The Government plans to drop the windfall tax on profits from the sale of rezoned land under measures announced in Budget 2015.

Currently, gains on land that is rezoned from agricultural use to residential and then sold or developed are taxed at 80 per cent. The tax was introduced as a disincentive to property speculation.

The Minister for Finance, Michael Noonan, announced today that from January, he will abolish the 80 per cent windfall rate, and profits from such deals will now be taxed at the standard capital gains charge of 33 per cent.

A number of organisations, including the Construction Industry Federation and the Ibec-affiliated Property Industry Ireland, called for this cut in recent weeks, arguing that it would boost the supply of land needed for house building.

Mr Noonan said that he is also removing the capital gains tax relief introduced to incentives property purchases between December 2011 and the end of this year as it has “served its purpose”.

“The 33 per cent rate of capital gains tax and other standard taxation arrangements will now apply to the property market as it does to other normal functioning capital asset markets,” the minister said.

Mr Noonan said that he is also intends extending the home rennovation scheme to rental properties whose landlords are paying income tax.

The minister stressed that the Government is committed to removing barriers in the system in an effort to spur building activity and increase the supply of houses. “It is now up to the other stakeholders,” he added.