More Incompetence in the central bank/DoF

Central Bank economists call for capital gains tax link to house prices - Dazn O’Brien → … -1.1420014

The central bank is an arm of the department of finance, so they would have a bias to using taxation as a means to control prices.
Tax incentives did play a part in driving development in parts of the country where there should have been none. Capital gains tax is just a tax on inflation and inflation is deliberate monetary policy actively pursued by government central planning.

For arguments sake lets say you could use CGT to control house prices, what would the effect of price controls be at the time? would there be more or less houses built for a growing population?

Very true BR, also once politicians use something like CGT to manipulate house prices, it would likely become a political bargaining chip, sweets for the middle class.

always always always more interference they can never ever leave things alone

Fast forward 100 years - if the European democracies still exist in their current form every single aspect of your life will be
subject to a law or regulation

What really worries me is how oblivious they are to the fact that house prices are returning to equilibrium.

I see no reason to waive CGT on any property, PPR or otherwise. It distorts people’s attitudes to investment.

Why would people invest in economically productive assets like export-oriented businesses when the government incentivises them to drive up the “values” of each others’ physically depreciating non-productive* assets.

  • I realise that housing is economically productive in the sense that people have to live somewhere to work, but it doesn’t produce greater societal gain by being priced higher, it just drives up costs in the economy.

Actually this seems remarkably clear headed by the Central Bank.

The CGT exemption on principal private residences definitely encouraged the property bubble. 0% CGT on your home encourages you to favour “investing” in that asset more than you would invest in other asset classes.

It is another form of Middle Class Welfare. And this is the perfect time (politically) to get rid of it.

editorialise your title much? You might disagree with the theory but calling it incompetence is silly.

  • CGT is not like stamp duty, think about the transaction at a micro economic level - the buyer will not know what CGT is due and will not affect the value placed on the house by the purchaser

  • Calling CGT a tax on inflation is simplistic - for starters CGT can, and used to be indexed to prices

Well, given that exemption only applies to PPR it’s rather tenous to claim that it’s going to be the primary factor in deciding building rates.

also, Capital Losses on PPR will then presumably be off settable, it would give something back to those who risk capital is other fields


What happens to those who need to move to larger house due to growing family?
What happens does who need to move location for employment?

If this is brought in I’d expect the CGT would apply mainly to those taking a profit, “reinvesting” would be exempt - too politically sensitive.

Stamp Duty was even worse - in a static market it would still be due.

Even though the purchaser paid the cash, economics 101 would tell you it had the same effect on prices

What “happens” to them ?.. They’ve made a gain and they pay tax on it.

If you introduced a roll-over relief then what would be the point? They’d just keep the property till death and pay no cgt. Although you could introduce a retention tax on estates I suppose.

Some people do buy a home for shelter. Also many have valid reasons for moving house.

The real problem was McCreevy cutting CGT from 40% to 20%, it is now back up to 30-33% I think.
If a 40% CGT rate is applied no Non-PPR this softens demand from the specuinvestors

From the Irish Times article: … -1.1420014
‘From a 1980 start date, they suggest that house purchase has been a better option for consumers until 2008, since when renting has represented better value.’

Tell that to the people who bought in 2005 and 2006!!

What happens is that if you want to move to a property of the same value and don’t have the cash lying around, you need to increase the size of your mortgage loan by the amount of tax you’ve paid.

It also means that you have that much less tax to pay in future.

You’re sort of implying that they “deserve” this Middle Class Welfare. Taxing a GAIN doesn’t interfere with “shelter”.

Suppose their neighbour had the same deposit as they did but kept it in the bank or another investment and rented the house next door for the same period. Then they both move houses because of jobs. Why does the owner deserve this tax shelter on his GAINS but a renter doesn’t?

It seems clear that the PPR exemption has had a distortionary effect on asset allocation and a lot of “me home is me pension” thinking.

I’ve read the IT article twice and still don’t understand it.

When I ‘index’ X to Y, I use changes in the value of Y to determine changes in teh value of X. So if house prices increase by 20% in a given year, CGT would increase by 20% as a result. This is all I can find in the article - I can’t see where it says that sales of primary residences should be subject to CGT.

Is there some other usage of ‘index’ that I’m not familiar with?

Hmm, I can sure see the sellers I mentioned on this thread keeping prices as they are and not raising them to counter potential CGT if they have gains.

Look, the reality is, if you have a mortgage, and your house goes up in value, you haven’t really made a profit. Just reduced the amount you owe the bank in interest.

Regulate lending practices not investors. Regulate the proportion a bank can lend to private/commercial property and SME’s etc. That’s how you push investment into other sectors.

Fix the root cause of the problem.

Here they link to no tax on PPR’s

I think they want CGT to be a bit elastic…but its not clear from the Irish times piece … 04RT13.pdf

here’s the paper, dozy Dan didn’t link it.
In fairness, it seems to be against IT policy though to link relevant papers and property ads

this is the quote from the paper - “rate of capital appreciation” is the key term

Thanks, I read the Conclusions and Policy Recommendations section.
In fact, the problem is the authors of the paper - they are arguing in favour of applying CGT as a way to dampen house price increases, but they’re just too woolly to state it clearly.