Government Cashing in on a Record €3billion Construction VAT in the Teeth of a Housing Crisis – Tóibín

Figures released to the Aontú Leader Peadar Tóibín TD show that the government collected almost €3 Billion in VAT on building materials and construction services in 2024, which is the highest amount ever collected in any single year.

Speaking today, Deputy Tóibín said: ” Government taxes are significant cost in building a house. We have estimated that as much as €50,000 on the price of each house, is taken up with government taxes and utility connection charges. In recent weeks we’ve seen elements of government talk about relaxing the rent cap rules to facilitate international investors. This obviously pitches landlords against tenants. It will lead to an increase in rents and it will cause more homelessness. Incredibly we have also seen a significant number of builders idle claiming that they cannot afford to build homes and sell them on the general market. The government is a key element of the cost of housing. A reduction in VAT would reduce the cost of homes. It would make it more attractive for builders to build and investors to invest. Yet it would not hurt renters at all”.

“Time and time again Aontú has exposed through our research that the government is profiting from inflation in terms of tax collection. Following the invasion of Ukraine when fuel costs soared, the government cleaned up with the amount they collected in tax on fuel. Here too we see that the government is effectively cashing in on the housing supply crisis, and the rising construction costs. This is intolerable in a Housing Crisis”.

“It is sometimes state that a VAT reduction would just be swallowed by developers in extra profits. This would be the case if the sector was working at full capacity, but its not. Much of the building capacity is lying idle. This idle capacity would become active with the increased margin.  Ditching rent caps would increase the profitability of builders and investors but the cost would come at the expense of the renter rather than the government. Ditching rent caps would facilitate higher margins across all housing stock not just what’s being built. A VAT reduction would facilitate increased margins just on what’s being built. It would be a far more focused investment.

Construction is grinding slow for so many reasons. The lack of water and utility infrastructure, planning capacity, skills shortage, constantly changing regulations and construction inflation are all hammering the supply of homes. To relieve the latter the government should for a 5 year period reduce the VAT on construction. This will bring in more investors and building firms into production”.

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For Written Answer on : 25/02/2025
Question Number(s): 323 Question Reference(s): 8084/25
Department: Finance
Asked by: Peadar Tóibín T.D.
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QUESTION

To ask the Minister for Finance the amount of VAT collected on building materials and construction services in each of the past ten years.

REPLY

I am informed by Revenue that traders are not required to identify the VAT yield generated from the purchase or supply of specific goods and services nor are they required to distinguish specific VAT rates on their periodic VAT returns. Therefore, it is not possible to provide an accurate estimate for the VAT yield generated from construction services or building materials.

However, using a number of third-party data sources, a tentative estimate of the VAT yield generated by construction related activity is presented in the table below for the requested years.