Wednesday, June 20, 2007

Government saving buyers from sellers!

The Government has published proposed legislation to eliminate all stamp duty liability for first-time buyers, to apply to all contracts signed on or since 31st march 2007.

There will be no change in the stamp duty regime for all other house buyers, who will continue to pay punitive rates of duty e.g. 9% on house/apartment purchases of over €635,000.

Thus Stamp Duty will continue to act as a disincentive to people who wish to trade-up or trade down e.g. it currently adds €58.5k to the buyer’s costs for a house/apartment purchased at €650k.

The Government offers the following explanation for not modifying the stamp duty costs to non-first-time buyers:

They argue that the reduction in stamp duty would simply be added to the asking price by the vendor, thus increasing house price inflation and removing any benefit to the buyer arising from the reduction in stamp duty.

In other words, to prevent the risk arising that the vendor might screw the seller for the amount of the stamp duty, the Government itself will guarantee that the buyer continues to be screwed for the amount of the stamp duty. That’s some deal!

The reality is that the Government raises billions of euros each year through this punitive tax. They'd have to work harder if they gave some of it up.

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