Lucinda Creighton (Dublin South East, Independent) | Oireachtas source

I move amendment No. 45:

In page 99, lines 4 to 9, to delete all words from and including "who" in line 4 down to and including "herself," in line 9.

I am pleased to have an opportunity to speak on this amendment as I did not have a chance to do so on Committee Stage. I am very concerned about the Government's plans to essentially introduce a new, or an expanded, tax on inheritance. Put simply, what the Government proposes to do is to limit tax exemptions for a parent who wants to provide support to his or her child if that child is over 18 years of age, or is not in full-time education, to €3,000 per year. This is on top of the 33% lowering of the threshold over the lifetime for tax relief on gifts or inheritances from a parent to a child which has taken place over the past three years, specifically since 2012 when these changes began.

What I would like to highlight is the unfairness that exists when one starts to look at the distinction that can be drawn between two children, one of whom goes directly into full-time education at 18 years of age and another who does not for a variety reasons. In these straitened times, many children are not going directly into full-time education. They are delaying it, deferring it or are doing it in a part-time capacity, none of which will be covered by the exemption in the legislation. I consider that to be an entirely unfair scenario. Another example is where a child is over 25 years of age and has faced illness, or who for some other reason, does not potentially benefit from the same exemptions as is currently the case.

The Revenue Commissioners issued a statement last week or the week before that the changes would not include the imposition of a tax on board or lodgings, food or other services provided by a parent to children over 18 years of age or over 25 years of age, depending on the circumstances, but we do not have any detail or clarity as to how the Revenue Commissioners intend to implement this amended legislation. This information should be published prior to the adopting of this legislation and not after it. We simply do not know how it will operate.

Some €3,000 per year in tax free gifts from a parent may sound somewhat reasonable but what is not said is that every gift from a parent to a child is included and many of them are gifts we would take for granted, for example, a deposit towards a house, paying for a wedding, which is the norm in this country, a car or money to start up a business. All of those payments or gifts valued above €3,000 in a year will increase the amount of tax liability for a child when, or if, he or she inherits from their parents.

Currently, there is a lifetime tax relief of €225,000. It is a significantly diminished amount from where it was a few years ago. This lifetime tax used to be linked to inflation in the economy. This was the case for decades so as to avoid a situation where, if house prices increased rapidly, children would not be left with huge tax bills and huge liabilities on inheritance. This changed in 2010 in order to meet various troika targets. The cap was lowered and indexation was eliminated. That did not have a particularly negative impact in 2012 when house prices were on the floor but things have changed. The average house price in Dublin now is €242,600, which is €25,000 above the current threshold for tax exemption for inheritance on once-off gifts. If a parent dies in the morning and leaves his or her house to his or her children, they will have to pay a 33% tax on that €25,000 difference. That is just an average house price but in Dublin, many house prices are a lot higher than that. That is assuming that the parent did not give their children any other help along the way by way of the kinds of gift I mentioned, whether a deposit for a house, assistance with a loan for a business or paying for a wedding. If the parent gave them other assistance when they were over 18 years of age or over 25 years of age, that will now be taxed at 33%. A child will, in essence, be paying on the double.

For every investment a parent makes in his or her child over the age of 18, if the child is not in full-time education, or over 25 years of age in a case where the child was in full-time education, which is above €3,000 a year, that will increase the amount of their inheritance, which will be taxed at 33% in the future. It is profoundly unfair.

It mitigates against the sort of society where families help each other and are not reliant on the State for a range of supports that they would otherwise need. It is illogical. It would be more honest if the Minister of State would tell us this is not a tax focused on the super wealthy but that it will affect ordinary people the length and breadth of the country. The Government is forecasting a 20% rise in the amount of revenue it will collect next year. For context there was a virtually identical number of deaths in 2011 and 2012 according to the Central Statistics Office, CSO, but the tax collected on inheritance in those years increased by 20%. That is illuminating because it shows the intention of the Revenue Commissioners, the Department of Finance and the Minister for Finance is to raise additional revenues by broadly applying this to ordinary citizens. The notion that this closes a loophole for the super wealthy does not stack up. The proof is in what has happened over the past few years and the fact that this will apply to everybody. It will disadvantage parents who work hard, pay their taxes honestly and want to support and help children, particularly those who are trying to improve their lot in life or children who have fallen on hard times and need financial support from their parents. They will be punished for getting that support.

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