[Article] McCreevy set to bring in tax break for first time buyers

Victor

This does in one way seem slightly novel insofaras it won't directly increase the price of properties, but provide an advantage to those who have saved under the scheme, to the disadvantage of those who haven't. The increase in mortgage intrest relief combined with no Capital Gains Tax on primary residences does push up prices.

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McCreevy set to bring in tax break for first time buyers
From:The Irish Independent
Thursday, 1st May, 2003
Brendan Keenan Group Business Editor

FIRST-TIME house buyers, who lost their €3,800 grant last year, could be in for a tax windfall in next December's Budget.

Finance Minister Charlie McCreevy is understood to have asked the Revenue Commissioners to examine the possibility of a special tax break for potential buyers saving for the deposit on a house.

This would be similar to the Special Savings Incentive Accounts (SSIAs), in that the tax break would apply only to particular accounts.

The difference is that the tax break would only apply if the money were used to buy a first-time home.

The idea was put forward by Independent Senator Joe O'Toole. He sees it as a way to get round the problem where the automatic first-time grant just went onto the price of the house.

"A grant is probably the worst possible way of giving money to the first-time buyers, because unscrupulous builders have invariably discounted it into the value of the house," Senator O'Toole said during last month's committee stage of the Finance Bill in the Seanad.

Speaking in the same debate, Fianna Fail Senator Dr Martin Mansergh said some large builders and developers were in a position to withhold or increase supply in the housing market.

"This is something a minister must take into account when making his decisions," he said.

Mr McCreevy reacted favourably to the idea during the debate. "I will instruct the Revenue Commissioners to look at the idea and have it assessed before next year's Budget and Finance Bill," he told senators.

"I am not giving a commitment that it will definitely take place, but the principle is worthwhile," he said.

A spokeswoman said yesterday the idea, with other items, would be considered in the context of the Budget, in conjunction with the Revenue Commissioners.

It is believed that Mr McCreevy remains keen on the idea. He has said the grant was specifically designed to help the building industry during the 1980s slump, not the buyers.

A tax break might be better for buyers, especially if supply and demand in the housing market come into better balance.

The Revenue experts will also want evidence that the tax break would not just add to house prices.

They will also be looking at ways to ensure that the money does go only on house costs, and consider problems such as a couple splitting up after they had been saving under the scheme.

"I'm sure all these difficulties can be overcome," Senator O'Toole said. "It might be a much more effective way of getting young people to save than the new personal pensions, which also have a tax break.

"But I don't want to pressurise Mr McCreevy by demanding it now. I would be quite happy to see it in the next Budget and I hope it will happen."