Dáil Éireann Debate, Tuesday - 27 March 2018
102. Deputy Maureen O'Sullivan asked the Minister for Finance further to Parliamentary Question No. 90 of 30 January 2018, if he will consider adopting a system similar to the Australian model on inheritance tax whereby there is no capital acquisition tax and instead adopt a system in which capital gains tax applies in certain circumstances; and if he will make a statement on the matter. [13642/18]
Amharc ar fhreagraI am advised by Revenue that section 573 of the Taxes Consolidation Act 1997 provides that the transfer of assets on the death of a person is not regarded as a disposal for capital gains tax purposes. The assets of a deceased person are treated as having been acquired by the personal representatives or beneficiaries at their market value at the date of death. Consequently, a CGT charge does not arise on the death of a person and any increase in value in the transferred assets since their acquisition by the deceased person up to the date of death is ignored.
However, capital gains tax does operate in relation to increases in the value of inherited assets following a death. Personal representatives are chargeable to capital gains tax in respect of gains made on the sale of assets during the course of the administration of a deceased person’s estate.
Persons who inherit assets are also chargeable to capital gains tax if they dispose of those assets where they have increased in value since the date of death.
I would also wish it to bring to the attention of the Deputy that one of the main of the reasons presented worldwide for inheritance tax is that it acts to address, to some extent, the concentration of wealth within families and to spread some of the benefit of inter-generational wealth transfers to society generally.
It follows that the basic principle on which CAT operates is that when a gift or inheritance takes place the wealth of the beneficiary grows, and this growth in wealth should be liable to taxation in the same way as income or gains through employment or investment.
The situation in this country is that inheritance tax and capital gains tax are entirely separate taxes and operate independently. Inheritance tax is charged on a person who inherits assets based on the value of those assets. Capital gains tax is charged on the person disposing of assets whose value has increased since being acquired. However, where both of these taxes are chargeable on the same event, a credit is given against inheritance tax for capital gains tax paid.
I understand that in Australia capital gains tax following a death operates in the same way as it does in this country. It is charged on the increase in value of inherited assets between the date of death and the date of their disposal. This seems to be the standard capital gains tax treatment and is not imposed as an alternative to an inheritance. Australia, unlike this country, does not tax the value of inherited assets.
Clearly individual States can make changes to their tax legislation as they consider appropriate, but I have no plans to abolish inheritance tax.
