Irish housing boom may boost Government finances to €9bn this year; Government collects average of €100,000 in taxes from the cost of every new housing unit built in State

Irish
Irish housing boom may boost Government finances to €9bn this year; Government collects average of €100,000 in taxes from the cost of every new housing unit built in State
By Finfacts Team
Jul 3, 2006, 06:46

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The average price paid for a house in Dublin and outside Dublin in May 2006 was €394,795 and €256,418 respectively. The equivalent prices at the start of 2006 were €368,576 and €240,201. The average price paid for a new house in May 2006 was €291,380.

The average sales price of a new US house in May was $294,300.

The continuing Irish housing boom may boost Government finances by at least €800 million this year, resulting in total revenue receipts of up to €9 billion - equivalent to 18.6% of planned current and capital spending in 2006.

The Construction Industry Federation (CIF) says that up to 86,000 new homes will be constructed in the State this year, up 6,000 on last year's numbers.

The Government collects about €100,000 from the cost of each housing unit built in the State via VAT, development levies, stamp duty, income tax, PRSI and corporation tax. To the house buyer, they are the greatest stealth taxes of all.

"There's no doubt about it that it has implications for first-time buyers," Martin Whelan of the CIF says. "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 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% acounts for €33,473 and €5,579 stamp duty on the site transaction.

Capital gains tax on the sale of the site, development levies and corporation tax on the profits push the tax take to about €100,000.