to new research by the Irish Home Builders Association.

The builders’ lobby group, which is part of the Construction Industry Federation, said tax generated by the construction and sale of new houses accounted for over €5 billion last year.

The IHBA research claimed that builders’ profits accounted for just 5% of the sale price of a house. Taxes and levies, such as capital gains tax, stamp duty, VAT and income and corporation tax, were to blame for the perception that builders were making excessive profits from new homes.

“House builders are easy scapegoats when the cost of new housing is discussed,” the IHBA said. “The Government is clobbering house buyers with a massive tax take,” it added.

The IHBA was critical of Dublin City Council’s recent decision to increase the development levy on new homes from €8,000 to €11,500.

The association dismissed suggestions that house builders were the main beneficiaries of increasing house prices. It said house builders had increased output to record levels in recent years in order to meet extra demand for housing and ease house price inflation.

Over 64,000 new homes were built during 2003, which represents almost 5% of the country’s total housing stock.

In most European countries, only around 1% is added to the national housing stock each year. The IHBA said house builders would continue to respond to the demand for extra housing but needed government action to create a better climate for doing this.

Increased tax burdens and other obstacles would result in a slowdown in the delivery of new homes. It said the Government was becoming more reliant on the vibrancy of the housing sector to generate extra revenues.

The sector yielded 9% of total government funding last year, according to the IHBA. This figure was only 3% in 1995.