Stamp duty God I sick of hearing those words

[bazermc]

Is it just me?

I am sick of hearing about stamp duty whether it would be on this site or in the media or people asking me how to avoid it.
What is wrong with this country? I think stamp duty is totally justified as a means of extracting wealth from the wealthy. If you can afford to buy a house then you should pay some tax - its as simple as that.

Regarding the clawback provisions when people rent there house out this is simply anti avoidance to prevent people from saying they are going to be owner occupiers but instead rent the house out. Of course the 5 year time line is debatable, but seems fair.

Laslty, I hope revenue do in fact make good on their promise and go after people who did not pay there clawback those that still do not pay should then be prosecuted. I know a lot of people that have rented there house knew they had a tax liability but didnt pay because they knew they could "get away with it". Obviously some exception should be made for a pure innocent error but how would revenue decide that?

lastly stamp duty will not change materially in next months budget so all the people holding off on buying property can rest in peace

Ok rant over

 

[ClubMan]

Even many of those (including myself) who have no fundamental objection to taxes in general and SD in particular do also recognise that the current system could be improved. For example in its current form it seems to militate against market liquidity by putting barriers in the way of owner occupiers trading up to second hand houses and freeing up their old (now second hand) PPRs for others such as FTBs. On this basis perhaps some sort of incremental/banded approach rather and maybe a review of the exemption rates rather than the single rate approach would be better. Or perhaps we actually need some form of property/wealth tax rather than something that just affects trades?

 

[liteweight]

In fairness, I don't think most people realise there is a stamp duty clawback if they rent within 5 years. IMO this timescale is too long and prevents people living their lives to the full. Most FTBs are young and may want to travel. In this instance their only choice is to sell, which is not ideal if they intend to return, or, perhaps allow a family member to live rent free. The mortgage still has to be paid and not too many can do this without charging rent while abroad. On their return they are faced with the dilemma of whether to admit to Revenue that they have rented the property for a time. Their financial position may not have changed dramatically in the interim and yet they are faced with a clawback at investors' rates. I'm convinced most would have to borrow to meet this tax liability, making life harder with little or no hope of clearing a mortgage early.

I also take Clubman's point that the general rate of stamp duty acts as a deterrent to those wishing to trade up. Of course everyone should pay their taxes but this particular tax is punitive IMO. If the Government wish to help out FTBs then let them do so without restriction. We could perhaps have no stamp duty for FTBs as long as they don't sell the property for 3/5 years. Let them rent it out if they can prove they are leaving the country and are willing to pay tax on their rental income.

Bazermc, I'm afraid you'll be hearing about stamp duty for a long time to come, especially over the coming weeks when David McWilliams starts his new program........I'm sure it's on the Agenda!

 

[Glenbhoy]

Or perhaps we actually need some form of property/wealth tax rather than something that just affects trades?

I think this is exactly what we need, I can't see any government introducing it in a hurry though. They're there to win votes, not implement equitable and rational policies.
What could be more progressive than a tax based on property value? The main advantage is that it might help free up housing stock for those needing to move up the property ladder because of increasing family size etc, it may mean in general that people would live in houses which meet their current requirements (and finally we would get a chance to tax the wealthiest group in our society - the pensioners!!!).
As for SD itself, the only change needed (and here i go again, harping on about this one) is to give marginal relief around the thresholds for each new limit, the current system is just stupid and is a deterrent to paying the proper taxes. Why bother paying 390K for a house when you can pay 381K, 10K for the furnishings and save yourself 10K odd - and that is rampant.

 

[ClubMan]

Why bother paying 390K for a house when you can pay 381K, 10K for the furnishings and save yourself 10K odd - and that is rampant.

Because this way of splitting contracts is of questionable legality at best.

 

[liteweight]

What could be more progressive than a tax based on property value? The main advantage is that it might help free up housing stock for those needing to move up the property ladder because of increasing family size etc, it may mean in general that people would live in houses which meet their current requirements (and finally we would get a chance to tax the wealthiest group in our society - the pensioners!!!).

I don't think there's anything progressive about a tax based on property value. With the crazy property price increases over the last number of years, there are many people living in expensive properties while not earning very much by today's standards. As for the pensioners being the wealthiest group in our society - you're having a laugh aren't you?

 

[ClubMan]

Perhaps Glenbhoy means asset rich?

 

[liteweight]

Perhaps Glenbhoy means asset rich?

Perhaps but are we really going to force 80 year olds out of the homes they've lived in all their lives? This would be the result for those who could not afford to pay tax on their properties. But wait....I know!..we'll force them to borrow so they don't have to move. Sure the banks could do with more money and the Gov. coffers could really use the cash.

 

[gearoidmm]

I don't think there's anything progressive about a tax based on property value. With the crazy property price increases over the last number of years, there are many people living in expensive properties while not earning very much by today's standards. As for the pensioners being the wealthiest group in our society - you're having a laugh aren't you?

Absolutely. At lest with stamp duty you pay it once and never again. If the tax was based on property value you will always live under the threat of losing your house in the event of illness/incapacity/bad luck.

Not only that but if you introducced a property tax tomorrow would you distinguish between those who have payed SD in the past and those who haven't? It would be difficult to make it fair

 

[Newbie!]

In fairness, I don't think most people realise there is a stamp duty clawback if they rent within 5 years.

Correct, didn't know that...for the mortgage/taxation uneducated out there (myself...), can you ellaborate and explain this to me?

 

[Purple]

Because banks will not allow mortgage borrowing to cover stamp duty it has a deflationary effect on house prices. The market decides the price of a house; the proportion of that price that the government chooses to take in tax is irrelevant. If the government reduced their tax take by X than the price charged by the seller would increase by X. SD is a fair and equitable way for the government to raise money. I agree with ClubMan that the current system could be more equitable but in principle I have no abjection to paying it.

 

[CCOVICH]

Correct, didn't know that...for the mortgage/taxation uneducated out there (myself...), can you ellaborate and explain this to me?

There are loads of thread on this issue (many recent) on AAM. If you search for 'stamp duty clawback' you will find out all you need to know.

 

[BigM]

Correct, didn't know that...for the mortgage/taxation uneducated out there (myself...), can you ellaborate and explain this to me?

Plenty of details on this on AAM - and Prime Time did a show on it this week as well.

With regard to SD in general, the idea behind it is fair enough and I don't have any objection to it. But rather than tinkering with bands/rates every now and again the Govt should have just indexed them.
In pre-boom times, the only people paying 9% SD were the already super-wealthy, buying massive trophy homes so there's a justification in making them cough up more in tax.
Now average family homes are being caught in the 9% bracket - which it was never supposed to do - hence the huge exchequer returns.

On the separate house/contents contracts - this is plain and simple tax evasion on the part of the purchaser (with the vendor jointly liable). It can only be achieved if the vendor and purchaser agree things between themselves - if either party's solicitor knows about it they are obliged to pass on the info to the revenue (they must sign a declaration that the house sale contract is not part of a chain of contracts whose total value exceeds €x - if they know about the deal most will not sign this).
Obviously it does go on, but it's still tax evasion.

 

[MugsGame]

Perhaps but are we really going to force 80 year olds out of the homes they've lived in all their lives?

The elderly could be exempted from any such property tax. Would it be so bad though to force people whose children have grown up to downsize, and thus free up larger properties for families?

 

[Glenbhoy]

Because this way of splitting contracts is of questionable legality at best.

I know, does not mean it does not happen, nor that the system doesn't inadvertently encourage it.

Perhaps Glenbhoy means asset rich?

Indeed, but there are also a large group of pensioners out there who are very well off in cash terms too, think about it, nice defined benefit pension, the only impact higher interest rates have is to increase the interest gained on their savings, better tax breaks too!! I'm not begrudging them that, and I'm sure they worked hard and struggled through the bad times here, but.....

Perhaps but are we really going to force 80 year olds out of the homes they've lived in all their lives? This would be the result for those who could not afford to pay tax on their properties. But wait....I know!..we'll force them to borrow so they don't have to move. Sure the banks could do with more money and the Gov. coffers could really use the cash.

To my mind that would be one of the major advantages of a property tax, it might encourage people to free up housing stock in the areas of most economic activity (while they head off to take advantage of those seaside apartments). What's the point of a 80yo widow living in a 4 bedroom detached house in Dublin, whilst a 35yo with 4 kids has to commute for 4 hrs a day from his/her Carlow base?

Absolutely. At lest with stamp duty you pay it once and never again. If the tax was based on property value you will always live under the threat of losing your house in the event of illness/incapacity/bad luck.

Not only that but if you introducced a property tax tomorrow would you distinguish between those who have payed SD in the past and those who haven't? It would be difficult to make it fair

We had a residential property tax here in the past (was it mid 90's when it was rescinded?), NI are currently introducing a form of it and virtually every (lefty) european country has one in place too. The rate doesn't have to be huge, say 1% of value.

 

[casiopea]

Or perhaps we actually need some form of property/wealth tax rather than something that just affects trades?

When I bought my house in Dublin (recently sold) I paid stamp duty. Myself and my husband have bought a house now in Switzerland where we dont have stamp duty but do pay a "rich tax". Its interesting to have experienced both. There is definitely the positive that we didnt have to pay a lump sum of tax at the beginning (rather have it spread out). However over the period of owning a house for a lifetime we'd pay more than stamp duty (for me it worked out at after about 20 years or so the rich tax would pass out the stamp duty). There are definitely debates here (in CH) about the elderly and affording rich tax. For all of these reasons you frequently see swiss people selling up when they are about to retire and return to renting (incorporated with a move out of the city etc). Renovations we make to the house can be counted against rich tax so for example it makes sense for us to do work on the roof and replace windows over a certain number of years rather than all in one in one year and receive tax allowances over those years. So far I think I prefer the rich tax approach rather than the stamp duty, but Im not an expert at all this is just a personal opinion and that opinion is still forming.

 

[MugsGame]

Also, we wouldn't have 275,000 empty properties if we had property wealth tax.

 

[liteweight]

Indeed, but there are also a large group of pensioners out there who are very well off in cash terms too, think about it, nice defined benefit pension, the only impact higher interest rates have is to increase the interest gained on their savings, better tax breaks too!! I'm not begrudging them that, and I'm sure they worked hard and struggled through the bad times here, but.....

Glad to hear you don't begrudge them. How many people would struggle in the early years to build pensions if they felt it might all be taken away, by taxes, when they reached an age when they could finally enjoy it?

To my mind that would be one of the major advantages of a property tax, it might encourage people to free up housing stock in the areas of most economic activity (while they head off to take advantage of those seaside apartments). What's the point of a 80yo widow living in a 4 bedroom detached house in Dublin, whilst a 35yo with 4 kids has to commute for 4 hrs a day from his/her Carlow base?

The point is that it's her home, where she raised her kids and where her memories are. Lots of old people's health deteriorates when they are taken out of their familiar environment. Personally, I don't intend to stay in my home when I get older but this is how I feel now and is based on economics...large house, large bills etc. Just because the 80 year old moves out it doesn't follow that the 35 yr. old can afford to move in! If he'd been able to afford it then he would have bought closer to his job in the first place. Following your logic, perhaps we should tell single FTB to live in studios and leave the 1 beds for the married...the married to leave the 2 beds for people with children etc. etc. Why should old people be denied the right to pick and choose where they should live and how?

Why look to isolate or punish one section of our community with a tax which potentially could cause hardship?

We had a residential property tax here in the past (was it mid 90's when it was rescinded?), NI are currently introducing a form of it and virtually every (lefty) european country has one in place too. The rate doesn't have to be huge, say 1% of value.

Just to be equitable let's say 1% across the board for all home owners. That would go down like a lead balloon at election time. Look at the hardship caused to many over the poll tax in the UK.

 

[liteweight]

The elderly could be exempted from any such property tax. Would it be so bad though to force people whose children have grown up to downsize, and thus free up larger properties for families?

I don't believe any section of society should be 'forced' into anything. We're a democracy not a dictatorship. Look at the furore caused by some Nursing Homes 'forcing' the aged to live in unsanitary conditions etc. Suddenly it seems to be alright to 'force' them out of their own homes, bought and paid for by them. How would the young people on this site feel if the position were reversed...or if it were their parents rather than some ethereal 'old person'?

 

[Ceist Beag]

Jeez Glenbhoy you sound just charming - I wonder will your attitude be the same after you retire having paid your taxes for 35 odd years and worked damn hard to pay up your mortgage and invest in your pension - will you feel entitled to enjoy the fruits of all your hard work or will you think "You know I feel guilty having this big house now all the children have moved out, maybe I should just sell it to someone more deserving. And sure why not move to the seaside like all other pensioners so we can keep out of the way of those young people"?