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Tax Code.

Dáil Éireann Debate, Tuesday - 23 March 2004

Tuesday, 23 March 2004

Ceisteanna (69)

John Bruton

Ceist:

59 Mr. J. Bruton asked the Minister for Finance his views on whether the failure to apply indexation in the capital gains code will result in taxes on paper gains. [8690/04]

Amharc ar fhreagra

Freagraí scríofa

After indexation relief was introduced in 1978 there was high inflation in the 1980s and high capital gains tax rates. At the time these high rates were a major deterrent for people considering disposals of assets. Now that the tax rate has been lowered to 20% and inflation is also consistently low, there is no reason to retain indexation relief in the capital gains tax system. Internationally, most countries do not apply indexation relief to the taxation of capital gains.

I have consistently stated that I believe in low direct taxation rates but that a broadened tax base is the price which must be paid to achieve this. As regards capital gains tax, the rate is now 20% and streamlining measures, including the abolition of indexation relief, have broadened the base. In the six years since I lowered the rate to 20%, there has been an upsurge in activity and revenue collected under the capital gains tax code. This proves my point that lower taxation means higher yield.

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