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Sunday Business Post

Sunday, 10 August 2014
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CIF wants Vat cut to boost housing supply
Builders are lobbying for a Vat
cut in the budget to boost the
supply of new homes after
getting legal advice that it is
possible under EU law
There had been a strong
campaign last year to reduce
the 13.5 per cent Vat rate to 9
per cent to match a similar incentive
given to businesses in
the restaurant and hotel sector
But doubts were raised
about whether such a move
would be possible under EU
However, the Construction
Industry Federation (CIF) has
now obtained legal advice that
a Vat reduction would be allowable
on home building under
EU law, but not allowable
on office building.
It has sent a submission to
Minister for Finance Michael
Noonan ahead of the October
budget, seeking a 4.5 per Vat
cut for the next two years.
CIF director general Tom
Parlon said that a temporary
Vat cut was needed to help
stimulate the housing market
and to get more builders
working on housing projects.
“This reduction would be
for a period of only two years
as the government seeks to
kickstart residential building
activity again. Once we have
started to bring more housing
to the market then the rate can
revert back to its current level,”
he said
It comes after the ESRI report
during the week estimated
that 90,000 new homes are
needed over the next seven
years to meet the demand The
CIF is arguing that it would
only require 605 extra new
houses to be sold for the Vat
cut to pay for itself.
Several rural government
backbenchers are understood
to be keen on the idea of a Vat
rate cut because a boost in
house building is one of the
only ways of creating jobs
quickly in their areas.
Parlon said there was evidence
that the cut in Vat had
helped boost the tourism sector,
where it has been credited
with creating 15,000 jobs.
“At a time when everyone
is crying out for more housing
to be built, the option is
there for the government to
take a similar initiative and
help bring more activity to a
sector that needs it,” he said.
But the proposal is not con¬
tained in the government’s
‘Construction 2020’ strategy
and it could be an expensive
measure, given that the Vat
cut for the tourism sector is
costing €240 million this year.
Noonan himself has been
unenthusiastic so far about
the proposal. In a response
to a parliamentary question,
he acknowledged that it was
possible to reduce the Vat rate
on house building to 9.5 per
cent. But he warned that having
a higher 13 per cent Vat rate
on commercial construction
would cause problems.
“Historically the same Vat
rate applies to all construction
in Ireland. I have no plans to
apply different Vat rates to different
construction services as
this would lead to administrative
complications and could
lead to tax abuse,” he said.