Friday 15 December 2017

Government advised not to exempt those who paid hefty stamp duty

Don Thornhill
Don Thornhill

Charlie Weston Personal Finance Editor

PEOPLE who paid thousands of euro in stamp duty to buy a house during the boom did not get a break from the new property tax after the Government was told not to exempt them.

The expert group that advised the Government on the design of the controversial new tax also said people knew they were paying high stamp duty when they bought homes.

A couple who bought a house during the property bubble would have typically paid €15,000 in stamp duty for a €300,000 home. That home has now probably halved in value.

The expert group headed by consultant Dr Don Thornhill that was asked by the Government to come up with options for the new tax admitted that many people ended up with bigger debts than they should have because they were forced to add the cost of the stamp duty to their mortgages.

The Thornhill report, which was released yesterday, also argues that giving a break to those who paid stamp duty would be giving a boost to some people who have high incomes.

Some of the cost of the stamp duty was absorbed by the sellers of property during the boom.

This meant that part of the cost of the stamp duty ended up being indirectly paid by house sellers.

The recommendations in the 144-page report have been largely taken up by the Government for the unpopular new tax which comes into force next summer.

The report, which was co-authored by six civil servants, quotes Central Statistics Office figures showing that by 2010 household incomes had fallen by 9pc since 2008.

There have been huge reductions in household net assets, with an uneven impact of cuts across different households.

"These have been felt particularly acutely by those experiencing unemployment, mortgage distress and compelling requirements to deleverage debt," the report says.

The Government has opted to charge a higher rate for the property tax than the rate consid-ered by Dr Don Thornhill's expert group.

His report set out details based on a tax of 0.1pc on the value of a property, but the Government is imposing 0.18pc.

Imposing a rate of 0.18pc, and applying it with a bands valuation system, will mean a house worth €160,000 will be liable for €315 from 2014 when the tax is fully up and running.

The Thornhill report looked at the option of a site valuation tax, but rejected it in favour of a tax based on the market value of the property.

The tax is only to apply to owners, unlike Britain, Northern Ireland and France, where renters also pay.

Dr Thornhill argues that it would be too difficult to target occupiers and it would be better to impose the taxes on owners. Changing the rents system for those in local authority houses would work better than imposing property tax on those in social housing, the report states.

Irish Independent

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