Saturday 3 December 2016

On a €230k build, State takes €83k

Published 20/03/2016 | 02:30

37.1% of the cost of a house goes to the government
37.1% of the cost of a house goes to the government

While much has been made of the Central Bank's demand that mortgage borrowers come up with deposits of up to 20pc, the Government could very easily do its bit to reduce the financial burden imposed on intending home buyers.

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An analysis conducted by accountants Grant Thornton on behalf of the Construction Industry Federation (CIF) in 2015 showed that some 37pc of the proceeds of the average new house is taken by the State in the form of direct and indirect taxes.

The analysis - the findings of which were submitted to the Department of Finance in response to its request for tax proposals to encourage development of zoned land - looked at the example of a house priced at €230,000 and found that some €82,294 ended up in the Government's coffers. It's worth noting that the CIF's analysis was based on an average house price, which is far below that found in reality in Dublin, the commuter counties of Kildare, Meath and Wicklow and in the major cities of Cork, Limerick and Galway.

The CIF analysis also includes other costs which frequently are surpassed in areas of acute housing demand. For instance, it includes a figure of €25,500 for development levies, which is based on a site value of €50,000.

Dun Laoghaire Rathdown County Council, for its part, imposes development levies of €60,000 per unit.

Commenting on the matter, the CIF's director of housing, Hubert Fitzpatrick said: "The overall tax take, both direct and indirect, to the Exchequer, on the construction and sale of an average new house at €230,000 is €82,294, which equates to 36pc of the sales price. This is too high.

"We will look to the new government to reduce the taxation payable for each new home and begin this by looking at reducing the costly VAT for building new homes. A zero VAT rate for new housing applies in the UK and Northern Ireland. Development contributions could also be waived for all new starter homes."

Sunday Independent

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