Michael McDowell (Independent) | Oireachtas source

I completely agree with the last contribution. This is not an ideological thing. It is about increasing the capacity of assets to flow into the market. A capital gains tax of one third is indefensible in that context.

Senator Gavan mentioned the Government's view of the proposal to give some income tax relief on rental payments to taxpayers who are not entitled to other reliefs. I voted in favour of that because I genuinely believe that people are being very heavily gouged by the housing shortage in respect of the rental payments they are making, especially in Dublin, where some of the payments being exacted by landlords and market forces are extraordinarily high.

The fundamental issue is whether we want assets coming into or going out of the market. As long as we have 33% capital gains tax, many assets will be withheld from market activity. On the point Senator Gavan made about a rate of 33%, 20% or 40%, it has to be borne in mind that it is not just a matter of how fair we think this is on some abstract level. If assets become more mobile and come into the market more quickly, that has a market effect. The market cannot be misunderstood. It is a thing where some assets are stodgy and will not become involved in sales and transactions, if 33% capital gains tax is applied to them. Charlie McCreevy took an awful lot of stick for his welfare reforms and so on, but he proved, in fairness to him, that if the rate is reduced, the yield is quintupled. That is what he did with a reduction from 40% to 20%. I do not think the yield would be quintupled at present but I believe the capital gains tax yield would be doubled or trebled, if the rate was reduced from 33% to 20%.

I strongly support a review of capital gains taxation. I know it is politically difficult. The Minister is probably thinking what his partners in government, the left and all The Irish Timescolumnists, with the exception of Senator McDowell, would think of it, but I honestly believe that the current rate of capital gains taxation is one of the influences on the market that is in fact working against the mobilisation of assets in order to deal with the housing shortage. I will not be persuaded otherwise. I will not call a vote on this matter but I am saying this is a case where effectiveness trumps ideology.