Terence Flanagan
Question:190. Deputy Terence Flanagan asked the Minister for Finance his views on the capital acquisitions tax thresholds; his plans to increase the thresholds; and if he will make a statement on the matter. [29946/15]
View answerThursday, 16 July 2015
Questions (190, 199)
Martin Heydon
Question:199. Deputy Martin Heydon asked the Minister for Finance his plans to review the caps and thresholds of the capital acquisition tax system given the increase in property prices which means that family members can now incur significant tax bills if they wish to retain their original family home in the family when it is not their principal private residence; and if he will make a statement on the matter. [30089/15]
View answerWritten answers
I propose to take Questions Nos. 190 and 199 together.
This issue has been raised with me by Deputies and others in recent months and I am conscious of the concerns involved.
Capital Acquisitions Tax applies to the beneficiary of a gift or inheritance rather than to the person making the gift or inheritance. While the rate of CAT is 33% each person has a number of life-time thresholds for gifts and inheritances which they can receive tax free. These are based on the relationship to the person who has made the gift or bequest.
The Group A threshold of €225,000 applies primarily in cases where an asset passes from a parent to a child. The Group B threshold of €30,150 applies primarily to transfers between other close relatives. The Group C threshold of €15,075 applies between more distant relations and people who are not related.
The 33% rate of CAT applies on assets received by a person above the relevant threshold. Gifts and inheritances between spouses and civil partners are exempt from CAT.
Over the last number of years the CAT thresholds have been reduced a number of times, while the rate has been increased. These changes were necessary in order to maintain the yield from capital taxes in a period of falling asset prices so that such taxes would continue to make a contribution to our efforts to consolidate the public finances. Moreover, the views of the OECD, supported by our own economic research, is that taxes on property and other fixed capital, such as CAT, are less harmful and distortionary to economic growth than taxes on work or consumption. As the economic recovery continues to take hold, I began this year to focus available resources on reducing the burden of taxation on earned income and take-home pay where high taxes impact on competitiveness, economic growth and job creation. That will continue to be my main focus.
That said, I do recognise that recent growth in property values has implications for the liabilities that can arise from capital acquisitions tax. It is for this reason that, as I have said in response to a number of other recent Parliamentary Questions on this matter, I am reviewing the various aspects of this tax in the context of the preparations for Budget 2016 and the subsequent Finance Bill.