Call for abolition of 'unfair' property tax

STAMP DUTY INITIATIVE:"UNFAIR" STAMP duty on property should be abolished and replaced by capital gains tax on the family home, the Kenmare economic conference heard this weekend.

At the Dublin Economic Workshop's annual policy conference in Co Kerry, Cormac O'Dea from the Institute for Fiscal Studies said the stamp duty "mobility trap" was even more severe in a falling property market and that capital gains tax would be more equitable.

"When houses are falling in value, the burden of stamp duty will increase and the tax liability can account for a substantial share of the equity owned even six to seven years after purchase," Mr O'Dea said.

This tax on mobility was forcing people to do longer commutes when they switched jobs because they could not afford to move house, he said.

His views were backed by Dr Don Thornhill, chairman of the National Competitiveness Council.

Dr Thornhill said stamp duty should be phased out and replaced by an annual property tax, with waivers for elderly and low-income people.

Pensions reform was also debated, with economists favouring proposals to automatically enrol workers in a pension scheme when they started work in order to encourage people to start saving for retirement from an early age.

In a paper co-written by Donal de Buitléir of AIB, Dr Thornhill proposed that a national savings fund to which workers could contribute pension savings through the tax system should be established.

Workers should be able to opt out of the scheme in writing, while capital withdrawals could be allowed for "major life decisions" such as buying a house for the first time. The complex social welfare pension system, which includes nine different classes of PRSI contributions, should also be simplified, he added.

Dr Thornhill, Mr de Buitléir and Mr O'Dea's proposals have been submitted to the Commission of Taxation, which was set up earlier this year and is due to publish a report on fairness and efficiency in the tax system by September 2009.