Bosses call for Budget stamp duty reduction
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Property and construction industry organisations have submitted their wish list for the Emergency Budget due to be launched in two weeks by Finance Minister Brian Lenihan. Top of this wish list is an immediate reduction of our penal stamp duty rates.
"Investment in Irish commercial property is down markedly this year," said Martin Whelan of the Construction Industry Federation (CIF).
"At the same time, Irish people continue to invest huge sums of money in commercial property abroad. This is despite the fact that the Irish commercial property market is performing on a par with that in Britain and elsewhere in Europe.
"Of the €12bn invested in property by Irish investors last year, €10bn was invested abroad. The Government's priority should be to keep that money at home," said Mr Whelan.
"At the same time, foreign investors do not invest in commercial property in Ireland. This has been the case for the past decade, despite the returns being made on the commercial property market here."
The CIF expert said transaction costs are now "totally out of line" with our competitor economies. He pointed out that a recent OECD study showed Ireland has one of the highest rates of commercial property transaction taxes in the world.
"Clearly, in a period of lower capital appreciation, such high transaction costs are a major disincentive to foreign and domestic investment in commercial property here," he said.
"The rate applying in Britain is 4pc while the average across the Euro area is 4.5pc. Government, therefore, should reduce Ireland's rate to 4pc to restore our competitiveness. As has been shown in the past, such a move is likely to increase Government's overall tax take by increasing transactions.
"Government will also benefit from the increased employment, construction and other, arising from this investment."
Ciara Murphy, director general of The Society of Chartered Surveyors (SCS) agreed that the stamp duty rates -- about double the UK rate -- must be reduced from 9pc to 6pc at least.
"The exchequer tax receipts from stamp duty have declined sharply as the market slowed down," she said. "The value of all commercial investment transactions was around €3bn in 2006, €2bn in 2007, and €1bn or less expected in 2008.
"The high level of stamp duty has forced investors to invest abroad where transaction costs are lower. Funds have been exported to continental Europe and beyond with little hope of repatriation. This outflow needs to be addressed and reducing stamp duty is crucial."
The latest SCS Tender Price index shows that tender prices have fallen by an average of 7.4pc in the past 12 months. The slowdown in new residential construction has now spread to all sectors of the industry, including commercial projects and civil engineering infrastructure works.
As such, given that a further fall is likely, the SCS believes that the Government should give serious consideration to increasing expenditure, through borrowing if necessary, in capital investment projects.
Alan Cooke, Chief Executive Officer, Irish Auctioneers & Valuers Institute (IAVI), also strongly recommended that commercial property stamp duty be reduced from 9pc to a maximum of 6pc.
The IAVI chief added that, when the top rate of stamp duty rose from 6pc to 9pc, the Government effectively devalued the considerable property assets of Irish pension funds by 3pc.
"Considering the difficulty such funds are in at present, any move by the Government to alleviate its position would be most welcome," he said.
A doubling of the €125,000 stamp duty allowance to €250,000 for non first-time house buyers and the introduction of a single 5pc rate of stamp duty has been called for by the Institute of Professional Auctioneers and Valuers (IPAV) in its pre-Budget submission to the Department of Finance.
"Despite the welcome changes to stamp duty in recent budgets, the higher rates are still penal and act as a huge disincentive to property transactions," said IPAV president Alan Redmond. "They are also causing a major shift of investor funds overseas." In relation to commercial transactions, he said a reduction to a 5pc rate could stimulate interest.
Tom Dunne, chairman of the Irish Property & Facility Management Association, said stamp duty on property transactions inhibits the efficient use of the stock of buildings available to industry and commerce. Effectively it is a tax on transactions rather than on property.
The Government should reduce the top rate of stamp duty to below 5pc and exempt property transactions where the price is below €250,000, according to Mr Dunne.
- Con Power
