Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I feel equally passionate about this as do some Senators but on the other side of the argument. I believe this is an issue that has got a lot of legs in the media and from companies like the one referenced in this House, although I am not sure how many low and middle income families are seeking advice on their taxes each year. I do not say that snidely but I believe there is an indication that there are people in this country who plan their tax affairs and they obviously have concerns.

This came from Revenue and it came from nowhere else. It came from Revenue because of the examples Senator Gilroy read out. I accept those examples sound extreme and I do not know an awful lot of people like that. However, at the moment, that is the legal situation. At the moment, those people are able to avail of those exemptions, which I do not believe anybody in this or the other House wishes to happen.

The concern of Senators is whether we are going too far and creating a kind of unintended consequence whereby we are going to put at a disadvantage families who are looking out for their children.

We have heard concerns about poverty traps and so on, and I am keen to allay some of these concerns.

I wish to set straight the position on civil partners. I am advised that children of civil partners are covered in the same way as all other children.

A tax-free threshold of €225,000 applies to exemption from capital acquisitions tax for lifetime gifts or inheritance up to this value in respect of a transfer from a parent to a child. In addition, there is a small gifts exemption of €3,000, and each parent can gift this amount. Therefore, the provision only kicks in after a child has received €225,000 free, with no tax paid from the parents, in a lifetime. This is reasonable in a time of scarce resources. I accept that the limit may be too low, and this is something that may need to be examined. The Minister for Finance has said he will keep it under review. The limits are applied to a sum of €225,000 tax-free and €3,000 per year free. If a parent wishes to give a gift of more than €3,000, he or she can do so. Not one cent of the tax kicks in until a person has received €225,000 in value. The limit is €3,000 per year, but there is no tax in any year until the cumulative value of €225,000 has been exceeded.

There is a useful example for comparison. We have had conversations about wealth and tax systems and so on. Let us compare this tax treatment with that of a single person earning an industrial wage of, say, €43,000 per year. Such an individual would pay €11,400 in income tax, PRSI, and USC each year. By the time such an individual had earned €225,000, he or she would have paid over €59,000 in income tax, PRSI and USC. Therefore, an average worker in the State earning €43,000 would have paid €59,000 worth of tax at the point at which a recipient adult child would still have paid zero up to the level of €225,000. We will keep the arrangement under review in case it has unintended consequences, but I do not believe it will.

The issue of bed and board was raised. The Revenue Commissioners has stated clearly in the public domain in recent weeks that it does not intend to impute a notional monetary value to bed and board or the value that might be attributable to other such normal informal family arrangements in respect of adult children who continue to reside with their parents, regardless of age. The Revenue Commissioners will not be knocking on doors collaring people who are 26 years of age and asking how much the bed upstairs is worth per year. That will not arise; the Revenue Commissioners have made that much clear. The approach of the Revenue Commissioners is to recognise that it is impractical to put a value on such an arrangement. I seriously understand the concerns that have been expressed by people earnestly and with good reason in this House and the other House and I hope I can allay those fears.

We had an extensive debate in the other House on property prices, and Senator Gilroy raised the matter in this House. It relates to the question of whether, given current property prices, the €225,000 threshold is now too low a limit, since in certain parts of the country house prices have risen a good deal. The Minister for Finance has said that the limit will be kept under review. However, this should be kept separate from the principle of what we are trying to achieve. We are trying to ensure scare resources are used appropriately and that supports are provided for adult parents looking after their children such that no notional value is attached to bed and board, but we do not want to allow people to abuse this. Some of the examples read out by Senator Gilroy and provided by the Revenue Commissioners sound so extreme that people in the Houses may end up scratching their heads and wondering whether much of this goes on. The information from the Revenue Commissioners is that this is going on and there is a good deal of it. Indeed, it is going on to such an extent that representatives from the Revenue Commissioners have asked the Government to consider it in the context of the Finance Bill, and that is what we are trying to do.