Developers win support for proposal to slash VAT
CIF issues 10-point economic plan
Finance Minister Brian Lenihan is considering plans by the country's developers to slash VAT to below the UK rate, give a stamp duty holiday to home buyers and use pension funds to invest in the National Development Plan in a last ditch attempt to save the country from bankruptcy.
Mr Lenihan has been handed a 10-point plan this weekend to get the economy back on track by the "bankrupt" construction industry, which they say won't cost a penny.
The plan was given the the minister by Construction Industry Federation (CIF) Chief Tom Parlon on Friday during an intensive meeting at the Department of Finance aimed at giving an instant jolt of activity to the stagnant property and retail markets.
Latest figures show the tax take is down from almost €50bn in 2007, to a projected maximum of €34bn this year. However, senior figures within the Department of Finance have suggested the year end figure may even be as low as €30bn.
Top of the Parlon list is a holiday in residential stamp duty until the end of the year. Revenues from stamp duty have "collapsed utterly" and he said introducing the holiday would remove the barrier which is at present keeping thousands of buyers out of the market.
The most radical aspect of the plan is the call by the CIF for the minister to slash the top rate of VAT to one per cent below the UK rate until the end of the year. The call comes two weeks after Mr Lenihan admitted that the increasing of VAT in last October's Budget was a mistake.
"We are getting nothing in taxes at the moment. Our detailed plan is aimed at giving the economy the immediate jolt it critically needs at the moment. The best part of it all is that it won't cost anything because we're not taking in any VAT or stamp duty. Incentives are needed to get the retail and property markets going," Mr Parlon said.
The CIF is also seeking the introduction of a tax credit scheme for first-time buyers whereby they would get €5,000 a year for four years off the purchase of a new home. Other parts of the plan include calling for the speed tracking of labour intensive projects to reduce unemployment which has a dual benefit of increased taxes while social welfare payments are lowered.
Mr Parlon also said the CIF would like to see a PRSI and PAYE holiday given to employers until the end of the year to make it less expensive for them to hire employees in the short term.
The Department of Finance said this weekend that it is considering the CIF's proposals. Opposition parties have also said the plans have merit for examination.
The Parlon 10-point plan:
1. Stamp Duty holiday for homebuyers until end of 2009;
2. Tax credit scheme for first- time buyers;
3. Use Irish pension funds for NDP;
4. Fast-track labour intensive projects to reduce unemployment;
5. Stamp duty holiday for commercial developments until end of 2009;
6. End the 12-month delays at An Bord Pleanala;
7. Give employers a holiday on PRSI and PAYE payments to help reduce unemployment;
8. Prevent banks from stopping overdrafts without six months' notice;
9. Remove cap on tax deductibility for charitable donations;
10. Slash top VAT rate to below UK's until end of 2009.
- DANIEL McCONNELL Chief Reporter
