In Budget 2020, the Minister for Finance announced a 1.5% increase in the rate of stamp duty on commercial property transactions. He also announced additional taxes for Irish real estate funds as well as significant changes to REIT taxation. The changes generally apply from 9 October 2019. These measures were all contained in a short series of financial resolutions which were approved by Dáil Eireann (the Irish Parliament) on 8 October 2019.
We are routinely asked whether the financial resolutions are legally effective. How can the Minister impose taxes, without a Finance Act being passed? The answer lies in an arcane piece of law called the Provisional Collection of Taxes Act 1927. This allows a financial resolution to temporarily increase taxes, or introduce new taxes. Under section 2 of the 1927 Act, these resolutions have immediate legal effect. It is as if they had been passed as an Act. The resolutions must be passed by Dáil Eireann before midnight on budget night in order to come into effect. This is why there is a routine late night sitting of the Dáil on Budget Day, in addition to allowing concerned politicians to give voice to their opinions.
However, the resolutions are only temporary in nature and cease to have effect in certain circumstances. Firstly, they will cease to have effect when an Act containing the measures is enacted. The final legislation need not replicate the financial resolutions and the language can be altered. However the legislation must have the same effect as the financial resolutions.
If the legislation is rejected by the Dáil, the temporary measures will also lapse. Similarly, it will generally lapse at the end of four months from its original approval date. If the measure lapses, any money collected has to be returned to taxpayers!
What does this mean? Although taxpayers would be well advised to review and consider the impact of the financial resolutions, they should not be regarded as final pieces of legislation. They can and may change, as the Finance Bill is enacted. While unsatisfactory from the point of view of certainty, having survived for over 90 years, it seems the Provisional Collection of Taxes Act will remain a feature of the tax landscape.