The move to raise commercial stamp duty in the last budget had a sound basis but longer-term analysis is needed to examine its sustainability, an Oireachtas committee has found.
Following Budget 2018 the Committee on Budgetary Oversight analysed the tripling of the commercial stamp duty rate to 6 per cent to establish whether it was working as forecast.
The committee, led by Fine Gael TD Colm Brophy, accepted the short-term revenue yield forecasts advanced from the Department of Finance. The department expects to raise an additional €376 million in this year, implying total commercial property transactions of €9.5 billion.
However, it also suggested there wasn’t sufficient evidence currently in place to allow it conclude that stamp duties are sustainable over the longer term.
The committee sought clarity on the length of time the department expects these revenues to continue. In response, the department said: “On the basis of Revenue’s analysis provided to us, it certainly seems robust and substantiated over the next year or two.”
Recommendations
A number of recommendations were advanced by the committee for future taxation measures and it called on the Minister for Finance, Paschal Donohoe, to report by the end of May on whether the present rate of commercial stamp duty is producing the level of increased revenue that was anticipated.
It also said that any revenue forecasts included in budget 2019 should project expected revenues over several years, not just the coming fiscal year.
Future proposed alterations to significant budget measures should be shaped in consultation with the committee, it added.
During the committee hearings on the tax Michael Tutty of the Irish Fiscal Advisory Council said his main concern was not necessarily with forecasts, but with the stage of commercial property development in this cycle.
“There has been a big ramp-up in commercial development in recent years. Activity is unlikely to remain at the current level and is likely to decline in future years,” he said.
In response to a question on why the duty was introduced, the department confirmed that the measure was intended to rebalance activity in favour of residential activity that is required. “Our position on this matter has been supported by a number of economic commentators,” the department said.
