Page: 4 Circulation: 34322 Area of Clip: 17100mm Page 1 of 1 CIF wants Vat cut to boost housing supply BY MICHAEL BRENNAN POLITICAL CORRESPONDENT Builders are lobbying for a Vat cut in the budget to boost the supply of new homes after getting legal advice that it is possible under EU law There had been a strong campaign last year to reduce the 13.5 per cent Vat rate to 9 per cent to match a similar incentive given to businesses in the restaurant and hotel sector But doubts were raised about whether such a move would be possible under EU law. However, the Construction Industry Federation (CIF) has now obtained legal advice that a Vat reduction would be allowable on home building under EU law, but not allowable on office building. It has sent a submission to Minister for Finance Michael Noonan ahead of the October budget, seeking a 4.5 per Vat cut for the next two years. CIF director general Tom Parlon said that a temporary Vat cut was needed to help stimulate the housing market and to get more builders working on housing projects. This reduction would be for a period of only two years as the government seeks to kickstart residential building activity again. Once we have started to bring more housing to the market then the rate can revert back to its current level, he said It comes after the ESRI report during the week estimated that 90,000 new homes are needed over the next seven years to meet the demand The CIF is arguing that it would only require 605 extra new houses to be sold for the Vat cut to pay for itself. Several rural government backbenchers are understood to be keen on the idea of a Vat rate cut because a boost in house building is one of the only ways of creating jobs quickly in their areas. Parlon said there was evidence that the cut in Vat had helped boost the tourism sector, where it has been credited with creating 15,000 jobs. At a time when everyone is crying out for more housing to be built, the option is there for the government to take a similar initiative and help bring more activity to a sector that needs it, he said. But the proposal is not con tained in the governments Construction 2020 strategy and it could be an expensive measure, given that the Vat cut for the tourism sector is costing 240 million this year. Noonan himself has been unenthusiastic so far about the proposal. In a response to a parliamentary question, he acknowledged that it was possible to reduce the Vat rate on house building to 9.5 per cent. But he warned that having a higher 13 per cent Vat rate on commercial construction would cause problems. Historically the same Vat rate applies to all construction in Ireland. I have no plans to apply different Vat rates to different construction services as this would lead to administrative complications and could lead to tax abuse, he said.