THERE has long been grumbling among house buyers and owners over the punitive level of stamp duty that has to be paid when purchasing a home, but the issue really only began hitting the headlines in September. At the PD parliamentary party's annual think-in, new leader Michael McDowell announced that "stamp duty was an issue of huge concern for thousands of home owners and would-be home owners around the country. It is our belief that there is scope for a significant readjustment of the stamp duty situation as it pertains to homeowners." The Tanaiste said the PDs intended to address this issue head on in its election manifesto. Despite McDowell's emphasis on the next general election, attention quickly began to focus on what might happen in the Budget in December. There have been reports that activity in the property sector has tailed off with buyers postponing deals until the upcoming Budget. There have also been reports that the junior coalition party were pushing heavily for something to happen on stamp duty in that budget, with senior party figures expressing hope there would be changes in December. However, the PDs have been at pains to stress since then that they accept that changes in stamp duty are not in the programme for government and that they are thinking ahead to next year's election.

How bad is the burden of stamp duty?

It depends how you look at it. There are those who argue that, unlike virtually every other country in Europe, there is no annual property tax or rates in Ireland. Therefore, the average outlay on stamp duty by a home owner simply equates to what a French or German person forks out in property tax/rates over a lifetime in their houses. However, there is no doubt that having to pay out such a massive once-off payment to the government on buying a home is an enormous burden for many people and is acting as a serious deterrent to many who wish to move house. First time buyers are exempt from stamp duty if they buy a new house. But if they buy a second-hand house, stamp duty of 3% kicks in if the house is worth more than 317,500, quickly rising to 6% if the property is worth more than 381,000.

Particularly in Dublin, it is virtually impossible to buy a house for that amount of money. The PDs have argued that buying a modest two bedroom terraced house in, for example, Dublin 8, a young first time buying couple will be paying the top rate of 9%. That top rate kicks in at just 635,000. Non-first time buyers, meanwhile, will have to pay 7.5% stamp duty on houses priced between 381,001 and 635,000 at which point the 9% rate also applies. A family moving to a house costing 800,000 . . . by no means unusual, particularly in Dublin . . . will be levied with a stamp duty tax bill of 72,000. Fifteen years ago, that amount of money would probably have bought the house. One of the other problems with the current system is that once the price of a house exceeds one of the thresholds at which a high rate of tax kicks in, the buyer has to pay the higher rate for the entire price of the property.

The PDs have called for banding stamp duty, so the buyer pays the higher rate only on the amount above the threshold.

What is Brian Cowen's position?

As ever, the finance minister is giving little away about what will be in the budget. However, he did appear to dampen speculation that he might do something to alleviate the stamp duty burden when he told RTE's George Lee that he was reluctant to interfere in the property market and that he was saying no more on it at this stage.

Cowen expanded on this further last week in an interview on Newstalk's Breakfast Show. He stressed that there was no property tax or rates in Ireland and "stamp duty has been and is an important revenue earner for government." The abolition of stamp duty was "not in the programme for government and will not be part of our programme between now and the next election, that's for sure, " Cowen said, adding that because income taxes were low, it was important to maintain a broad taxation base to make sure there is enough money to fund services.

So what is likely to happen in the budget?

Anybody's guess. The PDs are acutely aware that shouting for a reduction in stamp duty will only back Brian Cowen into a corner and make it less likely to happen. Therefore, after all the speculation of recent weeks that the PDs were pushing hard for some reduction, there isn't huge optimism within the party that something will happen on Budget Day. The booming property market has also made the government finances increasingly dependent on the surging revenues from stamp duty to fund their annual double-digit percentage growth in spending.

However, there are also many in Fianna Fail who would like to see something being done to reduce the burden, particularly for first time buyers. And with a general election just six or so months away, it would be an obvious vote winner. There would be little stomach in the party for wholesale changes to stamp duty levies . . . there are worries that major reductions would further drive house price inflation and undermine the tax base. However, there is a view that Cowen must do something about the threshold levels at which stamp duty kicks in, particularly for first time buyers. There were increases in these thresholds two years ago but with house prices continuing to grow strongly in the interim period, the case for a further rise may prove hard to resist.