The new Fianna Fail/Green/PD coalition has just announced plans to abolish all stamp duty for first-time house purchasers. It will help some of them out, no doubt, and that’s a good thing, of a sort.
This is a hugely inequitable tax. Michael McDowell was right about it (even though it pains me to have to say so). Stamp duty for second-time buyers still ranges in amounts from 3% all the way to 9% for houses costing more than €635,000. That means paying €63,000 euros for a €700,000 house. To put that in context, average houses in Dublin top out at a whopping €429,754. In large areas of Dublin, a four bedroom family house costs in excess of a million euros. They would be paying a whacking, inordinate amount of €90,000 on their purchase. This affects whole categories of normal, average people: ordinary young people deciding to have a family and move to a bigger house; older people wanting to trade down; or people forced to move house for a new job. All of them suffer the penal and outlandish stamp duty charges, that this current government shows no signs of repealing or amending.
And abolishing stamp duty hides another astonishing fact however. VAT paid on new houses is still set at 13.5%. Since these new houses are aimed squarely at first-time buyers, then that prohibitive tax burden lands on them primarily.
There are three recognised tax principles: fairness, operability, and appropriate purpose and goals. Stamp duty is unfair in that it penalises one set of house purchasers (second or subsequent buyers) over others; and it is inappropriate to its original purpose (which was to smooth the conveyancing process). Therefore, stamp duty in its current form is undemocratic. It should be reformed.