The housing crisis is deterring foreign investors from setting up business in the Republic and addressing the problem must be a focus for the Government in the budget, Big Four accountancy firm KPMG has said.
“The housing crisis is already a significant negative factor for foreign investors looking to establish substantial operations here,” KPMG said in a pre-budget submission.
“In an environment where the country must work harder than before to attract mobile individuals and businesses, our housing crisis may be the determinative factor which prevents future investors and workings from locating here unless urgent action is taken to resolve this.”
It is urging Minister for Finance Paschal Donohoe to temporarily remove or reduce VAT on new homes in a move it says would encourage developers to bring more affordable homes to market as soon as possible.
KPMG also calls for the restoration of capital gains tax indexation to allow for inflation and rollover relief – where capital gains liabilities are avoided by using the proceeds from the sale of one property to buy another. Both measures were last used almost 20 years ago.
Landlords
It also says steps should be taken to encourage Irish property investors into a market currently dominated by international players. KPMG says the removal of “existing disincentives” would deliver a pool of domestic funds useful in particular for financing medium-sized housing developments where, it says, at present, the business case for investment is “challenging”.
In particular, it wants landlords with more than 10 residential units to be treated under company law, not the personal tax regime.
“We believe this would align Ireland’s tax regime with the commercial reality of today’s business environment for large-scale letting of residential property units,” KPMG said.
With Ireland’s ability to compete with other jurisdictions on corporation taxes likely to become “increasingly constrained” as international pressure mounts for global tax reform, KPMG says the Government’s focus must be on improving competitiveness.
Outside of housing, this should involve a more attractive regime to attract talent, a focus on sustainability, and making the tax regime more supportive for entrepreneurs, it says.
