Minister for Finance Michael Noonan has signalled that there could be tax breaks for new house buyers in the 2017 Budget.
Addressing the Oireachtas committee on housing and homelessness, he said that he was not in favour of suggestions that VAT on the construction sector would be reduced from 13.5 per cent to 9 per cent.
Instead, he said he would prefer to introduce a tax break that would “put money in the pockets of purchasers rather than in the pockets of builders”. The model that could be considered is the very successful tax breaks for home extensions. This scheme allows homeowners to claim the VAT rate on their renovations over the subsequent two tax years, so 13.5 per cent of what is spent on the property is returned as a tax credit.
A similar scheme for buyers was “under active consideration by my department”, he told the committee. The proposed construction sector VAT reduction was still “worth looking at” but, he said, may not be the most cost effective way of increasing housing supply. The reduction to 9 per cent would cost €210 million. “If we were to use that same €210 million for extra capital spending on social housing we would be getting a bigger bang for our buck” as that spending would generate €800 million in activity, he said.