SWATHES OF LAND that could be developed to ease the housing crisis are lying idle and landowners should be offered incentives to sell up, according to the Small Firms Association (SFA).
In its pre-budget submission, the group has suggested the introduction of a 10% capital gains tax (CGT) rate on the profits from any sites sold where there is already planning permission in place.
SFA chairman AJ Noonan told Fora that this measure should be introduced on a temporary, three-year basis in order to encourage landowners to offload unused sites.
“There is an awful lot of land in Ireland, it’s not going away and because of an exorbitant rate of CGT, people won’t do anything with it.
“We have to figure out a way to get them to sell so it can be used to help address the housing problem. People are holding onto land, have no intention of developing on it and just hoping for the best.”
He added that a reduced VAT rate of 9% needs to be applied to the construction of residential property for two years, which will help relieve the housing shortages. Meanwhile, a 0% VAT rate should be put on the construction of social housing.
Key to investment
The SFA submission added that cutting CGT was a crucial component of driving investment in the Irish economy, with the country’s present 33% rate putting the Republic at a competitive disadvantage when it came to businesses attracting funding.
It has called on the government to reduce the standard Irish CGT to 20% to encourage more investment in indigenous firms.
“It is vital that this applies to all businesses so that the impact can be felt immediately. Practice over the last 20 years has shown that when the CGT rate drops, the exchequer benefits due to a surge in activity, so this is a clear win-win,” Noonan said.
CGT is the tax due when someone sells an asset – such as a stake in their business. For comparison, the rates for the tax in the UK range from 10% to 20% for non-property income.
Many in the business sector have argued Ireland’s CGT rate should be slashed for company-related transactions to reward those taking risks on new enterprises.
The SFA claims it recommended measures to overhaul the tax would cost taxpayers roughly €52 million in 2017.
Other pitches from the group include:
- A 10% entrepreneurial CGT rate to encourage business owners who sell on their business to invest in another company
- Abolish the 3% USC surcharge which applies to the self-employed in order to encourage entrepreneurship
- Reduce the taxation for share-based remuneration to allow SMEs to use this method to attract and retain talent and encourage employee buy-in
- Create a specific R&D tax credit scheme for small firms to prompt more R&D expenditure, and to address the fact that only 1% of companies that made use of the tax credit last year were small firms