# Unfairness of stamp duty



## Ballyman (18 May 2006)

*Moderator note: *split from this thread.



			
				ClubMan said:
			
		

> If you don't like the idea of paying this tax then why not shop around until you find a tax exempt (e.g. new property under 125sqm or second hand property under €317,500) property that suits your needs?


I'm not trying to be smart here but I've seen a few of your posts regarding FTB and stamp duty and you're living in cloud cuckoo land if you think people have time to shop around in the current housing climate.

If you're in the market for a house you buy the first reasonable thing that meets most of your demands including budget. You havent got time to turn things down......a week later they will be €2K more. Trust me. I'm doing this for a few months now and if you find something on the stamp duty threshold you offer them cash in excess. Simple as that. Otherwise you don't get the house. If you're not out there every day looking for a house then you haven't a clue what's going on.

Two months ago in one town in Kildare, I was bidding for a 3 bed semi, 5 years old at €325K, 300 yards down the road a new development of smaller terraced houses were released at €357K. And they sold out in a matter of hours. Where is the logic in that? FTB's are being raped left, right and centre by developers and the government and anything you can do to get a house at an affordable price has to be done. If it means paying cash. Do it. End of story.

Stamp duty on a FTB is an absolute disgrace.


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## niamhjones (18 May 2006)

*Re: Second hand Property - never resided in*

I absolutely and completely agree with Ballyman. How the government can justify FTB's paying stamp duty atall is a scandal. They should be targeting the second and third time buyers and those with more than one house. It's no wonder the younger generations are finding it impossible to get onto the property ladder!!! A threshold of Eur317k is ridiculous unless you're prepared to wait on a housing list for a new development that'll be built in c. 5 years time, at which stage the builders can charge what they like!!!


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## Purple (18 May 2006)

Ballyman said:
			
		

> Two months ago in one town in Kildare, I was bidding for a 3 bed semi, 5 years old at €325K, 300 yards down the road a new development of smaller terraced houses were released at €357K. And they sold out in a matter of hours. Where is the logic in that?


This example shows that the market sets the price of the house. The proportion of the price that the government takes in tax has no real impact on that price.


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## Gordanus (18 May 2006)

Is it even possible to buy any kind of 2nd hand house for less than 317K within reach of Dublin?


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## ClubMan (18 May 2006)

Exhibit A: 150 houses returned by www.MyHome.ie when I searched for properties of all types in _Dublin _city/county up to €317,500.


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## Tarquin (19 May 2006)

*Re: Do stamp duty rates dictate the selling price?*

Sd


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## casiopea (19 May 2006)

> I absolutely and completely agree with Ballyman. How the government can justify FTB's paying stamp duty atall is a scandal.



I dont agree. Just to put some perspective here, most countries have some idea of property tax.  Here in switzerland you pay an extra tax  (here called a "rich tax") every year for owning a property be you FTB or investor.

The problem is not stamp duty but the fact that the properties are over priced therefore putting FTBs into higher brackets than they possibly should be. 

The question might be should stamp duty amended while properties are so over priced?


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## TarfHead (19 May 2006)

Ballyman said:
			
		

> ..FTB's are being raped left, right and centre by developers ..


 
I am not a pinko liberal but I think your use of that word in this context is inappropriate.

Back on topic .. Government intervention in the housing market has, to date, been a disaster. Stamp-duty for FTBs is a problem but it's a massive cash cow for the Government so don't hold your breath.


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## ubiquitous (19 May 2006)

In fairness the govt reduced stamp duty for FTBs in the 2005 Budget. Prices for properties aimed at this target market shot up by an equivalent amount within a few weeks, thus rendering pointless the entire initiative.


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## Purple (19 May 2006)

ubiquitous said:
			
		

> In fairness the govt reduced stamp duty for FTBs in the 2005 Budget. Prices for properties aimed at this target market shot up by an equivalent amount within a few weeks, thus rendering pointless the entire initiative.


Which shows again that the market sets the price and the tax rate on the transaction is irrelevant. The price is being set by demand, not by cost of production. If cost of production was a factor then complaining about stamp duty adding cost for the FTB out there would be legitimate.


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## bearishbull (19 May 2006)

other countries have less stamp duty but then have rates and property taxes,its the same the world over,its swings and roundabouts,governement has to raise money and this is an easy way. if stamp duty was abolished tomorrow prices would just rise up to the previous price plus stamp duty!then governemnt would have to raise other taxes to generate revenue ,its the market not stamp duty causing this.
a guy on radio recently suggested that stamp duty should be abolished but capital gains should be paid on the increase when you sell.this would help those buying to live in a house long term but im not so sure it would work too well as prices would initially just rise up to take account of the extra spending power from buyers having zero stamp duty.
its just the  state of the market today ,everyone in manically trying to buy and making multiple bids on properties, maybe the government should raise the limits for stamp duty in line with the overall increase per year in property prices and not general inflation.


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## Guest107 (19 May 2006)

they should reband stamp duty to disincentivise fiddling on the margins.  Instead of jumps like 4% to 6% to 7.5% it should be 4.1% 4.2% 4.3% 4.4% 4.5% etc . 

As for the magic number 317k where the price jumps from 0-3% in one whack it would maybe be best to abolish stamp duty for the FTB below 500k and tell them thats their special subsidy for life .  

The enhanced income from the rebanding for second and investor buyers ,once their fiddling stops, would cover the losses from that dramatic rebanding. I would additionally flat rate the MRS Tax relief so that all home owners get 4k a year not like now where a FTB gets more. Why should they be more deserving of subsidy than a STB , another iniquity ???

The overall effect would be revenue neutral I'll wager !!!!

As it currently exists the system incentivises fiddling by both seller and buyer and needs fixing now . The sellers then go off fiddling with the 6% -7.5% band and the cycle continues onwards and upwards  .

There is nothing worse for society than an inequitable and stupid tax system that structurally encourages evasion. Our stamp duty system which is rarely ever reviewed is one such system.

People stopped fiddling income tax once it became simple and fair, lets do the same to  stamp duty.


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## Glenbhoy (19 May 2006)

I have no problem with stamp duty per se, it's a tax which the government need to raise revenue.  If we have lower direct taxes, revenue must be recouped somewhere, and to be honest if you can pay 1M for a house, then you can afford to pay 900K in taxes on that purchase.
The issue I have with stamp duty is the stupidity of its application eg:
a ftb pays 381,000 and incurs stamp duty of 11K, if forced to pay 1 euro extra he incurs stamp duty of 22k - that makes sense does'nt it.  In my opinion any truly modern taxation system eradicates these anomalies around the margins of limits by means of a graduated system of reliefs etc, it's not hard to work out how this can be done, as Prsi used to have similar inbuilt inequities which have now been solved (i believe).
Perhaps an alternative would be to do away with stamp duty for PPR's, but instead bring in a tax on the previously sacro sanct capital gain on the PPR (not necessarily a large percentage).


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## Markjbloggs (19 May 2006)

Question for the Economists out there - 

Does it make sense for a government to impose a tax (in this case, Stamp duty) that must be financed through borrowing (ie mortgage)?  thereby further increasing the burden of the cost of the stamp duty?  The cost to the economy in general is huge, as this money is not available to stimulate spending, now AND in the future.

We're in the position that the kids are almost ready to leave the nest, so we will be downsizing in the near future.  SD is basically money down the drain, so we are seriously considering emigrating (again!!) rather than waste our money on this idiotic tax.


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## Howitzer (19 May 2006)

Markjbloggs said:
			
		

> Question for the Economists out there -
> 
> Does it make sense for a government to impose a tax (in this case, Stamp duty) that must be financed through borrowing (ie mortgage)? thereby further increasing the burden of the cost of the stamp duty? The cost to the economy in general is huge, as this money is not available to stimulate spending, now AND in the future.


 
By that logic why pay any taxes? 

Allow everyone to take home 100% of their income and let them then decide how much they want to spend on hospitals/roads/schools. The less taxes people pay the less they want to pay, and the more out of the touch they get with the whole concept of social democracy.

Stamp duty is not currently loaned out, to FTB's anyway, as part of the mortgage. In other countries it is with what are effectively 110% mortgages.


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## TarfHead (19 May 2006)

Markjbloggs said:
			
		

> .. Does it make sense for a government to impose a tax (in this case, Stamp duty) that must be financed through borrowing (ie mortgage)? ..


 
That's quite an assumption - that lenders are giving mortgages for more than the purchase price. I don't doubt that it happens but I do doubt that the practice is widespread.

A lender is not going to lend for more than the value of the security and AIB have already made their call on the property market.

Isn't this why the acronym KIPPERS has become prevalent - people getting 90/95% mortgages and tapping their parent for the balance ?


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## Markjbloggs (19 May 2006)

Howitzer said:
			
		

> By that logic why pay any taxes?
> 
> Allow everyone to take home 100% of their income and let them then decide how much they want to spend on hospitals/roads/schools. The less taxes people pay the less they want to pay, and the more out of the touch they get with the whole concept of social democracy.
> 
> Stamp duty is not currently loaned out, to FTB's anyway, as part of the mortgage. In other countries it is with what are effectively 110% mortgages.


 
 I was driving at the need to take out the loan to pay taxes, resulting in the loss of the tax and the interest on the loan from the economy, sorry if I did not make that clear.

Btw, I did not know that SD is not financed through the mortgage for FTB's, thanks.

M


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## Howitzer (19 May 2006)

Markjbloggs said:
			
		

> I was driving at the need to take out the loan to pay taxes, resulting in the loss of the tax and the interest on the loan from the economy.


 
Well I would suggest that taxes should actually be higher anyway, that the Govt SHOULD be taking money out of the economy. Once control of interest rates was divested to the ECB then Govts only have one other means of controlling the level of money in an economy, through raising and lowering taxes.

Denmark is currently in a similar position to Ireland, bouyant economy + hot property market. The Govt there has indicated that, even though it could, it won't be lowering taxes for the forseeable future. Compare that to what Brian Cowan does on budget day with an election round the corner.


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## Art (19 May 2006)

I agree with 2pack that the jumps should be smaller i.e. 4.1% 4.2% 4.3% 4.4% 4.5% etc . I don't believe however that stamp duty should be abolished. If it was house prices would soar even more due to the existence of 100% mortgages. The existence of stamp duty slows this somewhat as buyers must (in most cases, unless they borrow it) have the stamp duty money themselves. 

What infuriates me is the fact that there is no stamp duty on new houses. This is a clear distortion in the market and means that money that should be going to the government in the form of stamp duty ends up in builders swollen pockets as they can increase the price of their houses even further due to the lack of stamp duty.


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## Glenbhoy (19 May 2006)

> Stamp duty is not currently loaned out, to FTB's anyway, as part of the mortgage


Indirectly it is, if the amount paid as stamp duty were paid against the property (and not on the whirlpool jacuzzi), then the mortgage would be lower, hence, stamp duty is paid by borrowing from the banks.
BTW Howitzer, agree totally with you re taxation levels - have you ever seen a more cynical and foolish pre-election promise than the PD's recent pledge to reduce taxes?


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## Guest107 (19 May 2006)

I did not advocate abolition . I would think the increments would also help in a downturn ...not exaggerating movements downwards or upwards towards the 'next band.


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## Howitzer (19 May 2006)

Glenbhoy said:
			
		

> BTW Howitzer, agree totally with you re taxation levels - have you ever seen a more cynical and foolish pre-election promise than the PD's recent pledge to reduce taxes?


 
These promises are what people want to hear. Politics and politicians, by definition, merely reflect the society they represent.


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## Gordanus (19 May 2006)

How about increasing the rate at which council homes and affordable houses were built, so that people wouldn't be in such a tizzy about buying? 
How about increasing the security of tenure of tenants, so that they are not at the mercy of their landlords?  (now, what were the demands of the Land League in the 1800s.......Fair Rent, Security of Tenure and what was the last one? Have we actually achieved this since Daniel O'Connell held his Monster Meetings?)


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## Art (19 May 2006)

2 pack. Sorry I did not mean to suggest that you were advocating abolition. Just reread my post - the sentence was carelessly structured. Just to clarify I agree with you 100%


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## Howitzer (19 May 2006)

Gordanus said:
			
		

> How about increasing the rate at which council homes and affordable houses were built, so that people wouldn't be in such a tizzy about buying?
> How about increasing the security of tenure of tenants, so that they are not at the mercy of their landlords? (now, what were the demands of the Land League in the 1800s.......Fair Rent, Security of Tenure and what was the last one? Have we actually achieved this since Daniel O'Connell held his Monster Meetings?)


 
80,000 built last year, 85,000 to be built this year. These numbers are unprecedented, outside of wartime, in the western world.



			
				Gordanus said:
			
		

> How about increasing the security of tenure of tenants, so that they are not at the mercy of their landlords? (now, what were the demands of the Land League in the 1800s.......Fair Rent, Security of Tenure and what was the last one? Have we actually achieved this since Daniel O'Connell held his Monster Meetings?)


 
http://www.prtb.ie/


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## Guest107 (19 May 2006)

Howitzer said:
			
		

> 80,000 built last year, 85,000 to be built this year. These numbers are unprecedented, outside of wartime, in the western world.


outside of post  wartime you mean. 

Yes Art I knew we agreed but I added the downturn scenario as well. 

The banding tendency , or can I call it a "snap to band tendency" , would cause the 350k house (today) to rapidly plummet to 316k in a downturn ...ie below the next threshold below and could therefore exaggerate a downturn . You would tend to have a 10% drop very quickly in that example. That kind of drop can cause panic and develop a negative feedback mechanism and the tax system will be responsible . The drop would probably not be as great if the stamp duty _savings _were incremental for the buyers as they bottom fed or bought in. 

Either way I feel that any tax which encourages wholesale fiddling from the way its structured is a stupid tax and is inherently difficult to police properly meaning that those who do get caught feel they are unfairly singled out. 

When CGT was 60% all sorts of shenanigans went on, once it dropped to 20% in 1997 people did not waste their energies on the fiddle and used their energy to generate more wealth and flip it because the tax aspect was not as significant. Wealth creators should be allowed to do what they are good at and not spend their time avoiding or evading the exchequer.

Another example is the residential property tax which taxed the owners of homes worth above a certain amount up to 1997 as well, once your house hit (300k IIRC) and your income was 25k as well you were tapped. 

The government makes more CGT at 20% than they ever made at 60% and the punters are happier to pay it. And its simple. Stamp duty is not.

I believe that stamp duty the way it is brings taxation and its overall purpose into disrepute and I speak as one who will not pay stamp duty again for a long time until my bottom feeding instincts are reawakened that is


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## Glenbhoy (19 May 2006)

> These promises are what people want to hear. Politics and politicians, by definition, merely reflect the society they represent.


True, but with a paltry 3% of the vote, maybe not!


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## Art (19 May 2006)

2% in the latest opinion poll today!!!!


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## Howitzer (19 May 2006)

Glenbhoy said:
			
		

> True, but with a paltry 3% of the vote, maybe not!


 
Well the PD's must be amazingly good at negotiating to be able to convince a party the size of FF that these are appropriate policies if they themselves didn't agree with them. I'm talking about their previous tax policies which have formed the basis of the current administration. 

And similarly I haven't heard many dissenting voices, apart from SF, from opposition parties, or indeed posters to AAM. We all like to have a few extra quid in our back pockets whilst at the same time moaning about the state of schools/roads/hospitals. It's handy that the party proposing these rates is small because the we can then disassociate ourselves with them.


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## Murt10 (19 May 2006)

I fully support stamp duty on property but I think it has to be paid by the wrong people. The buyer is usually up to his neck in debt when he's buying a new property, and has to stretch himself even further to pay a tax he cancan barely afford. He ususlly has to borrow to the limit of his ability pay the tax. How fair is that?

Why is stamp duty not levied on the seller of the property instead, after all the seller is the one left holding all the money at the end of the sale.

The Government would still take in the same amount of money. Problem solved!

(Of course, knowing the D/Finance, they might see it as more equitable to charge both the seller and the purchaser stamp duty)


Murt


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## Gordanus (20 May 2006)

Howitzer said:
			
		

> 80,000 built last year, 85,000 to be built this year. These numbers are unprecedented, outside of wartime, in the western world.
> [/URL]


But are these numbers in accordance with the increase in population over the last 5-10 years?


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## RainyDay (21 May 2006)

Murt10 said:
			
		

> Why is stamp duty not levied on the seller of the property instead, after all the seller is the one left holding all the money at the end of the sale.
> 
> The Government would still take in the same amount of money. Problem solved!


The seller would simply pass it on to the buyer by way of an increased sale price.


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## Purple (21 May 2006)

RainyDay said:
			
		

> The seller would simply pass it on to the buyer by way of an increased sale price.


Exactly right. The points made above proposing more of a sliding scale system are good. The rest of the thread, i.e. the suggestion that stamp duty adds to the cost of the house, is rubbish. If anything the fact that banks will not lend to pay it is a factor in keeping house prices lower.


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## bazermc (21 May 2006)

Murt10 said:
			
		

> Why is stamp duty not levied on the seller of the property instead, after all the seller is the one left holding all the money at the end of the sale.
> Murt



Different sort of tax called CGT is paid on a disposal assuming not a PPR 

I think stamp duty is very fair if you are able to afford the property you can afford to pay stamp duty if the house is new there is no SD but you pay the VAT assumming owner occupier.  If you are investor you pay both and so you should.


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## Del3D (4 Jul 2006)

*Stamp duty **IS really paid by the **seller! *

As a buyer in a sellers market, if I have €500k to spend on a house as my absolute maximum I will have to factor in stamp duty, so the maximum price I can bid on the house is ~€460k. Assuming it is accepted, the seller gets €460 and we (via the government) get €40k (approx. numbers only). 

If there was *no stamp duty* I would bid €500k, the seller would get €500k and the government would get zero. 

I don't see the problem with stamp duty really:
- It is a tax on transacting property, preventing people from turning over property very quickly, driving prices higher.
- If the sellers don't pay this tax, where will the tax money come from? (Yes, I also agree with VRT)
- It is based on wealth. If you can afford to buy a €5M house, you pay a greater tax, irrespective of your income (offshore, tax avoided etc.)

I do agree with a previous author. There should be full stamp duty on new property... currently the developer can price the stamp duty into the "new" price and keep the lot! This might have been ok years ago, but not now.

And yes, I have paid stamp duty - and was happy about it


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