Cowen urged to cut top stamp duty rate

Minister for Finance Brian Cowen was urged to cut the top rate of stamp duty from 9 per cent to 6 per cent and to index-link stamp-duty thresholds in line with house-price inflation by Friends First chief economist Jim Power yesterday.

Mr Power said an interest-rate cut predicted for late 2008 would not be enough to reignite the housing market, which he predicted would fall by between 5 and 10 per cent next year.

At a Friends First pre-budget economic briefing, Mr Power said reducing the rate at which stamp duty is charged would not necessarily reduce the amount the Government yields from the tax, nor would it automatically fuel house-price inflation.

"The present stamp-duty regime is a barrier to the availability and turnover of housing," he said.

The abolition of stamp duty for first-time buyers earlier this year had not resulted in price inflation, Mr Power said, and when the rate of capital gains tax was cut from 40 per cent to 20 per cent, it led to increased turnover of capital assets and a higher tax take for the exchequer.

"If the Minister and his department officials were to choose a lower rate of stamp duties, this may actually result in an increased tax take."

Mr Power suggested that the cut-off points should be index-linked, so that fewer people paid the duty at the highest rates.

But an economist at estate agents Hooke & MacDonald, Geoff Tucker, said this was a "ludicrous" idea.

"Index-linking stamp-duty thresholds would destabilise property transactions in the run-up to every budget," he said.