Businesses all over Dublin are coming under significant pressure because of spiralling commercial rents. Dublin has the second highest rents in the eurozone. Not only are they high, they are rising quickly. In the past two to three years, commercial rent in Dublin has nearly doubled. Obviously, that is bad for businesses, but it is also bad for consumers, who must pay too much money for what they buy, and for people who are trying to buy or rent a home, given that the returns on developing commercial property are so much higher than those on residential property that developers want to build offices and not homes.

Why is this happening? It costs approximately the same amount to build in Dublin as it does everywhere else. People earn approximately the same amount in Dublin as they do everywhere else. Hence, the cost of commercial rents should be the same, but they are not.

One of the reasons for this is tax breaks. In recent years, the Government introduced generous tax deferral mechanisms for landlords, including large foreign landlords, namely, real estate investment trusts, REITs, and Irish collective asset management vehicles, ICAVs. These tax deferral mechanisms have led to large foreign landlords pouring money into Ireland and, specifically, Dublin, which is jacking up rents on commercial property as well as the cost of commercial and residential property.

We were told that these mechanisms were going to be shut down in the Finance Bill. That was the clearly stated intention of the Minister for Finance, Deputy Noonan. He stated that economic activity carried on in Ireland must be taxed properly in Ireland. This obviously includes property. However, not only has the Finance Bill not shut down REITs and ICAVs, but it has turned tax deferral mechanisms into complete tax breaks. We have gone from landlords being able to defer tax to them having to pay no tax whatsoever.

The Finance Bill will make the entire commercial property sector tax free. This will tax a large chunk of assets out of the tax net. It will drive up the cost of doing business, which will drive up the cost of living and lead to Irish banks lending into a property bubble again less than ten years after the last property bubble collapsed.

In the middle of a housing crisis and a commercial property bubble and at a time when we need more public money to invest in services and infrastructure and we need to be reducing the costs of business and living, why is the Government about to make the entire commercial property sector completely tax free?

We are not intending to do that, which is the first thing I want to say. Obviously, the Finance Bill is before the House at present.

I know Deputy Donnelly has been in consultation with the Department on a number of the issues he has raised here in recent weeks, including section 110 and other issues. Committee Stage of the Finance Bill 2016 will be taken in the House shortly, with Second Stage due to conclude today. That is the place to tease out the particular issues raised this morning in terms of the tax treatment of commercial properties. There are several initiatives under way to deal with the differential as it is now and to reduce the differential between residential and commercial property. For obvious reasons, in particular the bankruptcy which the country faced, there has been a shortage in this area in recent times. The position changed very quickly from one in which there was a lot of availability to the current shortage now being experienced. This is a reflection of the economic growth that has occurred in the country. There is a huge amount of building currently going on, much of which is to increase commercial supply. This is necessary for the continued growth that we are seeing and will, hopefully, continue to see in the economy.

The Deputy will have an opportunity on Committee Stage of the Finance Bill to tease out the various issues he has raised this morning in regard to the tax treatment of this particular issue.

I will be seeking to meet the Minister, Deputy Noonan, privately and I will obviously be tabling amendments. The problem is that this is not a technicality in the Finance Bill. The Finance Bill provides for the establishment of a new vehicle called an Irish real estate fund, IREF. It explicitly states that once a commercial property is held for five years there will be no capital gains tax liability. That is an absolutely extraordinary tax break that nobody saw coming. The Bill also explicitly states that commercial property investors, foreign landlords, will pay 20% dividend withholding tax unless they are a pension fund, a life insurance fund or what is know as a collective investment undertaking. Almost 100% of the foreign landlords coming here are either pension funds, life assurance funds or collective investment undertakings. As I said, this is not a technicality in the Finance Bill. The Bill explicitly states that in respect of a property held for five years no capital gains tax will apply and that if landlords are one of a particular class of investors, which all of them are, they will also pay no dividend withholding tax.

Thank you, Deputy.

This is a policy position: it is not a technicality in the Finance Bill.

The Deputy must conclude.

I will conclude on this point. Does the Tánaiste believe that the Irish commercial property sector should not become tax-free? I am asking that she take up this matter with the Cabinet and, in particular, the Minister, Deputy Noonan, and find out what is going on because I doubt that any Deputy will be able to bring about serious policy change on Committee Stage.

I take the Deputy's point in regard to policy but we do need supply drivers. As I said, we were in a situation where there was no office space available. We have seen a huge improvement in terms of the commercial property that is now being built and is absolutely essential. This measure is one of the drivers to increase supply. It is a policy issue, which no doubt will be raised on Committee Stage of the Finance Bill. I will bring the points made by the Deputy to the attention of the Minister. I reiterate that there was a total deficit in this area and that situation is now changing. As I said, this measure is clearly a supply driver in terms of the need to ensure we have sufficient commercial official space available across the country.