The vacant site levy is to be more than doubled, rising from the current 3% rate that applies in the first year to 7% for the second and subsequent years.
The measure, announced in Budget 2018, will mean that any owner of a vacant site on the register who does not develop their land in 2018 will pay the 3% levy in 2019 and then become liable to the increased rate of 7% from 1 January 2019.
If land owners continue to hoard land in 2019, they will pay 7% in 2020, resulting in an effective vacant site levy of 10% over the two years.
Announcing the change, Minister for Finance Paschal Donohoe said it takes account of house price and rent inflation since the level of the levy was first set in 2015.
Mr Donohoe added that the seven-year period owners must retain qualifying assets to enjoy full relief from Capital Gains Tax has been reduced to four years.
In his Budget speech he added: "In order to encourage owners of vacant residential property to bring that property into the rental market for a minimum of four years, I am introducing a new, time-limited deduction for pre-letting expenses".
Reaction to Budget 2018
Dr John McCartney, Director of Research at Savills Ireland, said that increasing the vacant site levy to 7% could amplify "boom-and-bust cycles" in the construction sector.
Dr McCartney said that land is a raw material for developers and it is natural for them to carry a stock of development land.
"No developer will now carry a land-bank in a slow market. This means when a recovery follows developers will spend the early years on site assembly rather than the house building they could and should be doing," he explained.