High taxes ‘stopping homes being built’

ONE of the country’s largest developers has complained that the State’s tax take from construction is one of the reasons new homes are not being built.

Speaking after announcing his O’Flynn Group is behind a €130million development to build 515 houses in Cork, Michael O’Flynn said VAT on building needs to be slashed if more houses are to be built.

And he also pointed to the high development levies councils charge per house around the country. Last night the Institute of Professional Auctioneers and Valuers said these levies can be as high as 9% on the price of a new property.

And they said the State’s tax take on new homes is now estimated to be around 40%.

This means €98,264 of the average first time buyers house price of €245,662 goes to the State in local levies, VAT, PRSI, stamp duties and other taxes. ‘We need to look at why can’t your standard couple buy a house,’ Mr O’Flynn told Cork’s 96FM.

‘First of all, the tax take on housing is far too high, between indirect and direct taxes there is almost 40% going back to the State.

‘When your average couple can’t buy a house, you have a problem.’

He added: ‘People are paying more in rent now than they would pay on a mortgage, there is something wrong with the system which discourages people from buying their house because the house is too expensive.

‘We have too much tax on housing. We need to look at VAT, we need to look at the tax, the development levies and we need to look at the cost of land.’

The highest cost of a house is the actual cost of building it. This is estimated to be about 37% of the final cost. Of this, the State takes VAT on materials as well as taxes on all those employed in the construction.

The State also takes a tax cut from other professional fees, and building levies alone can be as much as 9% on the cost of a new home.

Institute of Professional Auctioneers and Valuers CEO Patrick Davitt last night told the Mail: ‘Mr O’Flynn is right. The State’s tax take is too high.

‘When you add everything up, including VAT, employees’ PRSI, stamp duty and other such taxes, it comes to around 40%.’

Mr Davitt, who is making a submission to the government for its plans for the future of homes construction in Ireland, added: ‘One of the things we would like to see is a drop of the VAT rate from 13.5% to 9%.’