Deloitte warns about hous­ing cri­sis

Chronic un­der­sup­ply could limit Ire­land’s abil­ity to at­tract post-Brexit in­vest­ment Con­sul­tancy says 52% per­sonal tax rate out of kil­ter with com­peti­tor coun­tries

The Irish Times - Business - - NEWS - EOIN BURKE-KENNEDY

Left unchecked, the hous­ing cri­sis has the po­ten­tial to be­come the big­gest con­straint on growth in the economy, Deloitte has warned.

In a pre-bud­get sub­mis­sion, the con­sul­tancy said chronic un­der­sup­ply in the hous­ing mar­ket would even­tu­ally erode the pro­duc­tive ca­pac­ity of the economy and limit Ire­land’s abil­ity to at­tract in­ward in­vest­ment.

Un­less “rad­i­cal” mea­sures are taken, it said the cri­sis could re­sult in the loss of busi­ness com­ing from the UK in the wake of Brexit. As well as the pro­vi­sion of more so­cial and af­ford­able hous­ing, the firm said the Gov­ern­ment could take ac­tion to ad­dress the is­sue through the tax sys­tem. Specif­i­cally, it called for tar­geted Sec­tion 23 prop­erty tax re­lief in cities to boost the sup­ply of rental prop­erty, and a cap­i­tal gains tax (CGT) rollover re­lief to al­low de­fer­ral of CGTonce the pro­ceeds of a sale are rein­vested in prop­erty.

It also wants the re­in­state­ment of full in­ter­est re­lief on bor­rowed money used to buy rental prop­erty. How­ever, it stopped short of call­ing for a re­duc­tion in the VAT rate for builders, not­ing the Gov­ern­ment was not in favour of such a mea­sure.

“Tack­ling the in­fra­struc­ture and hous­ing sup­ply should be part of the larger goal to en­hance Ire­land’s com­pet­i­tive­ness and build ca­pac­ity for the fu­ture – sup­port­ing in­ward in­vest­ment, Ir­ish busi­ness and en­trepreneur­ship,” Deloitte’s head of tax Lor­raine Grif­fin said.

Multi­na­tional tax avoid­ance

On global tax re­form and specif­i­cally the OECD’s base ero­sion and profit shift­ing (Beps) ini­tia­tive to clampdown on multi­na­tional tax avoid­ance, the firm sounded a note of warn­ing, sug­gest­ing the pro­posal per­tain­ing to coun­try-by-coun­try re­port­ing was prob­lem­atic as it would in­volve mak­ing po­ten­tially con­fi­den­tial in­for­ma­tion pub­lic.It re­peated for­mer min­is­ter for fi­nance Michael Noo­nan’s quip that “Ire­land could not serve two masters” in the EU or Beps. The firm’s sub­mis­sion noted that the in­ter­na­tional tax land­scape was evolv­ing at pace and that an up­com­ing con­sul­ta­tion on cor­po­rate tax re­form would be key to shap­ing Ire­land’s regime in the fu­ture.

“The Gov­ern­ment must en­sure the cor­po­rate tax strat­egy re­mains fo­cused on rate (12.5 per cent), rep­u­ta­tion (play­ing fair but play­ing to win), and regime (com­pet­i­tive tax regime),” Ms Grif­fin said.

On per­sonal tax­a­tion, Deloitte said Ire­land’s rel­a­tively high mar­ginal tax rate of 52 per cent was out of kil­ter with com­peti­tor coun­tries and un­der­mined the State’s com­pet­i­tive of­fer­ing for in­vestors. Tax part­ner Daryl Han­berry said the is­sue was fre­quently raised by clients look­ing to re­lo­cate staff here, and needed to be tack­led by the Gov­ern­ment, al­beit he ac­knowl­edged this may take a se­ries of bud­gets.

Per­sonal tax

He said the Gov­ern­ment also needed to present a roadmap on how it planned to sim­plify the per­sonal tax code so as to pro­vide prospec­tive in­vestors with cer­tainty. The firm also re­peated calls for a new share scheme for SMEs and more tax-friendly treat­ment for em­ploy­ees get­ting shares, in or­der to drive share own­er­ship within pri­vate com­pa­nies.

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