Joan Burton (Dublin West, Labour)
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Question 25: To ask the Minister for Finance his views on the increasing number of high net worth persons avoiding capital acquisitions tax on multi-million house transfers as a consequence of section 86 of the Capital Acquisitions Tax Consolidation Act 2003 and the increasing use of licensing arrangements in respect of land transfer and development land deals, thereby avoiding capital taxation, including stamp duty; the number of house properties and estates and the number of land transfer and development schemes qualifying for the avoidance of capital taxes for each year from 2000 to date in 2006; and if he will make a statement on the matter. [25179/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Deputy refers to two separate circumstances of potential abuse of the tax system. The first relates to section 86 of the Capital Acquisitions Tax Consolidation Act 2003, known as the family home relief, which provides an exemption in regard to second dwellings.

With regard to section 86 of the Capital Acquisitions Tax Consolidation Act 2003, the purpose of this exemption is to benefit individuals who had been living in their own family home for a period prior to acquiring the house, either by way of gift or inheritance. The provision came into effect for gifts or inheritances taken on or after 1 December 1999. The main conditions attaching to the exemption are that the beneficiary, that is, the person who receives the gift or inheritance of the dwelling house, must have resided in the house for a minimum of three years prior to the gift or inheritance and must not have had an interest in any other dwelling house. In addition, the beneficiary must continue to occupy that dwelling house as his or her only or main residence for a period of six years commencing on the date of the gift or inheritance. This lengthy owner-occupier condition was included in the legislation to restrict the relief to genuine cases and avoid the relief being used as a means of tax avoidance. These conditions of ownership and residence after acquisition may be waived where the beneficiary requires long-term medical care in a hospital, nursing home or convalescent home or where the beneficiary is aged 55 or over.

I am informed by the Revenue Commissioners that statistics are available on the number of claims under section 86 since the introduction of the relief. The number of claims was three in 2000, 24 in 2001, 13 in 2002, 252 in 2003, 553 in 2004 and 542 in 2005. This compares to almost 20,000 capital acquisitions tax returns in 2005, or just under 3% in that year.

The relief was introduced in the 2000 budget to help those sharing the family home who were faced with very large tax bills when inheriting the home they had lived in for some time. The relief was particularly addressed at cohabiting couples not catered for in the law before then, aunt and niece type cases and same sex couples. It was widely welcomed when it was introduced and applies irrespective of the value of the dwelling house being transferred.

I have no evidence that this provision is being abused. The fact that the numbers using the relief have increased sharply since it was introduced is not evidence of abuse in itself. The number of persons claiming relief under section 86 made up less than 3% of the overall number of claims under capital acquisitions tax in 2005. If the Deputy has evidence to support her concerns of abuse she should being it to the attention of the Department or the Revenue Commissioners.

The second matter raised by the Deputy refers to the avoidance of stamp duty liability and capital taxation charges by developers using licence arrangements. Stamp duty is a charge on documents, which are mostly legal, used in the transfer of property. Where a property is purchased, stamp duty is charged on the conveyance or transfer effecting change of legal ownership of the property concerned. If there is no conveyance, there is no stamp duty. A builder or developer can, therefore, obtain a licence from a vendor to build on land owned by the vendor without incurring a stamp duty charge at that stage of the venture. Once the buildings, whether commercial or residential, are completed the conveyances or transfers of such properties to purchases are liable to stamp duty in the normal manner unless specific exemptions are available to such purchasers.

Taking account of the proliferation of developments generally in recent times and in the context of its major project in the construction sector in 2006, the use of licensing and similar arrangements is being reviewed by the Revenue Commissioners as part of its audit and compliance programmes. The review, as with Revenue's overall approach to business, will focus on risk. I have asked Revenue to inform me of the outcome of its review and I will decide what action, if any, is required, bearing in mind the effect on the housing market and the cost to the Exchequer.

Information requested by the Deputy on the number of land transfer and development schemes involved is not available.

The Deputy is concerned that the use of licence arrangements by developers might constitute avoidance of capital taxation on the part of the developer but the Revenue Commissioners have informed me that as capital sums payable to landowners for the disposal of property by way of licence agreements are chargeable to capital gains tax in the normal manner, it is not considered that such tax is avoided by the use of these arrangements.

Joan Burton (Dublin West, Labour)
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Is the Minister considering, in the context of the next budget and Finance Act, amending avoidance legislation to cut off what have become two of the more notorious new ways in which very wealthy people can avoid legitimate taxation on very valuable property?

According to the Minister's reply, 1,400 homes have been transferred under section 86, a Charlie McCreevy "special" from the former Minister for Finance in the Finance Act 2000. Given that the exemption per child on house transfers for capital acquisitions purposes is approximately €500,000, does the Minister accept that people who own properties worth many tens of millions of euro are using this loophole to avoid any capital acquisitions tax arising?

I asked the Minister to indicate the value of the 1,400 properties subject to this special arrangement. Why is that information not available? It must be available. Is the Minister or the Revenue Commissioners hiding the information so that we cannot find out about this particularly lucrative form of tax avoidance, which in reality is only available to the very wealthy, given that one must transfer one's property in full to a resident person?

Can the Minister tell me whether a major property deal is going through in this country at the moment which is subject to stamp duty at 9%? His officials must know this from examining the files. People buying a second-hand home are paying stamp duty, yet every builder in town who is involved in multi-million euro transfers of property can avoid the duty. We have seen extraordinary prices in the Ballsbridge area, for example. All those deals are subject to licensing arrangements, as the favoured method, or to the transfer of shares.

Ordinary taxpayers are paying a heavy price in stamp duty, their children are paying capital acquisitions tax when the family home is transferred and yet the Minister is leading a coach and four through the taxation system so that very wealthy individuals can engage in tax avoidance with regard to capital taxes. These are the same people for whom the Minister has a whole regime of special schemes to allow them to avoid income tax.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Unfortunately, the supplementary questions were prepared prior to my giving the answer. With regard to the first part of the Deputy's question on section 86, I have pointed out that the Revenue Commissioners do no have evidence of abuse as suggested. Claims under the section represent less than 3% of the cases. It is very unfortunate that the Deputy is suggesting that we are not giving her the information she seeks. The information, if it is available, is always given. There is no agency more adept or proactive in that regard than the Revenue Commissioners.

In the light of any concerns raised regarding the potential for abuse, the Revenue Commissioners have decided to carry out a survey, for the sake of assurance, of a proportion of cases where the relief was granted. That will be carried out over the coming months with a view to completion in advance of next year's Finance Bill. I have asked Revenue to keep me informed of progress in this regard. On the face of it, the Revenue Commissioners feel that abuse is not taking place but will carry out a review for assurance purposes, and that is fair enough.

With regard to the other matters raised by the Deputy, I have given the full picture in my reply. A review is taking place across a range of areas relating to the construction sector, including with regard to the matters raised. When that review becomes available and we have the evidence from the Revenue Commissioners, we will determine if action is required.

Section 86, as I understand it, was welcomed by all sides of the House when it was introduced in the Finance Bill. To portray it otherwise is inaccurate.

Joan Burton (Dublin West, Labour)
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Property is being sold in the Ballsbridge area on a weekly basis for over €1 million per acre and many deals of €50 million and upwards are being completed. The saving through the loophole regarding stamp duty costs the Exchequer approximately €5 million a week in Ballsbridge alone. Meanwhile, young couples who buy a second-hand house in the same area pay 9% stamp duty. That loophole is used by Fianna Fáil's friends in the construction industry, and it must be reviewed and eliminated. I welcome the news that the Minister is having a review carried out regarding both capital tax elements. When it is made available, will he publish its results in full? I cannot understand how the Revenue Commissioners do not receive the value of large house estates being passed under section 86.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I reject the usual innuendoes from that side of the House regarding these matters. Unfortunately, I must listen to the same old stuff every day. I have no personal knowledge of anyone availing of such exceptions or reliefs. As is the requirement and norm for questions, I am giving the relevant information rather than engaging in assertion and innuendo.

The reviews are being carried out at the initiative of the Revenue Commissioners. I brought the matter to the attention of the House at Question Time in replies given some months ago. There is nothing new in the fact that those reviews are taking place. It was the intention of the Revenue Commissioners to have them, and they have announced a targeted approach towards the construction industry for this year, with the involvement of 25% of audit personnel concentrating specifically on this sector. It is a national audit focusing on risk in the construction industry under various tax heads. The project is being managed by a national steering group reporting to Revenue management.

The Revenue, in association with the Irish Taxation Institute, organised a series of open fora on the construction industry project. As I have said, those are the sorts of mechanisms the Revenue Commissioners have employed in other sectors where they feel revenue protection might be at risk. When they report to me, I will decide what action is required. I will give no commitment before receiving the report.