Taxpayer picks up construction industry’s bill once again

Robust assertions can de diluted very quickly in the aftermath of a budget presentation. Within a few days of the announcement of the concrete levy, the backlash had ensured it would be repackaged, reduced and its implementation delayed. On Tuesday, the Minister for Finance Paschal Donohoe duly announced the reframing, suggesting it would raise just €32 million annually “to offset some” of the estimated €2.7 billion mica bill. That is some understatement.

“It’s the industry or the taxpayer, make up your mind,” was the response of Taoiseach Micheál Martin in the Dáil a few weeks ago to critics of the proposed levy. At least it is clear now that it will overwhelmingly be the taxpayer. The predictable chorus that the levy would be passed on to homebuyers has ensured that the construction industry wins again.

The alternative suggestion that a levy be imposed on the profits of the construction companies was rejected by Taoiseach Micheál Martin with the assertion that “no matter how you apply any levy” it would fall on the customer. Donohoe has also dismissed the ESRI’s idea that the cost of mica redress should be funded from windfall corporation taxes, such taxes being, it appears, untouchable.

By 2007, compared to the rest of Europe, Ireland was building twice as many housing units per head of population

That’s that then: there will be no imposition of a meaningful levy on the construction industry. But history will record no shortage of State assistance and tax breaks during the Celtic Tiger era and beyond to those selling and investing in land for development.

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Such incentives for urban and rural development did much to fuel hurried building projects and it was a period when many defective houses and apartments were built. Alongside the mica scandal, there are estimated to be between 62,500 and 100,000 apartments in this country built between 1991 and 2013 affected by fire, structural safety, or water ingress issues.

In a report presented to the Minister for Housing Darragh O’Brien during the summer, the estimated cost of remediations for these defects is between €1.56 billion and €2.5 billion. The report suggested it was “not feasible” to put in place retrospective penalties on individual builders responsible for defects: “A general industry levy imposed now would target all those in the industry, including those who did not contribute to the problem.” But will taxpayers be afforded the same consideration in relation to the punitive cost of mistakes that had nothing to do with them?

Through boom and bust, and the revelation of an over €5 billion cost of improper building, lobbyists for the construction sector have always made demands of the State to ease what they present as intolerable burdens and barriers. In the decade to December 2005, more than half a million (553,267) housing units were built. By 2007, compared with the rest of Europe, Ireland was building twice as many housing units per head of population.

It has been reported that Fine Gael wants an overhaul of the Coalition’s housing policy, including, yet again, potential tax breaks for developers and relaxation of planning laws

With the property market on the floor in 2010, Tom Parlon of the Construction Industry Federation (CIF) urged the Government to suspend stamp duty and introduce other tax incentives to stimulate the struggling industry. “It’s not a political issue now, it’s a financial issue,” he declared, adding that there was “superb” value to be had from carrying out infrastructure projects at that stage.

This time last year it was reported that the largest construction companies in Ireland “shrugged off” the impact of Covid pandemic restrictions in 2020, with a rise in turnover for the top 50 members of the CIF of close to 14 per cent, to €11.37 billion. A review at the beginning of this year by leading infrastructure consulting firm AECOM predicted the value of Irish construction output would jump from €27 billion to €32 billion this year, an increase of 18.5 per cent.

Of course, inflation is hitting the building sector like all others, but well before the inflation spike, the Irish Home Builders Association, a division of the CIF, was demanding that the Government consider a range of tax breaks and stimulus measures to spark housing development. This summer the CIF also urged the Government to apply to the EU for a “super reduced” rate of VAT for the construction sector — as low as zero per cent — to help address the issues builders are facing, partly because of the “recent extraordinary production costs and regulatory increases.”

More recently, the CIF has insisted that the proposed concrete levy “is a blunt instrument, which is not targeting those responsible for defects.” Blunt tax incentive instruments, however, are deemed imperative for those in the industry.

It has also been reported that Fine Gael wants an overhaul of the Coalition’s housing policy, including, yet again, potential tax breaks for developers and relaxation of planning laws. Regulation and the quality of the builds, as painfully apparent from previous experience, can easily get lost in the rush, but the overriding message is clear: taxation is a barrier to housing development so buyers must carry the burden, not builders.