Today’s Finance Bill, marking the 10th such Bill of the Fianna Fail / PD government, is a rather bizarre mixture of further tax breaks and incentives for the chosen few.

The Minister has made a number of changes in relation to stamp duty but these are unlikely to benefit the first time buyer or the person trading up from a first home to a family home.

The Minister has described as a tightening up of an existing scheme a new section which will allow those well enough to gift an acre or site worth €254,000 to each of their children. The Minister should disclose how much the previous scheme cost and how much the new one is likely to cost in the future.

The Minister in Section 97 confirms relief for stamp duty where sites with a value of up to €254,000 or an acre are transferred from parent to child for the construction of the child’s principal private residence. This measure on stamp duty singularly benefits parents who are rich enough to have sites of up to an acre and worth up to a quarter of a million to gift to their children. These transfers will also be exempt from capital gains tax.

The Finance Bill 2007 is however silent in relation to the dilemma of first time buyers buying a second hand home costing more than €317,500 or indeed young couples trading up to buy a modest family property for a growing family where many such families face stamp duty bills routinely of between €30,000 – €60,000. Owners of land will no doubt be delighted at the Ministers generosity although the Minister is claiming that this is in fact a tightening up of existing schemes which allow even further latitude to individuals with landholding of valuable houses which they wish to pass to their children unencumbered by stamp duty considerations or indeed capital taxes. Individuals and couples in the ordinary housing market subject to the full rigours of an unreformed stamp duty regime will wonder why they have been ignored again.

There are a number of other stamp duty measures in today’s Bill. I welcome in particular the agreement by the Minister to exempt amateur sporting bodies from stamp duty on the acquisition of sports fields and grounds. This has been campaigned for by the Labour party for the last 2 years and by the GAA and local sports clubs.

Another feature of the Bill is the introduction of a whole new set of significant and generous property based tax breaks for the Mid Shannon Region. This is a new scheme of area based construction tax incentives for the Shannon Region, much of it in the Minister’s own backyard. It will particularly benefit people living within 12km of the Shannon.
The Minister has chosen to benefit his own constituency area despite consultant’s reports that such schemes don’t offer best value for money and promises by Government not to overheat the construction sector even further. These schemes have been one of the principal mechanisms by which the very wealthy have avoided tax and in many cases millionaires have ended up paying little or no tax compared to a single PAYE worker earning more than €34,000 who will pay tax at 41% on any extra earnings, bonuses or overtime.

This is in spite of the report of Goodbody Economic Consultants published with last years Finance Bill which stated that the cost of Area Based Tax Incentives to the Exchequer is very high and that the Area Based Schemes already in existence are and will cost the Exchequer many tens of millions of Euros into the future. In their review of tax breaks, Goodbody Economic Consultants said of these Area Based Schemes:

“These tax costs are high relative to the outputs achieved. For example, the present value of tax costs represent up to 43% of the building costs associated with developments undertaken as part of the schemes”.

The fact is the Minister has decided to fly so blatantly in the face of his expensively commissioned Consultants report and the statement of the Taoiseach and others that the property based tax schemes would be wound down, particularly in the context of the booming construction sector and the inflationary impact of such schemes on property prices. What is particularly worrying is that the scheme has been announced without any evidence of cost benefit analysis or of consideration for environmental impact on this beautiful Shannon region. We need to learn from earlier schemes which have resulted in parts of the upper Shannon in some developments of apartment blocks and holiday homes on a mass scale which do not appear to be sustainable in the long run.

This year some 32% of taxpayers will pay some income tax at the top rate despite the government’s election promise of 5 years ago to have no more than 20% of taxpayers paying tax at the top rate. Today’s measures will see further possibilities for very wealthy individuals to limit their exposure to taxation.

The Labour Party put forward a proposal almost five years ago for a fair tax take from stud fees. The Minister has announced a limited scheme in relation to the taxation of stallion fees but only time will tell whether or not this will result in large-scale stud undertakings actually making a fair but modest tax contribution.