Friday, 30 April 2021
Nithe i dtosach suíonna - Commencement Matters
I thank the Senator for raising this issue. I want to include the wording of the actual motion in the Official Report so people will be absolutely clear what I am replying to.The matter the Senator submitted asked if the Minister for Finance "would consider changing the rates of 'taxes on mobility' such as stamp duty and inheritance tax, which disincentivise downsizing and make moving house particularly difficult for people in certain financial circumstances." I will address the two different taxes that have been mentioned, namely, stamp duty and inheritance tax.
The transfer of a residential property constitutes conveyance on sale for the purposes of the Stamp Duties Consolidation Act 1999. Stamp duty is payable by the transferee, that is, the acquirer of the property, whether it was transferred by way of sale or gift. Stamp duty on transfers of residential property is chargeable at the rate of 1% where the consideration does not exceed €1 million. Where the consideration exceeds €1 million, stamp duty is chargeable at 1% on the first €1 million and 2% on the balance in excess of that, as the Senator has noted. Stamp duty is set at a low and relatively flat rate, with few reliefs, to be as straightforward and transparent as possible. It is essentially a transaction tax. Without any detail as to the changes to stamp duty the Senator envisions, it is not possible to put a figure on what such a measure or measures might cost. However, I can confirm that in 2020, the stamp duty on residential property raised €156 million. Looking further back to the normality of 2019, it raised €179 million. We would not wish to forfeit even a portion of this money from the Exchequer at this time. The Senator acknowledged that such a measure would put a hole in the Exchequer's finances and we cannot consider doing that at this time. That is the truthful position. The Minister for Finance does not accept that a stamp duty rate of 1%, which is the rate most people would pay when buying a new home after downsizing, is an inhibiting factor to such a transaction. In many cases people who were downsizing would have sold a larger house and would generally have the money to pay such a duty. Therefore, he does not see the stamp duty on residential property as a "tax on mobility".
Regarding inheritances, the Senator should note that CAT is payable on the total of all taxable gifts or inheritances received by a beneficiary. There are three tax-free thresholds, which are set according to the nature of the relationship between the person transferring the asset and the beneficiary. CAT applies at a rate of 33% on all amounts above that threshold. As there is no CAT levied on the sale of a property, it is not likely in itself to disincentivise downsizing. Should an individual wish to downsize a property and distribute additional proceeds made from liquidating the equity in the home, the normal CAT rules will apply to the beneficiaries of these assets. The group A threshold applies where the beneficiary is a child of the disponer, providing a tax-free threshold of up to €335,000. The Senator stated that it was much higher but it was reduced in light of the reduction in property prices over the period to which he referred. The group B threshold of €32,500 applies where the beneficiary is a brother, sister, niece or nephew and the group C threshold of €16,250 applies to all other relationships or if there is no relationship at all. CAT applies on any values inherited or gifted above these thresholds. Therefore, a significant value of assets can be received, particularly from parent to child. I accept that may only happen in some situations where there is only one child involved and the value of the estate is not being distributed among three or four children. The Minister is not in a position to take on board the cost that would be involved in the Senator's proposal.