'Penal' commercial property stamp duty hitting pension funds

Irish pension funds are being hit by the "penal" stamp duty levied on commercial property, the industry has told Minister for Finance, Mr McCreevy.

The Irish Auctioneers & Valuers Institute (IAVI) said that as a direct consequence of the imposition of stamp duty at 9 per cent on all commercial building transactions, values had fallen by 2.767 per cent.

"This has major implications for all pension funds with a commercial property element and has further compounded the average losses of 19 per cent already encountered in those pension funds last year through the fall in the value of equities," said IAVI president Mr Aidan O'Hogan.

The 50 per cent increase in stamp duty rates on commercial property would also scare away investors, he said. "If rates can be increased once by 50 per cent at the stroke of a pen, is it not likely that other penal duties will be imposed without warning?" he said.

In the group's pre-Budget submission, Mr O'Hogan also called for changes in the stamp duty rules for the residential market.

He said reform to take account of house price inflation in recent years would remove the deterrent to mobility. Increased volumes of property on the market would compensate for the resulting loss of revenue to the Exchequer and help first-time buyers, he said.

Mr O'Hogan suggested that the exemption limit below which no stamp duty is paid should be doubled to €250,000 in value. He also proposed widening the rate bands, so that the 9 per cent stamp duty rate would kick in on properties worth more than €1.25 million, compared to the existing €635,000 threshold. But he was content to leave in pl;ace the existing regime for both new homes and for investors in residential property.

In other submissions, the Irish Tourist Industry Confederation called for measures to restore the State's competitiveness internationally. Specifically, it wants a moratorium on indirect tax and price increases that might affect the tourism sector.

The Institute of Certified Public Accountants in Ireland called for a review of benchmarking and cutbacks in public spending.

It also criticised the introduction of income tax and PRSI on benefit-in-kind, saying the majority of its members felt business was not ready to implement the new regime in January.