Windfall Taxes from the Boom

The Central Bank
1

Came across an interesting paper published by the CB in Nov 09 looking at the windfall taxes from the residental property market.

Tis here centralbank.ie/data/TechPape … _note1.pdf

Figures the windfall stamp duty and vat as follows:


The methodolgy seems to be to take standardised demand of 40k new units a year and figure out what surplus was derived from the excess.

Interesting in of itself but strikes me as a bit narrow as it doesnt take into account PAYE from all the employees and doesnt consider commercial at all.

Does anyone know if there is an attempt of figuring out the windfall from the whole bubble?

2

Any tax returns in excess of those in 2001, adjusted for EU wide levels of inflation (since any excess inflation was also a ‘windfall’ from the bubble).

3

Do you think 2001? I remember when it looked like we were going to have a stiff recession in 2002. The country seemed plenty frothy then. Personally I’d look back to 1997 or so…

4

Here’s a stab at working out the excess we spent on building houses and other things in comparison to the German average % GDP to calculate surplus spending on construction. The tax take is a bit of a stab, but probably not much more than that.

What I think is interesting is that it would seem that it wasnt the over reliance on construction that sowed the seeds of our destruction as even if you attributed a much higher tax take as a % of the construction cost it still comes nowhere near accounting for the growth or collapse in tax revenue.

[code] GDP Dwellings % GDP Normal Excess Estd Tax Other % GDP Normal Excess Estd Tax
Capital 5.50% Cap Form 35% Buildings 5.00% Cap Form 35%
Formation Capital
Formation
€M €M €M €M €M €M €M

1995 53,112 2,825 5.3% 5.5% -96 -34 2,407 4.5% 5.0% -248 -87
1996 58,714 3,533 6.0% 5.5% 303 106 3,045 5.2% 5.0% 109 38
1997 67,934 4,548 6.7% 5.5% 812 284 3,968 5.8% 5.0% 572 200
1998 78,535 5,685 7.2% 5.5% 1,366 478 4,896 6.2% 5.0% 969 339
1999 90,378 7,224 8.0% 5.5% 2,253 789 6,067 6.7% 5.0% 1,548 542
2000 104,830 8,746 8.3% 5.5% 2,980 1,043 7,134 6.8% 5.0% 1,893 662
2001 116,931 10,114 8.6% 5.5% 3,683 1,289 8,061 6.9% 5.0% 2,214 775
2002 130,258 11,472 8.8% 5.5% 4,308 1,508 8,638 6.6% 5.0% 2,126 744
2003 139,763 14,749 10.6% 5.5% 7,062 2,472 8,769 6.3% 5.0% 1,781 623
2004 149,098 18,146 12.2% 5.5% 9,946 3,481 10,049 6.7% 5.0% 2,594 908
2005 162,091 22,083 13.6% 5.5% 13,168 4,609 11,267 7.0% 5.0% 3,162 1,107
2006 176,759 24,754 14.0% 5.5% 15,032 5,261 13,062 7.4% 5.0% 4,224 1,479
2007 189,751 23,265 12.3% 5.5% 12,828 4,490 15,002 7.9% 5.0% 5,514 1,930
2008 181,815 15,986 8.8% 5.5% 5,987 2,095 14,011 7.7% 5.0% 4,920 1,722

     1,699,969      173,130                  79,632  27,871          116,375                        31,377  10,982[/code]
5

Great analysis Grumpy. and your commentary is incisive.

The government permanently increased spending, on the back of the property boom tax revenues, and the construction sector outbid the rest of the economy for labour. The minimum wage and it relativities where ratcheted up accordingly.

Result a uncompetitive , inappropriately trained workforce.(too many brickies, plumbers and leckies)

6

I was being generous, and assuming that the boom until the 2001 dot com crash was ‘genuine’ - though i think even then the economy was overheating, and beginning to run on credit.