Legislation passed to close a stamp duty loophole used by major property developers has not been implemented by Minister for Finance Brian Cowen nearly three months after it became law.
Developers using the loophole do not buy lands outright but, instead, pay the landowner a licence fee to develop them, leaving the homebuyer to pick up all of the stamp duty tab.
Last year, the Revenue Commissioners identified 60 cases, though it admitted that many more cases existed since its survey was "not exhaustive".
Under a late Finance Act amendment, Mr Cowen tightened the rules, requiring stamp duty to be paid in any contract where landowners received a licence worth more than 25 per cent of the land's value.
During the debate in February, Mr Cowen acknowledged that the Revenue Commissioners had found that use of the tax loophole had become "common practice" in 2006. "They devised this proposal to deal with it," he said, adding that Revenue believed that a minimum of €40 million was lost to the exchequer last year.
"We expect the provisions we are now making will deal with that situation," he told Labour Dublin West TD Joan Burton, who has frequently raised builders' use of tax loopholes.
Despite the scale of the problem, however, Mr Cowen has not signed the commencement order needed to bring the new powers into effect.
Asked about his decision not to do so, the Minister's spokesman said: "The inclusion of a commencement order allows the Minister to decide on an appropriate time for giving effect to the provision having regard to the state of the housing sector, market conditions and the impact of the stamp duty cost to the developer being passed on to housebuyers."
In a letter late last month to Ms Burton, the chairman of the Revenue Commissioners, Frank Daly, said developers secured a licence to "enter on to lands and erect buildings.
The usual way of achieving this is for the landowner to grant the developer or his bank or both a power of attorney, which allows them to execute a conveyance or transfer of the legal title to the ultimate purchaser without further recourse to the landowners.
"Because there is no conveyance of the land from the landowner to the developer, stamp duty does not arise at this point. Stamp duty does, however, arise when the ultimate purchaser buys the land on which a building will usually have been erected by the developer, subject to the availability of the normal stamp duty reliefs."
Ms Burton said builders had other means of avoiding tax, including cases where they hired their own companies to do work for them. The company is paid at below cost, leaving the builder with all of the profit. Once the land is sold, the money is declared as a capital gain and taxed at 20 per cent and not as income tax at 41 per cent.
Changes made to the Finance Act give Revenue powers to query "artificial transactions", but company owners are under no obligation to declare such cases in advance to the taxman.
