Taoiseach denies stamp duty loophole cost €250m

DÁIL REPORT:TAOISEACH BERTIE Ahern has rejected Labour Party claims that a stamp duty loophole by developers had cost the Exchequer €250 million in a single year.

Party leader Eamon Gilmore criticised the Government for failing to implement legislation it had passed to close a loophole whereby developers could avoid paying stamp duty by making licensing agreements with owners selling land rather than formally completing sales.

He claimed that in 2006 it had cost the Exchequer €250 million and questioned why home-buyers had to pay stamp duty on houses "whereas big developers buying land for development purposes can get away without paying stamp duty".

He said the Government had passed legislation to close the loophole but "it appears that the boys in the Galway tent got to work, as the relevant section of the Act was never commenced".

Mr Ahern said the measure "avoids, rather than evades stamp duty liability" and he insisted that if they implemented the provision in the Finance Act in the current climate it "would be negative for the market, negative for employment and negative for first-time buyers".

The Taoiseach said there was no question of €250 million being lost.

"If there is no obligation to present documents for stamping, there is no way to estimate accurately the amount of duty that could have been collected" if the situation changed, he said.

An independent analysis vindicated that position, he said adding that the matter was under constant review "to take into account changes in the property market".

The Taoiseach said Goodbody Economic Consultants had been commissioned to do an independent examination of the economic consequences if the "anti-avoidance" provision in legislation was implemented.

Its recently published report recommended against implementation because it "risks exacerbating the downturn in the property market".

The report stated that it might increase the cost of land by 10 per cent "which would result in a decline in transactions and would increase house prices".

It would also "result in driving activity levels far below long-term housing requirements, thereby contributing to a spiral of increasing prices for first-time buyers as fewer units would be built".

Mr Gilmore dismissed the report, saying it amounted to "nothing more than a survey of developers. What else would they have told Goodbody Economic Consultants other than they did not wish to see the measure implemented."

He rejected the Taoiseach's explanation as "rubbish" and questioned how stamp duty could be retained on the purchase of houses and not affect the property market, "but a developer buying development land who has to pay stamp duty on land they might not develop for many years to come somehow will have a catastrophic effect on the market".

But Mr Ahern said deputy Gilmore had asked on Tuesday about jobs in the construction industry.

He said: "You can't be worrying about construction employment on Tuesday and then on Wednesday try to trigger something that will affect the construction industry."

The Taoiseach said there were arrangements to maintain the situation "in the long-term because of the negative impact of the provision on the availability of development land and the supply of housing".

The Government had to weigh up the balance between the benefits of tax revenues and the "potential loss to the Exchequer of the reduction of activity in the building sector and its impact on society and the economy", said Mr Ahern.