Finance Minister Paschal Donohoe has issued an unapologetic defence of his decision to increase the rate of stamp duty on commercial property transactions from 2pc to 6pc in the Budget.
Responding to questions on the matter at Davy’s annual conference, held in Dublin last Thursday night, he made it clear that he would not bow to special pleading on taxation from the property industry, or any other sector, if he believed such a move would be contrary to the national interest.
“I don’t believe the national interest is equal to the sum total of the private interests of every sector in our economy. I have to look at what I do as [being] collectively the right to do,” he said.
Commenting on the suggestion that the industry had been taken aback by his move to raise the commercial stamp duty rate, he said: “If it was a shock to the [property] industry, then I urge them to look more carefully at what I say in the future.
“In the run-up to the Budget, I said I will make economic choices in the context of how the economy is performing, and I will make taxation choices in the context of those parts of the economy for which that taxation policy is relevant.”
“In the tax strategy group’s paper, which I published during the summer, it very clearly identified this [stamp duty increase] as an option that could be under consideration by me.
“It’s not my job to interpret my comments, but I was being pretty clear about the direction of thinking in terms of options that I was looking at,” he added.
Mr Donohoe dismissed suggestions from commercial real estate sector analysts that the Government’s intended target of €376m in stamp duty receipts for next year would not be met, owing to an expected reduction in transactional activity.
“I take advice in relation to what I think the yield will be. I’m satisfied as to the advice I’ve received. If I look at the contribution I believe it will make to my tax take next year, I believe it will deliver that yield. I also believe it’s manageable.” the minister said.
Asked if the Government wasn’t going down the “same road” as it had before by looking to meet ongoing liabilities with monies raised from the transactional tax of stamp duty, he insisted this was not the case.
“If you look up when we went down that road before, at that point, that tax heading [stamp duty] was contributing 6pc of the total tax take of the country.
My forecast next year would be for [stamp duty] to be less than 3pc, and as you know, when you’re making tax choices, really what it boils down to is what you do with income taxes and transaction taxes.”
The finance minister’s comments at the Davy annual conference will do little to reassure investors as they weigh up decisions on whether or not to commit to investing in Ireland.
Numerous international investors are already said to have been unsettled by the Government’s readiness to alter its taxation policy almost without warning in response to political or other pressures.
In the last 12 months alone, the property industry has seen three tax policy changes relating to QIAIFs, rental controls, and now in the area of stamp duty.
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