Joan Collins (Dublin South Central, Independent) | Oireachtas source

I support the amendment. It is a very important one. On 16 October, I was contacted by a journalist and a concerned citizen about this loophole. I raised it with the Taoiseach on Leaders' Questions on 26 October. The Taoiseach told me to go away and draw up an amendment to put into the Finance Bill because at that stage it was not on the agenda. The Department of Finance decided last year it would not reform this rampantly abused exemption from inheritance tax despite knowing for close to a decade that it has been used for tax avoidance by the wealthy. A specific loophole in Revenue rules allows parents to gift valuable properties to sons and daughters without paying any tax so long as their child has lived in the property for three years and remains there for another six years. The loophole has in the past been used to transfer properties worth tens of millions of euro each year and has been aggressively used by tax accountants as a mechanism for their wealthiest clients to help shelter money. Documents obtained by the journalist under freedom of information revealed that both the Department of Finance and the Revenue Commissioners have known since at least 2007 that this scheme is subject to systematic abuse. It is in the public interest to know why this was brought in and when it was changed. In 2007 there was an investigation done. It was obvious it was being used by wealthy families for that purpose but it had not been touched. An e-mail sent from a Department official to Revenue in April this year explained that there was a truncated timespan in which to consider it and so it would be better to postpone. As part of that discussion, a Department of Finance submission was also circulated which revealed Revenue had already carried out a review of the exemption and its abuse nine years ago. That briefing note was clear in its findings saying there was strong evidence it was being used by some wealthy individuals to avoid inheritance tax and it is probable that if section 86 relief is not curtailed it will become the vehicle of choice for inheritance tax and passing on wealth to the next generation. Figures for 2005 show that properties with a value in excess of €1 million had been inherited entirely tax-free on 19 occasions and given as gifts tax-free on four occasions. This is very serious. What shocked me when I was approached by the journalist and the concerned citizen was not that we had a tax loophole but that it had been known we have had a tax loophole since 2007. There is evidence there for it and it was not moved on until I raised it in the Dáil. Deputies Tommy Broughan and Joan Burton also raised it. The briefing note in 2005 mentioned two sisters who were both given tax-free gifts of houses, one of which was worth €2.25 million and the other cases involved houses worth up to €10 million. It stated the system in place now allowed parents to purchase a house for a child to live in and on the death of the parent the child inherits the house tax-free. It said "To all intents and purposes, this is a mechanism for the tax-free passing on of wealth". On occasions, children were renting out the house and living and working abroad. The exemption generally only benefits high wealth individuals as they are best positioned to purchase a second property outright for the children. The Revenue Commissioners said:

[Our] responsibility is for the fair and impartial administration of the tax legislation in place, and responsibility for tax policy rests with the Minister for Finance and the Government. Revenue has no further comment to make in this regard.

In response, the journalist approached the Department of Finance about this amendment and it said the investigation by Revenue had conservatively estimated the total loss to the Exchequer at almost €19 million over the period from 2011 to 2015. It stated that as the investigation had been carried out and a significant modification of the exemption had been included in the Finance Bill, a further historic report would not be warranted. It is warranted and the Minister has a duty to the people of this country to ensure it happens. The loophole could have been closed in 2014 when a detailed submission was prepared for the Minister warning him about the tax avoidance. However, at that point, for reasons not explained in the official records, the Minister opted not to act. The submission seeking change was bluntly marked "no" in the freedom of information material received, which I have seen. It has to be looked into. It is a very serious situation. Since 2007, the Department of Finance, Revenue and the Minister at the time knew about it. The Minister, Deputy Noonan, knew about it in 2014. We have to find out exactly what went on.

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