Seán Dunne: briefing for meeting

A scheduled meeting in early 2007 between Taoiseach Brian Cowen, who was finance minister at the time, and developer Seán Dunne, to discuss a loophole that allowed some developers to avoid stamp duty on land purchases, did not take place, according to a spokesman for the Taoiseach.

Cowen brought in legislation outlawing the practice of so-called "resting on contract" but never signed a commencement order to introduce the law. A briefing document drawn up for Cowen before the meeting with Dunne stressed that the loophole was costing the exchequer at least "€50m in stamp duty receipts at present and could spread further, potentially placing more stamp duty at risk".

The document, dated 8 February 2007 and released under the Freedom of Information Act, said "the most imponderable element" in closing the loophole was the effect on the property market. "Clearly, if builders or investors have factored in the non-payment of stamp duty into the price or return they expect from their investment, then any substantial increase in that duty may cause a reaction of some sort and affect market confidence".

The impact was impossible to say, the document stated, but there was an expectation that some action to deal with it was in the offing.

"If, however, the market is on the turn, as it may be now, the effect will be compounded. In addition, in the present market situation of excess demand, some of the extra duty will be passed on to the residential purchaser affecting their demand for property".

Cowen, whose policies as finance minister were castigated by reports into the banking crisis, later asked Goodbody independently to examine the economic and market consequences. They recommended that the provisions not be introduced at that stage.

Cowen said last week that he had abolished "property tax incentives which had outlived their usefulness. In retrospect it wasn't sufficient because we needed probably to do that sooner and I acknowledge that".

The Regling-Watson report said tax cuts by Cowen "left revenues increasingly fragile, since they were dependent on taxes driven by the property sector and by high consumer spending".

The Honohan report said "macroeconomic and budgetary policies contributed significantly to the economic overheating, relying to a clearly unsustainable extent on the construction sector and other transient sources for government revenue". Dunne did not return a call for comment.