Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I thank Members for their wide-ranging contributions on this issue and on these amendments. This has been useful and I will endeavour to respond to as many of the queries raised as possible. At the outset, it is important to state this is not a new tax and the idea is not to introduce an expansionary tax. The idea is to address a reality on which the Government has been advised by Revenue. In this context, I will respond to Deputy Michael McGrath's call to give some tangible examples of what precisely the Government is responding to from Revenue.

We have a scenario in which an exemption is being applied in situations in which it was never intended to be applied by any party in this House during the debate on any Finance Bill. It is also important to state that, as some Deputies have observed, no tax at all is paid until the aggregate of all gifts exceeds €225,000. One does not pay a single euro until one reaches that point. I wish to inform the House that the Revenue Commissioners, in the course of their compliance programmes, have established that this exemption, designed to cater for normal everyday payments related to the provision of support, maintenance and education for people's children, is being abused.

For reasons of taxpayer confidentiality, the Revenue Commissioners will not give the Government a list of names, but they have provided some anonymised examples, which are worth sharing with Members. The first example is where an exemption was claimed where a wealthy individual gifted a house worth €400,000 to an adult child. In the second example, an exemption was claimed in respect of a €90,000 cash gift to an adult child to purchase a car and furnish and maintain a house. The adult child was not a dependant, that is, not one of the dependent relatives discussed earlier and had a substantial income in that person's own right. The third example with which Revenue has provided me is of a taxpayer who has given free use of a credit card, through which more than €150,000 was gifted over a two-year period.

These are realities that are being faced by Ireland's taxing authority today and in a time of scarce resources, the Oireachtas at present is allowing this to carry on. The Government is endeavouring to close that loophole in this Finance Bill. This is an attempt to rectify the fact that, currently, an exemption that never was meant to be used for such a purpose is being so used. I doubt it is a purpose for which this House ever intended its use. It is also important to note that over and above payments for support, maintenance or for education, the legislation also exempts from capital acquisition tax gifts of up to €3,000 in any one year from any one person. Thus, two parents can gift €6,000 to each child in any year without giving rise to a capital acquisitions tax liability. Gifts over this amount only give rise to such liability if the group tax threshold of €225,000 pertaining to parents and children is fully used. Beyond these exemptions, it is difficult to justify making any further allowance to parents who seek other means of making tax-free gifts to their children by trying to bring them within the terms of section 82 of the Capital Acquisitions Tax Consolidation Act 2003.

As for some of the points raised, one logical and important point concerned wedding gifts. Each parent can make a gift of €3,000 in any year to each of the persons getting married. In effect, this means it is possible that a gift of up to €12,000 can be given by parents without incurring a capital acquisitions tax liability. Obviously, if only one parent is involved, the maximum tax-free amount is €6,000. If the amount of the gift is more than that, the gift would be subject to gift tax, but, of course, the gift again would not give rise to a tax liability unless the €225,000 exemption threshold available to the child has been used against other gifts or inheritance from his or her parents. While I think Deputy Michael McGrath and others may have clarified this matter, I refer to adult children who are permanently incapacitated by reasons of physical or mental infirmity and who are dependant on parents. Obviously, the amendments being proposed by the Government in the Finance Bill do not apply and there is no change to that scenario, and rightly so.

In respect of the discussion on property prices - there also was a broader contribution by Deputy Shatter - the property market continues to improve, with positive developments that originally had been restricted to the Dublin area now manifesting themselves in other areas of the country, albeit thus far not to the same extent. I recognise there are supply issues in certain areas of the Dublin property market. The group tax-free thresholds are kept under review in the same way as other relevant tax provisions, and in this regard, it is important that the Government bears in mind for future budgets the comments of Deputies Shatter, Creighton and others in respect of these thresholds. As Deputy Shatter quite correctly outlined to the House, the Government has found itself constrained on many levels in its three and a bit years in office. However, as we move into a different period of economic recovery, these issues are being kept under review by the Minister for Finance.

It is important to put some figures on the record of a House. As one is only taxed on amounts over €225,000, a child who inherits €250,000 will pay a tax of approximately €8,000. The question for the House is whether that is penal and I do not believe it is. A child who inherits €300,000, which is a huge sum to ordinary people, will pay approximately €25,000. However, I acknowledge the issue of thresholds is a valid point that no doubt will be looked at and reviewed by the Minister for Finance. As for the question posed by Deputy Shatter, whose legal knowledge is much greater than mine, I am informed by my officials that the transfer of assets on the dissolution of a marriage or civil partnership is exempt from capital acquisitions tax under section 88 of that Act, but I would be happy to have further engagement with Deputy Shatter on that issue.

For these reasons, the Government does not propose to accept the amendments. Constructive comments have been made in respect of thresholds and the need for them to be kept under review in the context of changing and rising property prices. However, the point is that the purpose behind the Government's action is genuine and sincere and is informed by Revenue. As has been alluded to by many speakers, the Revenue Commissioners have made a statement with regard to the bed and board issue. I take them in good faith and do not propose to accept the amendments.

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