Vol. 486 No. 1
80 Ms McManus asked the Minister for Finance if he will give the anticipated cost to the Exchequer of the budget decision to halve the rate of capital gains tax; how this sum is calculated; if his attention has been drawn to newspaper reports suggesting that some wealthy individuals have already benefited from substantial windfalls arising from this decision; and if he will make a statement on the matter. [1867/98]
When I announced the new 20 per cent CGT rate in my recent budget, I indicated that as a prudent accountant I had allowed for a net cost to the Exchequer of £5 million in the first year and £19 million in a full year. On a purely static basis, the Revenue Commissioners have estimated that a reduction in the rate of CGT from 40 per cent to 20 per cent would cost the Exchequer £40 million in a full year. However, it is only fair to assume that the new lower rate of CGT will encourage a larger number of annual transactions, especially from long-term capital holders. Hence the cost to the Exchequer reflects the estimated dynamic effects.
While I am aware of recent newspaper reports concerning the reduction in the CGT rate, I do not think it is appropriate for me to comment on individual taxpayers. As I have said in reply to an earlier question, I believe that the rate of tax applied to the realisation of a capital gain was too high and the reduction in the rate of 20 per cent will redress the imbalance which existed between the taxation of risk-free deposits and other productive investments.
