Tax Code.

Dáil Éireann Debate, Thursday - 30 September 2004

Thursday, 30 September 2004

Questions (99, 100, 101)

Seymour Crawford

Question:

100 Mr. Crawford asked the Minister for Finance the reason for the removal of the rollover tax for compulsory land purchase for such areas as new road structures and so on, in view of the fact that his system was removed in the 2002 budget based on the difficult financial outlook; his views on whether a person who is forced to give up property for the overall good under the compulsory purchase structure should have the right to replace that property without paying unjustified tax; if the rollover will be reinstated in the 2005 budget and Finance Bill as an issue of fairness; and if he will make a statement on the matter. [23022/04]

Written answers

Minister for Finance (Mr. Cowen)

Capital gains tax, CGT, is a tax on a capital gain arising on the disposal of assets. A 20% rate of CGT now applies on the gains arising on the disposal of assets, including land which is the subject of a compulsory purchase order, CPO.

It was announced in the 2003 budget that no rollover relief would be allowed for any purpose on gains arising from disposals on or after 4 December 2002. This relief was introduced when CGT rates were much higher than current levels. In effect, it was a deferral of tax to be paid, where the proceeds of disposal were re-invested into replacement assets. The taxation of these gains would take place following the eventual disposal of the new assets without their replacement.

The abolition of this relief was in accordance with the overall taxation policy of widening the tax base in order to keep direct tax rates low. Reliefs and allowances made sense when CGT rates were 40% and above. In budget 1998, the rate was halved from 40% to 20%. Taxing capital gains when they are realised is the most logical time to do so, and this change brought CGT into line with other areas.

In view of overall taxation policy, there are no plans to change the methods by which CGT is calculated on land that has been compulsorily purchased. Accordingly, there are no plans to reintroduce rollover relief.

Olivia Mitchell

Question:

101 Ms O. Mitchell asked the Minister for Finance if he will extend capital reliefs available for nursing home construction to mental hospital construction, particularly to the provision of geriatric and psychiatric hospitals cum nursing homes in which additional capacity is urgently required and the voluntary sector is anxious to become involved in meeting this obvious need. [23068/04]

Minister for Finance (Mr. Cowen)

In accordance with precedent, it is not appropriate for me in the period leading up to the annual budget to indicate what tax changes, if any, may or may not be made in this area in the forthcoming budget.

Bernard J. Durkan

Question:

102 Mr. Durkan asked the Minister for Finance the reason, in the event of a son or daughter receiving a free share in addition to their own share from an inheritance, the entire property, the subject of the inheritance becomes liable for gift tax assessment whereas only the free share should be so levied; and if he will make a statement on the matter. [23101/04]

Minister for Finance (Mr. Cowen)

The Deputy in this question may be referring to either of the following situations. The first situation is where an inheritance is given by a parent to a son or daughter with a direction in the parent's will that the inheritance be taken free of inheritance tax. In that situation, the capital acquisitions tax legislation provides that the amount of the tax on the inheritance is treated as an additional inheritance taken by the son or daughter. This equalises the position as between beneficiaries who pay tax themselves and those for whom the estate pays the tax.

The second situation is where children inherit property from a parent, but where some of them gift their share to their brother or sister. The amount that can currently be taken tax-free by a person from a parent is €456,438. In the case outlined, the brother-sister is treated as having received a gift of the property transferred to him or her from his-her sibling and is liable to gift tax on that property. This is in addition to the inheritance tax due in respect of that person's direct inheritance. The amount that can currently be taken tax-free by a person from a sibling is €45,644. If the Deputy is referring to some other situation, perhaps he would consider providing more details.