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Dáil Éireann debate -
Wednesday, 29 Jan 1997

Vol. 474 No. 1

Written Answers. - Tax Reliefs.

Trevor Sargent

Question:

65 Mr. Sargent asked the Minister for Finance the cost to the State in terms of revenue foregone from the operation of the scheme whereby certain discretionary trusts have a special low tax or no tax regime applied to them in the context of the most recent tax year for which figures are available. [2550/97]

Trevor Sargent

Question:

66 Mr. Sargent asked the Minister for Finance the number of tax exempt discretionary trusts which currently operate with the sanction of his Department; the public office, if any, where a list or schedule of such trusts may be inspected by a member of the public; and if he will make a statement on the matter. [2551/97]

I propose to take Questions Nos. 65 and 66 together.

Capital acquisitions tax (CAT) does not arise when assets pass from the settlor into a discretionary trust since neither the trustees nor the beneficiaries are beneficially entitled to the assets while the assets are in the trust. The beneficiaries become liable to CAT only when the trustees pass them the assets. However, the assets held in certain discretionary trusts are subject to a 6 per cent once-off charge and a 1 per cent annual charge. These taxes commence when the following two conditions are fulfilled: (a) the settlor dies; and (b) the youngest of the named beneficiaries reaches 21 years.

In relation to the 6 per cent once-off charge, a 3 per cent refund is available if the trust property is appointed absolutely to the beneficiaries within certain time limits.

There are exemptions from the once-off and annual discretionary trust taxes where the Revenue Commissioners are satisfied that the discretionary trust was created exclusively for one of the following purposes: (a) for public or charitable purposes in the State or Northern Ireland; (b) for the purposes of any statutory or approved superannuation scheme; (c) for the purposes of a registered unit trust scheme within the meaning of the Unit Trusts Act, 1972; (d) for the benefit of one or more named individuals and for the reason that such individual, or all such individuals, is or are, because of age or improvidence, or of physical, mental or legal incapacity, incapable of managing his/her or their affairs; (e) for the purpose of providing for the upkeep of heritage property referred to in section 39 of the Finance Act, 1978 subject to reasonable facilities for viewing the property being extended to the public; or (f) trust property which on termination of the trust, is comprised in a gift or inheritance taken by the State.

The Revenue Commissioners advise that it would not be possible to put a cost in terms of revenue foregone from those trusts either not liable or exempt from discretionary trust tax. Statistics are not recorded in such a manner as would enable the information requested by the Deputy regarding the number of discretionary trusts which are not liable or are exempt from discretionary trust tax to be identified.

In 1995 the yield from discretionary trust tax was £4.9 million. The yield in 1996 was £10.4 million and the number of trusts which paid this tax was 186.

Income received by a discretionary trust is taxed at the standard rate of income tax (26 per cent from 1997-98) and if the income is not distributed within 18 months and it exceeds the expenses of the trust, a 20 per cent surcharge applies for anti-avoidance reasons. These rules apply to all trusts, including discretionary trusts. In addition, a distribution of trust assets by the trustees to the beneficiaries gives rise to a capital gains tax charge by reference to the gain over the period the assets were in the trust.

Trevor Sargent

Question:

67 Mr. Sargent asked the Minister for Finance the estimated cost to the State in terms of revenue foregone by the granting of charitable status by the Revenue Commissioners to certain bodies; and the office, if any, where a list or schedule of such bodies is available to be inspected by a member of the public. [2552/97]

I am informed by the Revenue Commissioners that statistics are not available which would enable the precise information requested by the Deputy to be given in relation to revenue forgone through the granting of charitable exemptions. Such information could not be obtained without undertaking inquiries which could be carried out only at a disproportionate cost.

For reasons of confidentiality the Revenue Commissioners do not supply details about applicants for charitable exemption for tax purposes nor provide a list of organisations to which such exemption has been granted. The Deputy will be aware however that the report of the advisory group on charities/fundraising legislation was recently presented to the Minister for Justice and is now before the Dáil Select Committee on Legislation and Security for its consideration prior to the finalisation of legislative proposals. That report includes a recommendation that organisations raising funds for charitable and other purposes will be required to register with a registration authority.

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