The Economic and Social Research Institute (ESRI) has said it is “crucially important” the implementation of the Government’s residential zoned land tax proceeds “immediately”.
The levy is due to take effect from February next year and in the coming days ministers are to discuss how it can be introduced without affecting active farmers.
ESRI research professor Kieran McQuinn said that land prices can account for up to 20% of the final cost of a home.
He said addressing these costs was the only way the Government can bring down the price of building houses and apartments.
He said the tax would allow the Government tackle the issue of possible land hording.
A spokesperson for Minister for Finance Jack Chambers said that “proposals are being worked on to ensure active farmers are exempt from the tax”.
He added that the issue will be discussed with the three party leaders ahead of the Budget – which will be published on 1 October – so a “solution can be found”.
The annual tax is to be charged at 3% of the value of the sites which have access to services such as electricity, roads and water.
The ESRI has also forecast that the number of new homes this year will be similar to last year’s output of 33,000.
It has calculated the number of units delivered next year will reach 37,000.
“In the first six months, we’ve built 12,000 units, so unless there’s a very, very significant increase in production and supply in the latter six months of the year, I think you’re looking at a figure around 32,000 or 33,000 units,” said Mr McQuinn.
Its predictions are broadly in line with forecasts for house building published by the Central Bank last week.
However, a number of senior Government figures have maintained that there will be more homes built this year than in 2023.
Issues like higher costs and interest rates have had an impact on supply, Mr McQuinn said, but he said the Government has stepped in “in quite a substantial manner”.
Speaking on RTÉ’s Morning Ireland, he said: “We think that’s a good and positive development, because I think very little would be built otherwise.”
The ERSI has also warned the coalition not to overheat the economy in the Budget by putting more money into the country during a period of remarkable economic growth.
It said the main challenge facing the country and economy were the “structural deficits and bottlenecks that have been identified”.
“Most people are aware of those. In areas such as housing, in healthcare and in climate change where we face real challenges over the next five to ten years,” said Mr McQuinn.
“We are in a relatively fortunate position, in the sense that the public finances are in relatively good order.
“And I think the Government certainly is able to put the funds together to invest in those areas but it is important as we keep seeing in recent days that any significant investment Government makes is done in a prudent fashion – that we do collectively get value for money for whatever investment is made.”
It has called for a tax package which would be “neutral” giving workers tax cuts, so they can keep up with the rise in the cost-of-living.
On the economy, the ESRI said the domestic economy will grow by 2.3% this year and 3.1% next year.
“Those growth rates are a little bit lower than, for instance, the growth rates we’ve had over the last four or five years, but it’s still quite robust and strong growth,” said Mr McQuinn.
The ESRI said employment continues to be “very strong” and unemployment will be about 4% next year.
It added that this was “quite remarkable” given the very significant increase in the population.
Article Source – ‘Crucial’ zoned land tax implemented ‘immediately’, says ESRI – RTE
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