Department of Finance rejects plan to slash VAT on new homes
Published 30/03/2016 | 02:30
The Department of Finance has shot down Fine Gael's plan to slash VAT on new homes because it would have no impact on housing supply, the Irish Independent can reveal.
Finance officials have also warned the proposal would cost €250m and would require additional tax hikes elsewhere in order to be implemented.
Acting Taoiseach Enda Kenny and other senior Fine Gael figures yesterday argued that VAT should be cut from 13.5pc to 9pc, in a similar move taken in relation to the tourism industry.
The measure is one of dozens contained in a five-page housing document, which has been circulated as part of discussions aimed at forming a new government.
According to the document, the plan would be "funded through time-related savings on the capital programme and the expiration of the Home Renovation initiative at the end of 2016".
But news the department has shot down the VAT proposal will prove deeply embarrassing for Mr Kenny.
"A key consideration is that economic analysis by both the Department and the ESRI found that the effect of reduced VAT would not have a major impact on housing supply," a department spokesman said last night.
The Irish Independent understands former Housing Minister Paudie Coffey, who lost his seat in the General Election, twice lobbied for the measure to be introduced in the Budget.
But Mr Coffey was told the move would result in a "large cost to the Exchequer" and give a tax boost to developers.
Meanwhile, Fine Gael also wants to provide 500 "rapid delivery" housing units and introduce a new 'Help to Buy' scheme aimed at first-time buyers.
The party also pledges to produce an Action Plan for Housing within eight weeks of a government being formed.
And a new Cabinet Minister for Housing will also be appointed under a Fine Gael-led Government.
"It is an economic, social, and ethical priority that the new Government do more to address the housing needs of our people," the document states.
In relation to homelessness, the document promises to end involuntary long-term homelessness.
Ending the need for rough sleeping by providing emergency beds and maintaining a high level of financial support for homeless services is also pledged.
The housing document was discussed as new figures revealed that some 790 families, including 1,616 children, were in emergency accommodation in Dublin during the last week of February.
Homeless agency Depaul described the figures as worrying and said they illustrate the need for government action.
"The figures released by the Dublin Region Homeless Executive show what Depaul is seeing every day in our Dublin services - increasing numbers of families and children becoming homeless due to the housing crisis," said charity CEO Kerry Anthony.
"A dynamic and robust national housing plan that delivers on its housing commitments, addresses increasing demand and unaffordability in the private rental sector, and prioritises the prevention of homelessness is long overdue."