Jim O'Keeffe
Question:65 Mr. J. O'Keeffe asked the Minister for Finance the reason capital gains tax was reduced to half its former level for most transactions; and if he will make a statement on the matter. [1956/98]
Written Answers. - Capital Gains Tax.
For a long period of time, I have held the view that the rate of tax applied to the realisation of a capital gain was too high. Consequently, I announced on budget day that the standard rate of capital gains tax for all taxable gains, except development land gains, would be reduced from 40 per cent to 20 per cent, with effect from that day. The capital gains tax code already treats the disposal of development land less favourably than other disposals and such gains will remain taxable at 40 per cent.
The higher rate of capital gains tax discouraged individuals from placing their capital at risk in new ventures. The 40 per cent rate encouraged the long-term holding of assets, often until death, without regard for commercial considerations. This meant that capital gains tax was often avoided as assets transferred by way of death do not generally give rise to a capital gains tax charge. Furthermore, the reduction in the rate of capital gains tax will redress the imbalance which existed between the taxation of risk-free deposits and productive risky investment.