Oireachtas Joint and Select Committees

Wednesday, 6 November 2019

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach

Finance Bill 2019: Committee Stage (Resumed)

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I move amendment No. 75:

In page 84, between lines 22 and 23, to insert the following:

“Report on applying Capital Gains Tax to all sales of property by IREFs

38. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on applying the full rate of Capital Gains Tax of 33 per cent to all sales of property by IREFs, as opposed to current rules whereby tax on capital profits is paid only through a Dividend Withholding Tax when the IREF makes a distribution.”.

This amendment calls for a report to be laid before the Houses within six months looking to apply the full rate of capital gains tax of 33% to all sales of property under an IREF as opposed to the current rules whereby tax and capital profit is paid only through a dividend withholding tax where an IREF makes a distribution. We had lengthy discussions about this at different points yesterday and talked about the dividend withholding tax, the changes that will take place next year, the increase of the rate from 20% to 25%, the ability for individuals not to pay that amount because of double taxation treaties and so on and forth. Tax revenue is being collected from these structures that are made up of at least 25% of property. There are challenges for the State in collecting the appropriate amount of tax. When a normal company sells a property, capital gains tax is levied. If we treated IREFs in the same way, there would be certainty at least in relation to that portion of the tax.

This amendment seeks a report on the matter. Capital gains tax should apply in respect of the sale of property. It applies in the sale of every other property outside of the exemptions that apply in terms of first homes and so on and so forth, or primary residence. It applies for anybody else. It applies to somebody selling a corner shop. It applies to a company that is selling a couple of offices. It applies for everybody and for all property but does not apply for these fund structures. My concern relates not only to taxation. It is a matter of the impact that these funds are then having on the wider property market as a result of the tax structure from which they are able to benefit.

I ask that this area be given proper consideration. For at least three years I have been raising the issue of applying capital gains tax to IREFs as we need to move in this direction. I am pleasantly surprised that some of the suggestions I made and some that were identified by others have been included in this year's Finance Bill, which means that there is at least some movement on these structures. The amendment needs to be given proper consideration and I would like to see it being given effect this year. I ask that it be given serious consideration through the provision of a report on what applying capital gains tax to these structures would mean. We should not have to depend on the dividend withholding tax which is problematic, to say the least, to ensure we receive the entire amount being levied.

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