Dáil Éireann debate -
Thursday, 16 Dec 1999

Vol. 512 No. 8

Written Answers. - Capital Gains Tax.

Róisín Shortall

Question:

56 Ms Shortall asked the Minister for Finance the rationale for the reduction in capital gains tax from 40% to 20% on development land as proposed in budget 2000; if he will report on the representations he has received in this regard; the estimated cost of this measure in the years 2000 and 2001; and if he will make a statement on the matter. [27477/99]

Minister for Finance (Mr. McCreevy)

Before the recent budget only a small number of asset types remained subject to the 40% rate of capital gains tax. These included disposals of residential development land to connected parties and disposals of non-residential development land. The application of the 20% rate to non-residential development land is expected to lead to an earlier release of land for development of necessary infrastructure such as roads, as well as factories, offices and other social and public amenities appropriate in the context of the rapidly expanding economy. In this regard the budget measures on capital gains tax, by incentivising a more rapid development of land, complement the provisions of the national development plan which was published recently.

Representations were made to me by the Construction Industry Federation, the Irish Farmers Association and a number of private individuals. These highlighted some inconsistencies and anomalies, arising from the previous dual rate structure, with respect to both wider economic policy and the structure of the capital gains tax system.

It is expected that the cost impact will be neutral as the reduction in rate will be offset by increased market activity. It is worth noting that the halving of the general capital gains tax rate has been followed by a 78% increase in the revenue yield to £343 million in 1999, the first full year's receipts under the new regime.