Stamp duty reform is a cost-free bandwagon in the short term for politicians. Guff on alleviating pressures on the "coping classes" has been matched by silence on the rip-off cost of development land in a country that is 4% urbanised coupled with the greatest stealth tax of all - the Government collection of about 100,000 from the cost of each housing unit built in the State via VAT, development levies, site stamp duty, income tax, PRSI, capital gains tax and corporation tax.
The silence on the opportunism of just focusing on stamp duty alone has extended to much of the media even though a corruption planning tribunal is now in its tenth year.
The stamp duty system is in need of reform as part of a comprehensive reform of the whole system. There's fat chance of that happening given the power of vested interests and the fear of the farming lobby in Fianna Fαil, Fine Gael and the Progressive Democrats (in their case, former IFA leader and President of the party Tom Parlon, has a veto on any change in the existing lucrative system for farmers).
"There's no doubt about it that it has implications for first-time buyers," Martin Whelan of the Construction Industry Federation has said in relation to the multiple taxes on new property. "Take something such as VAT, which they don't have on new homes in Britain. It adds significantly to the overall cost of getting onto the property ladder."
Based on an average cost of 291,380, the site costs 25% at 61,985 (national site costs are estimated to be higher- see below) while construction costs amount to 162,153.
The builder is left with a profit of 15,371 while the Government takes 33,000 in income tax and PRSI. VAT at 13.5% accounts for 33,473 and 5,579 stamp duty on the site transaction. Capital gains tax on the sale of the site, development levies ((SEE: Irish property development levies now account for 13.6% of local government expenditure) and corporation tax on the profits push the tax take to about 100,000.
In November 2004, Minister for Finance Brian Cowen put the take in taxes and levies as a percentage of the cost of the new house at 28%: The Construction Industry Federation says the percentage exceeds 30%.
First-time house buyers have to pay VAT to the Government while second-home buyers for investment can get an exemption from paying the 13.5 % on VAT on the property and 21% VAT on furniture as a lump sum.
Once the VAT on the rental income equals the VAT refund received in the first year of the investment, the investor can deregister for VAT and then cease to pay VAT on the rental income.
The Bonanza for Farmers Subsidised by German and Dutch Taxpayers
It was estimated in 2003 that site costs accounted for 42.5% of a house nationwide compared with a typical range in the mid 1990s of 12%-15%. In the US, land accounts for 20% of the total cost of a house. In Denmark the figure is similar while in Portugal the land factor drops to 15%.
Up to 4.6bn of the 18.5bn of taxpayers' money that will be spent on new main roads over the next decade will go into the pockets of landowners. Fred Barry, chief executive of the National Roads Authority is reported as saying that the increases in the cost of land for major roads projects as "disturbing".
Land acquisition accounts for 23% of the cost of roads projects in Ireland, but just 12% in England, 10% in Denmark, 9.4% in Greece and 1% in Iceland. A further 2% of the 18.5bn provided in the Government's Transport 21 for road building over the next decade will go to archaeologists.
In a bizarre twist, PD leader Michael McDowell is leading the campaign for abolition or reform of stamp duty while PD President Tom Parlon can take credit for the road building bonanza for farmers on public welfare via the Common Agricultural Policy from Brussels - - welfare that is still primarily funded by German and Dutch taxpayers.
The New Lanlordism
The Planning Tribunal was established by the Oireachtas in October 1997 and NOTHING has been done in the interval to change the system of land rezoning that spawned the corruption. The brown envelope may have been consigned to history but only the naοve could believe that cronyism and corruption is dead.
Tom Parlon said in a 2003 speech, that attempts to weaken private property rights would be part of an ideology to "the left of Stalin."
In 2001, the NRA, said in relation to a campaign for an increase in compensation for land acquired by Compulsory Purchase Order, that was led by Tom Parlon, then President of the Irish Farmers Association (IFA), that the IFA claimed that the compulsory acquisition of farmland for the national roads building programme is unjust, inequitable and seriously damages the livelihood and viability of 8,000 farm families.
Farmers near Irish towns can sell land for 500,000 or more an acre and many of them have become lords of property. Last summer, It was reported in the UK that Irish farmers, flush with money, are pushing up land prices.
The other side of the coin is first-time buyers on 40 year mortgages for some of the poorest quality housing in the Developed World.
In 1973, a report known as the Kenny Report recommended that development land should be priced with a 25% mark-up on agricultural land prices.
In 2000, Taoiseach Bertie Ahern asked the Committee on the Constitution to examine the issue. In 2004, it concluded that Mr Justice Kenny's recommendations could be introduced by legislation, and without amending the Constitution.
Planning and local government reform are also relevant. However, reform Irish style is only to react to a dire crisis.
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