SECTION 23 RELIEF & THE FINANCE BILL
Tax and property experts believe the current proposals to scrap tax relief on Section 23 properties will never see the light of day in its present form, The Sunday Business Post reports.
The Green Party is insisting the reliefs must be ended this year in some form but much will depend on the attitude of the incoming government. The government deferred the proposed changes for at least a year to allow for an economic impact assessment on a measure designed to raise €60m in tax revenue.
The move would have affected people who had bought properties using Section 23 tax breaks that allow them to reduce their tax bills on income from investment properties.
John Heffernan, tax partner at Ernst & Young, told the newspaper that the proposals could not be “binned altogether” but they would not be published in their present form.
“The original proposals would have pushed more investors to bankruptcy and added to the problems of the banks,” he said. “There are a number of properties in Nama whose loans are only being serviced because investors can divert earnings from Section 23 and don’t have to pay tax on these.”
Martin Phelan, head of tax advisory at law firm William Fry, was even more emphatic about the future of the proposed reforms, saying it “may never happen”.
Kersten Mehl, president of the Irish Auctioneers and Valuers Institute (IAVI) said that thousands faced bankruptcy if the measures were ever introduced.
“It would have led to a surge in distressed sales, an increase in the number of properties on the market and prices would have fallen further,” he said. “Investors would not be able to make the repayments and that would have had a knock-on effect on mortgage repayments and jobs. It would lead to a whole avalanche of properties on top of the properties already there.”