With the budget just a few weeks away and the property market pretty much at a standstill, the ongoing issue of stamp duty has reared its ugly head once again, as the experts battle it out over how the government should address stamp duty, and the effects of any changes on a falling market.

And while the post-election abolition of stamp duty for all firsttime buyers, announced earlier in the year, was welcomed, it has effectively done nothing for the ailing property market, with only 1,661 buyers taking advantage of the new measures. At the same time the cost to the exchequer for these first-time buyer transactions was 33.76m.

Bodies like the Irish Auctioneers and Valuers Institute (IAVI), and the Institute of Professional Auctioneers and Valuers (IPAV) are urging the government to act quickly and reduce the stampduty levels in order to kick-start the dying property market back into action, and protect the thousands of jobs linked to the industry. However, Minister for Finance Brian Cowen seems opposed to making any changes on the stamp-duty system, despite IAVI president Robert Ganly accusing the minister of "lacking the courage of his predecessors" on reform.

At his pre-Budget outlook in October, Cowen refused to discuss the issue claiming that "speculation and uncertainty about stamp duty has a negative effect on the housing market.

"It is my long-held view that, as Minister for Finance, it is neither appropriate nor responsible for me to speculate or discuss what I will or will not do in regard to stamp duty. The market reacts to whatever the Minister for Finance says, and I do not want to do anything that would disrupt the market."

But there's no denying that the property slowdown has impacted on the government coffers with stamp duties 13.8% below target...401m lower than forecast, according to the recent exchequer figures for the first nine months of 2007.

This could mean that we can expect little if any changes to stamp duty in the forthcoming budget, as Cowen is unlikely to reduce this source of income even more. However many property professionals claim that stamp duty reform would bring a lot of buyers back into the market and thereby increase transactions.

The IAVI maintain that 5% of something is better than 9% of nothing.

"When Minister Cowen looks at his finances next March, he'll see a big black hole in stamp-duty revenue, unless he does something now to re-energize the market, " says Ganly.

For second-time buyers the current rate of stamp duty is as follows: 0% on properties under 127,000; 3% on 127,001 to 190,500; 4% on 190,501 to 254,000; 5% on 254,001 to 317,500; 6% on 317,501 to 381,000; 7.5% on 381,001 to 635,000; 9% on 635,001-plus.

We put a series of scenarios on reforming stamp duty to the property experts in the industry and asked for their opinions.

ABOLISH STAMP DUTY COMPLETELY
What does it mean? Abolishing stamp-duty would mean that buyers would have a lower mortgage as they wouldn't have to borrow the extra money, anything from 15,000 to 90,000-plus, usually calculated into the overall loan.

However it could mean that vendors will hold out for a higher price, knowing that buyers no longer have to pay stamp duty.

Pros: Abolishing stamp duty would definitely kick-start the property market into action again, as homehunters purchasing an average family home in Dublin could save between 70,000 and 80,000 on a transaction. It would also allow older people living in large homes to trade down without being penalised.

This would eventually free up significant numbers of mature three- and four-bed homes in the suburbs, and thus put less pressure on young families living in the commuter belt. Any shortfall in the government finances could be made up by cutting spending in our more spendthrift departments, or from general taxation.

Cons: "Buyers and sellers would love it, but abolishing stamp duty would just send things spiralling out of control, " says Ron Cregan, senior negotiator with Colliers Jackson-Stops. "We could find ourselves back in 1998/99 when the investors were buying up all the property, and first-time buyers were complaining that they couldn't compete. This was one of the reasons the government increased stamp duty for investors, " says Cregan.

Ronan Lyons, economist with Daft. ie agrees that abolishing stamp duty altogether would be a disaster. "It might be great for the market in the short-term but it would ignore the principles of taxation, and people's responsibility to pay taxes. It would deprive the government of significant funds and overall would not be good for society, " says Lyons.

CHANGE THE STAMP DUTY TAX BANDS
What does it mean? Probably the most practical and fair means of collecting property on tax, would be to re-adjust the property bands. At present, the vast majority of buyers in Dublin pay stamp duty at 7.5%, the second highest level, as the average house in Dublin costs just over 410,000.

"In this country, we have 11 separate rates of stamp duty, depending on the type of property and the circumstances of the buyer. Streamlining the system, having a maximum of four rates with a top rate of 5%, which is 1% higher than in the UK, would dramatically increase the number of transactions, and would benefit the exchequer in the medium term, " says Robert Ganly, adding that if Minister Cowen doesn't do anything with stamp duty in this budget, families will revolt by not buying property. IPAV have also proposed a re-banding of the stamp-duty rates, suggesting that property up to 250,000 should be exempt, while homes priced from 250,001 to 500,000 should be taxed at 3%, and at 6% for homes priced 500,001 to 1m.

Pros: Re-banding the stampduty levels would allow a much wider group of people to buy homes at more affordable levels. According to Permanent TSB, the volume of mortgages drawn down in the first half of the year was down 21.2% on the first half of 2006. Increased buying and selling would reactivate the entire market and increase the number of property transactions, which ultimately would increase the level of funds that the government can collect through stamp duty. And according to Ron Cregan, reducing the property bands would increase the yields for investors. And like it or not, we do need a certain amount of investor activity in the market.

"There are no yields in the residential market now, so reducing stamp-duty would up the yields and attract investors."

Cons: If the highest tax on property was just 5% or 6%, then people buying the most exclusive homes in the country would get away with only paying a reduced tax. Is this really fair?

INTRODUCE AN ANNUAL PROPERTY TAX
What does it mean? In Northern Ireland, and in many other countries, people pay an annual property tax, which is either based on the value of their home or means-tested. Property rates in Ireland were abolished in the 1970s.

Pros: Expecting buyers to have a wad of extra cash to fork out on stamp duty, on top of paying a deposit, when money is tight is bad for business. An annual tax would ease the burden of stamp-duty and allow homeowners to budget for a yearly fee. It would also mean the government would have a constant and consistent source of income from this tax.

Cons: "In principle this is the most equitable way of collecting property tax but in reality it doesn't work, " says Ronan Lyons. "We would be back to the problem of the little old lady, a widow whose home is now worth a million, but in reality, she has little or no money. How do ask her to pay an annual property tax?"

Also, an annual property tax would be impossible to collect and police. Like the bin tax it would become another thing that some people would pay and others wouldn't. Plus there's the added cost for the government of perhaps hiring inspectors (like TV inspectors) to make sure that the tax is paid.

And what about those who recently bought a house and paid a lot of stamp duty?

Would they be exempt from the annual tax? Would it be levied at a lower rate? Also how do you quantify a recent purchase? A house purchased in the last six months, year, two years?

TAX ON THE DIFFERENCE
What does it mean? The current stamp duty system has rigid thresholds, which means if a buyer pays even a few Euro over a certain price, they immediately are bumped up to the higher tax rate. For example, if a buyer pays 381,000 for a home, they pay 6% stamp duty on the full amount. However if they pay 381,001, they must pay 7.5% stamp duty. At the moment, the system creates false price floors and ceilings. During the boom time, 381,000 became the magical figure that sellers were looking for even for the most appalling run-down property. A better system would involve buyers paying 6% on 381,000 and only paying 7.5% on the difference. "The stamp duty system works in a funny way by penalising buyers who pay one euro over the threshold, and a good tax system shouldn't do that, " says Ronan Lyons.

"Purchasers should only pay higher stamp duty rates on the percentage of the property which falls into that category of tax rather than on the full amount, " agrees Marian Finnegan, chief economist with Sherry FitzGerald Group.

Pros: Paying different rates of stamp duty on the difference would be a very fair system, allowing buyers better flexibility in house purchasing.

Cons: Buyers would definitely welcome it but the government would probably end up collecting less in stamp duty.

KEEP THE STATUS QUO
What does it mean? While there are great hopes that budget day will see a reform of the stamp-duty system, it's looking likely that there will be no changes.

Buyers paid stamp duty during the boom years without much thought. It was accepted that stamp duty had to be paid. In the last number of years it has only become an issue because house prices have spiralled way out of control. Few buyers could get on the ladder and those that could paid way over the odds for their property. That's all changing now. According to Declan Cassidy of Gunne, stamp-duty isn't necessarily the only thing slowing down the property market at the minute.

"During the last year and a quarter, first-time buyers have held off purchasing a property as they wait until the market bottoms out, which we have more or less reached now, so once buyers accept that there are no more changes coming to prices or stamp-duty, they will start buying which will hopefully get the whole market moving again, " says Cassidy.

Pros: While no change is bad news for buyers at least it should take the uncertainty out of the market once and for all, and hopefully put and end to the whole debate.

Cons: With no changes to stamp duty on the horizon, there is a danger that the trader-up market might just start extending and improving their homes rather than moving, resulting in an even more stagnant market.