Friday 20 November 2009

80% windfall tax will make Nama's task more difficult

The value of future rezoned land is likely to fall fast once a new 80 per cent windfall tax – part of the Nama legislation – becomes law, writes JACK FAGAN

LAST MINUTE changes to the Nama legislation will mean that all land rezoned in future will be subject to an 80 per cent windfall tax rate when sold.

The introduction of an open-ended tax affecting all changes in zoning was slipped through virtually unnoticed as an amendment to the Nama legislation in the Seanad last week. A senior figure in the property industry warned yesterday that the broad changes in the new tax regime would undermine the value of land eligible for rezoning in the future.

He said it would also make Nama’s task more difficult and would have an immediate impact on many land valuations being carried out for the banks and for Nama itself.

The 80 per cent windfall tax originally proposed by the Green Party was intended to apply where land was rezoned from agriculture, open space or recreational to development use. However, the amendment introduced in the Seanad means that the new tax will apply across the board where any change of use is made – even for very good planning reasons, such as where a developer decides to use an old factory site for housing.

Garvan Walsh of land agent Kelly Walsh said the tax changes would mean a return to the old days when money was passed under the counter in land sales to avoid paying high taxes to the Revenue. It would also lead to joint ventures between landowners and developers to ensure the land was not subject to the new tax. He said the principle of a betterment levy was sound but “not at a crazy 80 per cent level”.

Other property specialists also acknowledged that the current 20 per cent capital gains tax rate is too low in the present climate, but argued that the balance had now swung too far in the opposite direction. “The implications will only become clear over time, as the developers, valuers and their lawyers try to understand the implications,” said one leading valuer. “The devil will be in the detail as the new law is analysed.”

Development on most residential sites in the greater Dublin area stopped earlier this year and, when work eventually resumes, builders will be concentrating on low density housing rather than apartment blocks.

The complex Nama legislation was rushed through the Seanad last week and is due to be signed into law by President McAleese within days.

Irish Times

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