I want to raise with the Taoiseach a tax scam that was first raised by my colleague, Deputy Burton, and that cost the Exchequer approximately €250 million in 2006. This is the tax scam whereby developers purchasing development land can get away with paying no stamp duty. As I understand it, the developer pays the money to the land owner who enters into a licence agreement with the developer to allow the latter to develop the land and grants power of attorney to the developer. The sale is not formally completed to the point where title is formally transferred. Therefore, it is not stamped and stamp duty is not payable.

Deputy Burton spotted this loophole in our tax code first and drew the Minister for Finance's attention to it. The Revenue Commissioners recommended that the loophole be closed and the Minister for Finance introduced legislation in 2007 to close it. However, it appears that the boys in the Galway tent got to work as the relevant section of the Act was never commenced. It is estimated that the amount lost to the Exchequer in 2006 was €250 million, a great deal of money for a Government that the Minister for Foreign Affairs, Deputy Dermot Ahern, tells the House does not have a red cent to build a hospital.

Will the Taoiseach explain to home buyers who needed to pay stamp duty for the purchase of their homes — some paid stamp duty for homes that are now worth much less than the purchase prices — or to those who are still paying stamp duty due to trading up and so on why people buying family homes have been required to pay stamp duty whereas big developers buying land for development purposes can get away without paying stamp duty and why that provision of the Finance Act 2007 has not been commenced?

This matter has been around for some time. It is not true to say that it has only been raised in the past year or two.

Buyers of development land can reduce stamp duty liability through mechanisms such as licensing, resting on contract and long-term lease arrangements. Under these mechanisms, land is purchased for development without conveyancing, transfer of legal title or submission of stamping by Revenue. It thereby avoids, rather than evades, stamp duty liability. A number of anti-avoidance measures were included in the Finance Bill last year to enable the Minister to deal with such practices whenever it was deemed appropriate to so do, having regard to the state of the housing sector and market conditions. This is the reason the provisions were subject to the introduction of a commencement order, as are many of these areas.

Goodbody Economic Consultants was commissioned to examine independently the economic and market consequences of commencing the provisions, while taking into account the changes that occurred in the housing market from the time the Finance Act 2007 became law at this time last year. In line with prior commitments, the report was published by the Department in either late December 2007 or January 2008. Its main points were that the commencement of such anti-avoidance provisions might increase the cost of land by approximately 10%, which would result in a decline in transactions and would increase house prices; and that the impact of the section, which is known by the industry and to the tax authorities as section 110, would result in driving activity levels far below long-term housing requirements, thereby contributing to a spiral of increasing prices for first-time buyers as fewer units would be built. The report recommended not commencing section 110 because it risks "exacerbating the down turn in the property market", which would have a negative impact on employment and tax revenues.

Rubbish.

There are arrangements for maintaining the current arrangements in the long term, because of the negative impact of the provision on the availability of development land and the supply of housing. The Government must weigh up the balance between the benefits of the tax revenues that would arise from the introduction of this section and the potential loss to the Exchequer——

The Government will retain the scam.

——of the reduction of activity in the building sector and its impact on society and the economy.

The Government will take the hit, lest the lads become nervous.

It is a scam. Will the Government think up a few more scams?

As the Deputies in the Labour Party may recall, yesterday I referred to the first quarter. Deputy Gilmore asked me about the income figures for the first quarter and I replied the issue did not pertain to the taxes from employment, which have increased by 5%, but to the area of capital gains. This is because there is insufficient purchasing and development going on.

Despite the breaks, they still are not working.

The difficulty lies in stimulating the industry. One cannot worry about construction employment on Tuesday and then try on Wednesday to trigger something that will affect construction employment.

The Taoiseach should get out of it. He is trying to suggest the scam is a good thing.

Consistency in this regard might at least last for 24 hours. It was recommended that the provisions should not be commenced at this time——

Unbelievable.

——and this recommendation has been accepted by the Government.

This typifies everything that is wrong with the Government.

It must be emphasised that the matter is being kept under review to take into account changes in the property market.

The Government will ensure it continues.

Hold on to your scam.

Perhaps my understanding of basic economics is less than that of the Taoiseach, but I do not understand the reason the Taoiseach can retain stamp duty, albeit at a changed rate, on the purchase of houses. He states that will not affect the property market, but a developer buying development land who has to pay stamp duty on land he or she might not develop for many years to come somehow will have a catastrophic effect on the market. Given the amount of hoarding that has taken place of development land, particularly in Dublin, Members are aware of the length of time that elapses between the purchase and development of land. This is rubbish.

Hear, hear.

The Taoiseach is providing a shelter for people who are buying. This pertains to the major developers; big high-rolling development land purchases are what is being protected. To tell Members this practice has been around for some time makes it worse. It means it has been around since the time when serious money was being made from those who tried to make a home for themselves by purchasing their first homes in the face of the amount of profiteering that took place in the property market. This does not offer any comfort.

The Taoiseach has reminded Members of yesterday's exchanges. I asked him yesterday about the statement made last week by the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, who is absent, to the effect the Government intended to introduce a new windfall tax on land and the sale of land. How does the Taoiseach expect Members to believe that the Government will introduce a new windfall tax on development land when it will not even implement the taxes that are already on the Statute Book? This does not make sense.

It is a windfall all right.

This is a gift to people who are making big money on the exchange of development land and who have made massive profits on it.

They should give some of it back.

The Taoiseach is giving them something back at a time when Government finances are tightening. The Government is failing to implement a measure that is on the Statute Book. As for the report from Goodbody Economic Consultants, it was nothing more than a survey of developers.

They were the only ones consulted.

What else would they have told Goodbody Economic Consultants, other than they did not wish to see the measure implemented?

Members should examine what is an independent report carried out on the basis of the entire industry and the situation as a whole.

It was a survey of the developers.

It is not by any means a survey of developers.

Was advice received from the Revenue Commissioners?

I will make a number of points. As I noted previously, it is incorrect that nothing has been done on this matter. The survey points out the full detail in this regard and there is no need for me to go into it. However, the Finance Act introduced these provisions and the Government stated it would consider the matter. My point to Deputy Gilmore is that since 1999, the Government has been attempting to stabilise the housing market. This week, the Central Bank for the first time stated that this had been achieved. The Government is trying to keep employment in construction as strong as possible. It is trying to ensure that at a time when there are affordability issues, it is at least getting on top of that for first-time buyers.

Hear, hear.

I refer to what has happened in the market, in respect of stamp duty and the actions of the Tánaiste and Minister for Finance regarding mortgage relief. We are giving them a break.

While it is possible to introduce this measure, there would be a corresponding and immediate large increase in the price of a house. What is the point in achieving that?

It is okay for the——

The Opposition would have increased the prices.

If this measure is not introduced, will they bring down the prices?

As for the figures used in the various assumptions that are being put forward, a point that has been lost is that they are based on the premise that all developers have put in place arrangements so that no stamp duty liability could have arisen in respect of any conveyancing. This pertains to the projected figures that I have read in articles recently. However, this does not represent reality because developers take conveyances on property for various reasons. As the report points out, these reasons include security where a property may be in the process of being assembled to ensure long-term certainty or a requirement from financial institutions prior to advancing funding. In reality, the tax at issue is taken to be a small percentage of this. Were Members to examine the report, they would learn there is no sum of €200 million or €400 million being lost in this regard.

The Revenue Commissioners——

Stamp duty statistics are taken from instruments presented to the Revenue Commissioners from stamping. This is where it applies and if there is no obligation to present documents for stamping, there is no way to estimate accurately the amount of duty that could have been collected, had the provisions been changed.

The Taoiseach is defending a loophole. He should abolish it.

The Goodbody report points out there are no official data sources on the value of development land sales. Therefore, it gives an indicative estimate of the total value of development land in 2006 of between €7 billion and €8 billion. It goes on to point out how one can calculate the figures in a realistic manner, in so far as is possible. It is nothing like the projected figures.

As I stated at the outset, the provision is on the Statute Book. When the situation in respect of the property and housing markets will enable the Government to implement it, I am sure it will so do. To do so now would——

Why not apply principles?

——be negative for the market, employment and first-time buyers. An independent analysis has vindicated that position.