Jimmy Deenihan
Question:310 Mr. Deenihan asked the Minister for Finance if capital gains tax on development land will be increased to 60%; and if he will make a statement on the matter. [26042/01]
Written Answers. - Capital Gains Tax.
It is assumed that the Deputy, in asking this question, is referring to the provision that I introduced in the Finance (No. 2) Act, 1998, which while reducing the capital gains tax rate from 40% to 20% for disposals of development land which had planning permission for residential development also stipulated that this 20% rate would be increased to 60% for disposals after 5 April 2002. This was the carrot and stick approach recommended in the first Bacon report in order to bring to the market land suitable for residential development.
In the Finance Act, 1999, I continued this approach by extending the 20% capital gains tax rate for disposals up to 5 April 2002 of land zoned for residential development and disposals to the National Building Agency and to the voluntary housing sector. In the Finance Act, 2000, I reduced the rate of capital gains tax on the disposal of development land generally to 20%.
As a consequence of these changes I believe the supply of residential land increased considerably in the last two years and there was a big increase in the number of full planning permissions granted in 2000 as compared to 1999. In other words, there was good reason to believe that the impending 60% CGT rate had served its purpose in speeding up disposals of residential development land. Furthermore, if the 60% rate of CGT were to apply from 6 April 2002 it would have meant that the rate of CGT on zoned residential land would have been three times that on zoned commercial land which could have resulted in land being diverted from residential to commercial development.
Accordingly, in the Finance Act, 2001, I withdrew the provision dealing with the introduction of the 60% capital gains tax rate on the disposal of residential development land which was to take effect for such disposals on or after 6 April 2002. The 20% capital gains tax rate, therefore, will continue to apply to all taxable disposals, whether of land or other assets.