Professor Niamh Moloney:

I thank the Deputy for his question, which goes to the heart of the report. Our terms of reference asked us to stand back, be strategic and look at the risks to sustainability the country is facing. As I mentioned, there is a clear structural change coming to Irish society and the economy in the context of an ageing demographic in particular. To raise revenue in the most efficient way, in other words to avoid economic cost, it is important to look across the tax system. I will make a brief comment in answer to the Deputy's question and then ask my colleague Dr. Roantree to come in.

Regarding capital taxes and the principal private residence relief, as explained in the report, we are currently raising about 6% from taxes on wealth generally as compared with 66% on taxes on labour and that balance needs to shift. We are not prescriptive about the extent, but as a matter of principle the direction of travel needs to move more towards assets and wealth. If we look at the distribution of wealth and assets in the country, over 50% of wealth is held through homes and about 70% in property. Private residences form a large part of the capital base of the country.

The report is very conscious of phasing how taxes are designed. With respect to the principal private residence, our report refers to the potential for a particular tax rate, caps and thresholds. The report does not suggest removing that particular relief; there are good reasons for having it. However, in this as in other capital taxes, we are setting a direction of travel to flex as much as possible the capital base while being absolutely cognisant of why some of these reliefs are in place. This is a large relief and we frame our report in terms of potentially having a separate rate, cap or threshold, but with the details to be worked out. This is the direction of travel. I will now hand over to Dr. Roantree to answer this.