The Department of Finance is considering cutting or abolishing an 80% windfall tax on land rezoning profits as the Government seeks to increase the housing supply amid a price surge, a person with knowledge of the matter said today. 

According to reports on Bloomberg, the tax may be altered in next month's Budget.

The tax is levied on profits flowing from the rezoning of land for residential, commercial or industrial use since October 2009. 

"Any changes to the windfall tax is a matter for the budget," the Finance Department said in response to questions today. 

"There will be no announcement made before Budget day on October 14," it added.

The measure was introduced to control land speculation, following the worst property crash in western Europe, as part of legislation setting up the National Asset Management Agency. 

Changes are now being contemplated to encourage landowners to have their property rezoned to allow the building of homes.

Home prices surged an annual 23% in Dublin in July, pushing values 13% higher nationally, after developers stopped building houses in the wake of the property crash. 

About 8,000 homes were built last year, down from about 93,000 in 2006, the height of the "Celtic Tiger" economy.
  
The Government has estimated that at least 25,000 new homes a year will be needed over the next 15 years. 

NAMA's chief executive Brendan McDonagh said at a conference in Dublin last week that it might be helpful if the tax were now reviewed as the Government tries to increase housing supply.

"I certainly think in the first few years of operation, it probably didn’t matter, because there wasn’t too much activity in the market," Mr McDonagh said. He said he was speaking in a personal capacity as he can not comment on Government policy.

Revenue have no record of tax returns of individuals or companies making profits subject to the levy from 2010 to 2012, according to Mr Noonan. 

"The windfall gains provisions were introduced primarily to discourage overheating of the property market by way of speculative transactions involving rezoned land, rather than as a revenue raising measure," he said in a written response to a parliamentary question.