Michael Mulcahy (Dublin South Central, Fianna Fail)

Unearned income deserves to be taxed, given the state of the national finances, but this should be a temporary measure. At 20%, DIRT is too high. We should encourage people to save. If we do not, we are encouraging people to consume, to spend their money rather than save it. That is not a good idea.

I wish to make a similar point on capital gains tax. I support the measure on a temporary basis because we have little choice. We all recall that capital gains tax used to be 40% and the former Minister, Charlie McCreevy, reduced it to 20%. When he did that, he hugely increased the tax take from capital gains tax. Similar to the DIRT issue, the more one raises capital gains tax the less people are inclined to take risks or dispose of their property, shares or whatever and one runs the risk that the tax take may go down.

Will the Tánaiste indicate whether the sum of €160 million is in addition to the normal take or if it is the total take from capital gains tax? I agree with what Deputy Rabbitte said. The take on capital gains in the next two or three years will be abysmally low. I think I am correct in saying one can bring forward losses indefinitely. In the past year or 18 months I estimate that tens of thousands, if not hundreds of thousands of people have made large capital losses and they will be bringing them forward. I fear that the take from capital gains will be very small. However, I am not sure the Minister had an option. Given the overall financial circumstances he probably did have to increase the tax, but if the net effect is to decrease the tax take then it might be a self-defeating item.

The rationale for the increase in capital gains tax given in the Budget Statement was a good one. The Minister for Finance specifically outlined that it was to decrease the rate of commercial property stamp duty from 9% to 6%. That is a laudable move because many people were simply not developing properties or buying commercial properties because the 9% rate of stamp duty was absolutely exorbitant. I support the measure in the sense that it has made possible that decrease in stamp duty. I also support it on the basis that it had to be done given the overall state of the national finances.

The capital gains tax increase should be only a temporary one. As soon as economic conditions improve the rate should be reduced to 20% or even less. We all know what a competitive environment there is for capital and if Ireland is not at the edge of the competition there is no future for us.

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