Property sector doubts first-time buyer plan will work

Business groups give limited welcome to tax cut for entrepreneurs

11th October, 2016
Ministers Michael Noonan and Paschal Donohoe on Budget day. Pic:

Early reaction to the Budget from business groups contained the usual mixture of 'missed opportunities' and 'two cheers' phrases, as well as praise for some of the measures introduced. But the early reaction from the property sector to the new scheme to help first-time buyers was negative.


The new plan for first-time buyers will give first-time buyers an upfront tax rebate equal to five percent of the value of the property when they purchase a new home.

Estate agent Savills Ireland said limiting the scheme to new houses would stimulate supply - but only by giving people more money to compete for limited supply, driving up prices and helping to restore developer profits

Savills said cutting VAT on new homes, would have encouraged development, but at lower prices. It accused the Government of 'bottling out' of that option because it would have looked too much like a handout for developers. The estate agent said the 'help to buy' scheme announced today was just as much of a hand-out for developers - the only difference being that the money would briefly pass through the hands of first-time buyers.

The Society of Chartered Surveyors Ireland also said the scheme would have very little impact on the housing crisis as the problem was supply, not demand.

SCSI president Claire Solon said the Government should have focused on supply measures as they would have a much greater impact on the crisis. “In our view, the Government should have been focussing on initiatives to make development viable, like reducing Vat on affordable housing, making public land available for affordable housing schemes and providing finance to help kick-start building on sites around the country, with all the employment and tax benefits that this would bring,” she said

Solon said the new scheme, in the short-term, would just mean greater competition for those few properties that are available. "As we have seen increased competition means higher prices,” she said.


The Small Firms Association (SFA) criticised the Budget for not recognising the immediate crisis facing small firm exporters in the context of Brexit. “Even in a Budget with very limited room for manoeuvre, the Government has missed an opportunity to address the many issues facing entrepreneurs, which would assist them in providing additional employment and driving prosperity in all parts of the country," said SFA chairman AJ Noonan.

He welcomed the Capital Gains Tax cut for entrepreneurs but criticised the €1m limit, saying Britain had a lifetime limit of £10m.

Chambers Ireland welcomed the pro-business measures announced in the Budget, but said it would have liked to see more in order to help firms with post-Brexit uncertainty.

Chief executive Ian Talbot welcomed in particular the reduction in the rate of Capital Gains Tax applied for entrepreneurs from 20 per cent to 10 per cent and the €400 increase in the Earned Income Tax Credit for the self-employed.

The Dublin Chamber of Commerce said changes announced to Capital Gains Tax would do little to stem the flow of start-up companies moving to Britain from Ireland. It welcomed a reduction in CGT for entrepreneurs from 20 per cent to 10 per cent, but expressed disappointment at the capping of the relief at €1m. The chamber had called on the limit to rise to €10m.

The group's Aebhric McGibney said the Government had missed an opportunity. "The CGT measures announced are another small step in the right direction, but improvements to our tax regime need to be sped if Ireland is to put itself on an even footing with cities such as London, which has rolled out the red carpet for startups in recent years," he said.

Tourism and hospitality

The tourism and hospitality sector welcomed the retention of the special 9 per cent VAT rate for the sector, which had been increasingly questioned in recent months.

The Irish Tourist Industry Federation said 17 of the 19 euro zone countries had tourism Vat rates of 10 per cent or less, adding that the rate in Ireland is "right-sized and competitive at the moment'.

He said decisions taken in Budget 2017 were vital for a sector that is likely to be challenged by Brexit. He said that the weaker sterling had made holidays to Ireland more expensive for British tourists. "It is therefore vital that the state has not imposed any additional tax burdens on the sector,” said Gallagher.

The Drinks Industry Group of Ireland said the decision not to increase excise on alcohol was a reflection of economic reality, but argued that the case for a cut was gaining momentum due to Brexit uncertainty and the weakness of sterling.

The Alcohol and Beverage Federation of Ireland (ABFI) also called the Government’s decision not to reduce excise on alcohol as a missed opportunity for one Ireland’s largest indigenous sectors.

But the Licensed Vintners Association, which represents Dublin publicans, was more satisfied, describing the maintenance of the status quo on excise and the continuance of the 9 per cent rate as "a reasonable outcome" for the trade.


Motoring organisation the AA said the budget had done nothing for motorists and contained no measures to address the crisis in motor insurance prices. It said there was no attempt to each the burden of fuel taxes, no change to motoring taxes and no positive measures on road safety.

“Motorists cannot be expected to feel grateful just because things did not get worse,” said the AA's Conor Faughnan. “We are facing a crisis in motor insurance prices at the moment which is badly affecting 2 million Irish people. It would have been very helpful to reduce the 5 per cent levy on all motor insurance which we are paying at the moment but this was not done.”

The AA also wants to see fuel prices reduced to levels that pertained before the financial crisis.

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