Thursday, November 29, 2012

Stamp Duty versus Mortgage Interest Relief

Here is a table of the amount of revenue raised from Stamp Duty on residential property and the amount of tax relief granted to residential mortgage holders for the past decade.

Stamp versus MIR

The figures for Stamp Duty are taken from here and relate only to Stamp Duty paid on residential property transactions, while the figures for mortgage interest relief are taken from here including the estimate for 2012, with a full-year 2011 figure here.  The amount of income tax relief granted to mortgage holders is equivalent to nearly 75% of the revenue received from Stamp Duty on residential property.

The two columns do not reflect the same groups of people but there is likely to be very significant overlap.  The Stamp Duty column will include duty paid by investment buyers who are not entitled to mortgage interest relief (but do get a separate relief).  If investors paid a quarter of the Stamp Duty and were omitted the sums of two columns would be almost identical.  The Mortgage Interest Relief column will include people who bought before 2002, though these will be smaller mortgages and many will have been repaid by the end of the period, and also first-time buyers who bought in the period in question but were exempt from Stamp Duty.

Although the Exchequer did collect significant revenue from the purchase of residential property by households in the last decade, the Exchequer has also lost significant revenue by awarding income tax relief for mortgage interest to households.


  1. You're confusing a stock with a flow. Stamp Duty is a percentage of the one off sale price of houses in a single year. Mortgage interest relief is a percentage of the repayments on all houses, which were cumulatively sold in the last several (very several) years.

    Admittedly it's all the one to the Revenue when they tot up the sums, but the two figures are coming from very different processes.

    That said, I'm personally against mortgage interest relief. Retrospective non-recourse defaults are the way to go.

    1. All tax revenues/tax reliefs are flows! And some flows have a habit of stopping.

      Obviously from the perspective of the household they are different; once-off lump-sum payment versus continuous monthly receipt. But that isn't the issue from the Exchequer's perspective.

      In 2006, the revenue from Stamp Duty on residential property exceeded the cost of MIR by nearly €1,000 million. This year the cost of MIR will exceed that Stamp Duty by €300 million. That snapshot is indicative of the public finances.

      The other point is that it hasn't been all take, take, take from the housebuyers of the last decade. MIR has provided some relief, though it is rarely acknowledged. George Lee did a show on taxation last week and not once did any of the homeowners with mortgages mention MIR. They were all well able to point to the Income Tax deduction on their payslip, but none mentioned have much was recycled back via the banks from the Revenue.

      I too would oppose mortgage interest relief, rent relief etc.

  2. Seamus

    Don't even go there !

    The whole "but I've already paid my property tax - it was called stamp duty" nonsense was ably exploded by this man here long, long ago:


    1. Too many broad assumptions for me there Fergus .... Especially the "all things being equal" one. for example I bought in the boom as a non first time buyer up against first time buyers so our stamp implications were not equal.

    2. @ Fergus,

      The incidence of taxation is a minefield in the absence of some combination of perfectly elastic/inelastic supply/demand schedules. In most cases it is likely shared between buyers and sellers.

      Transferring your argument to MIR would logically lead to the conclusion that MIR is a subsidy for sellers.

    3. And what is wrong with that conclusion ?

    4. The logic is impeccable. What we need is some way to test it.

  3. Seamus

    Good post and interesting that ~75% of amount collected in what were at times high rates of stamp duty was given back to property purchasers, though not necessarily an equivalent set, if that is the correct math terminology.

  4. Seamus

    If I may briefly enter the tail end of the discussion. Vat on new houses and extensions (at 12.5/13.5%) is also a consideration. This Vat is paid effectively 'instead of' stamp duty; or it could be said to be the other way around. My understanding is that, as the system of Vat registration is too cumbersome for second-hand house sales a stamp duty is applied instead.

    Systems of tax & subsidy are central to how governments work, to how society conducts itself. Education, health, social welfare are all applied within a norm of 'tax & subsidy'.

    Likewise, the current problem of excessive private dwelling indebtedness will find its way into a formal society solution of a 'tax & subsidy' type. Taking the 'as is' in the area of current policy. And tweaking, changing.