Property developers have seized on a stamp duty loophole leading to annual exchequer losses of up to half a billion euro, it emerged last night.
The tax avoidance devices are known to have cost the State €251m in 2006, but the figure could be over €400m if the most wealthy property dealers used the loophole.
The loophole has also been used in other areas such as residential property schemes, pubs, hospitals, hotels and local authorities through public private partnerships, pointing to concerns the losses could be rising significantly.
Data obtained by financial guru Eddie Hobbs under the Freedom of Information Act show that in a Revenue Commissioners' survey of just 100 developers in 2006 they found a €234m loss to the Exchequer.
The Revenue survey found that 40pc of all land deals by value exploited the loophole.
Goodbody Economic Consultants put the loss to the Exchequer slightly higher at €251m.
"The Revenue have pointed to their deep concerns about it because they felt that in their 2006 study, just on that year alone, that the loss to the Exchequer could be as high as €400m to €500m," Mr Hobbs told TV3's 'The Political Party' with Ursula Halligan.
The Department of Finance has previously insisted that the loss to the Exchequer of these "anti-avoidance schemes" amounts to €50m per annum.
The private documents accessed were from the Department of Finance, the Revenue Commissioners and Goodbody Economic Consultants.
Explaining how one of the major loopholes works, Mr Hobbs said land could be bought under licence or under trust with stamp duty only paid when a document is stamped.
If a document isn't stamped then you don't have to pay the stamp duty, he said.
"What you do is, you buy a piece of land or a property from somebody but you don't put your name on the title document. Instead you get an undertaking from the person you are buying from to give you power of attorney which means you transfer their name onto the title document the next time you sell it," Mr Hobbs said.
"So your name never appears on the title document, therefore there is no stamping, therefore no stamp duty is paid."
Despite Government promises to close the tax loopholes, a recent report by Goodbody advised against such a move because it would have a negative affect on a changing property market.
"It has become a bit of a virus so the Exchequer is losing, and seems to have lost, hundreds of millions in tax revenue.
"And the effect of that is that ordinary people who pay stamp duty at 9pc are subsidising the wealthiest people," he said.
One of the most common practices used by property developers is known as "resting on contract". In this, the purchaser enters a contract to buy the property and pays the price to the landowner, but does not take a deed of conveyance.
When the development is complete, the landowner delivers the conveyances to those who bought apartments or houses from the developer, thus eliminating the stamp duty charge.
Published in the Irish Independent , 07 April 2008