Tom Clonan (Independent)
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I thank the Minister of State for coming here this morning. I am raising this matter on behalf of James, Sheila and Kieran Sexton. They are Cork based. They find themselves in a very difficult position because they do not have children. James and Sheila are a married couple. James’s brother Kieran has returned from London, as many Irish people do over the generations. Kieran has come home to the family home where he has, at the age of 58, been diagnosed with an incurable cancer, lymphoma, and he is trying to get his financial affairs in order.

This raises the core subject of this Commencement this morning, which is about inheritance tax discrimination. This is something I was not aware of. If people in Ireland who do not have children – I do not like the term "childless" because it almost contains within it an assumption that there is a lesser or lower status applying to people who just do not happen to have children – leave anything in their wills, those who inherit must pay full capital acquisition tax. I believe that is unfair, discriminatory and inequitable. It is self-evident. This is something that affects every single constituency in this Republic.It affects every Member of this House and the Dáil. It also affects our families. For example, if somebody leaves a property worth €400,000 in their will to a son or daughter, they pay no capital acquisitions tax, which is right and proper. However, if that person happens not to have children and leaves the property to a beloved niece or nephew, he or she has to pay €118,000 in tax, which is completely unfair. The State does not need this money.

In previous responses on this matter, the Minister stated that there is a presumption of constitutionality for this legislation unless the courts find differently. He said that the CAT legislation enjoys that presumption of constitutionality. I doubt that because the Irish for household is teaghlach, which contains a much broader definition of what constitutes a family. It is not just the mother and father; it is also the elderly, like Peig Sayers ina suí next to the fire, and that community of relatives who help to raise families in this Republic of ours. We are rightly proud of our extended families.

This actually breaches the Equal Status Acts because it discriminates against people on the basis of their family status. Couples may rightly leave €400,000 to a registered charity, for example, My Little Pony, and capital acquisitions tax does not have to be paid on that. Yet, if a couple who do not have children want to leave the same amount to a niece or a nephew who might be trying to make their way in life and get a roof over his or her head, he or she has to pay €118,000. That is both unfair and inequitable. The Minister has argued that this is constitutional, but it is something he could change. It would be very positive if he did so. It would be relatively cost neutral to do it and it would right a grievous wrong. It would help not just people who do not have children but their extended families, which is all of us. It is the right thing to do. I ask the Minister to use his discretion to amend this.

Robert Troy (Longford-Westmeath, Fianna Fail)
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I thank the Senator for raising this matter. I have also been contacted by the family in question. To their credit, they have been very strong in their advocacy and other work they are doing contacting all Members of the Dáil and Seanad. I am taking this matter on behalf of the Minister, Deputy Paschal Donohoe, who is out of the country.

Capital acquisitions tax is a tax on inheritances or gifts on an amount over a particular tax-free threshold. It is a beneficiary-orientated tax, which means it is payable by the recipient of a gift or inheritance as opposed to the person providing that gift or inheritance. Capital acquisition tax plays an important role in ensuring we maintain a broad tax base and raised €854 million in 2024. The Senator will agree that the latter is a not an insignificant sum of money. It also ensures that transfers of wealth within families and between generations are appropriately taxed.

For CAT purposes, the relationship between the person giving a gift or inheritance, the disponer, and the person who receives it, the beneficiary, determines the maximum amount, known as the group threshold, below which CAT does not arise. The Finance Act 2024 increased each threshold and the estimated cost was €88 million annually. The group A threshold, currently €400,000, applies where the beneficiary is a child of the disponer.The group B threshold, currently €40,000, applies where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant, such as a grandchild, of the disponer. The group C threshold, currently €20,000, applies in all other cases. Where a person receives gifts or inheritances that are in excess of the relevant tax-free threshold, capital acquisition tax at a rate of 33% applies on the excess benefit.

In the past year, there has been a focus brought to the group B threshold with the argument being made that beneficiaries such as nephews and nieces of disponers who are single or childless - I take the point the Senator made about using the word "childless" - should benefit under the group A threshold. It is important to be aware that Ireland is not unique in providing a distinction in how children are treated for inheritance tax purposes compared with nephews, nieces and siblings.

There are a number of exemptions and reliefs from this tax that may apply depending on the circumstances of the case, some of which do not require that any specific family relationship applies. One such exemption is the dwelling house exemption. Where a person takes an inheritance of a dwelling house, that person may be able to avail of the dwelling house exemption. To qualify for the exemption, the inherited property must have been the disponer’s principal private residence at the date of death. The beneficiary must also have lived in the house for three years prior to the date of the inheritance and must continue to live in the house for six years after that date. In addition, the beneficiary must not have a beneficial interest in any other residential property. Nieces or nephews of that disponer may qualify for favourite niece or favourite nephew relief in respect of gifts or inheritances of business assets. The relief allows a niece or nephew who qualifies for the relief to avail of the group A threshold. A number of other exemptions and reliefs are available, including the small gift exemption and agricultural and business relief.

The Senator should note that the existing CAT regime, as with all legislation, was created with the benefit of advice from the Attorney General. Therefore, the Minister for Finance is satisfied that the regime does not conflict with the Equal Status Acts 2000 to 2008 and is not unconstitutional.

Tom Clonan (Independent)
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Unfortunately, we live in an era of moral legalism. It may well be the case that the Attorney General argues that it does not breach the Equal Status Acts, but it is clearly wrong. In a time of moral legalism it has never been more difficult to tell the difference between what is right and what is wrong. I put it to the Minister of State that it has never been more important that we draw a distinction between what is right and what is wrong. I heard it very clearly in his answer. An amount of €854 million is not an inconsiderable sum of money, and I know that Paschal Donohoe would say that if he were here. However, that is not the basis on which we should make a decision as to whether something is right or wrong. I do not think that just because something yields revenue to the State it should be an injustice that is perpetrated on families like the Sextons and all our families.

I appreciate the answer, but I would be grateful if the Minister of State could ask the Minister, Deputy Paschal Donohoe, to consider righting this wrong.

Robert Troy (Longford-Westmeath, Fianna Fail)
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I will certainly bring the compelling case the Senator has made today back to the Minister. Some of my colleagues have made the same case at our parliamentary party meetings. There certainly seems to be inequity. Some might even say there is inequity in having any inheritance tax because the person who generated that wealth has paid tax on it in the first instance through savings, through their work, through PAYE or whatever. However, we need a tax regime in place in order to run our country and we need to collect taxes. On other days we will be in here when the Senator and others will rightly ask what we are doing about investing in disabilities, mental health, education and social welfare. We need a revenue stream to be able to make such investment in our public services.

Quite often, people are treated differently in terms of their circumstances for taxation. Married couples are treated differently from single people. The more people earn, the more tax they pay. There are variances in the tax regime across the board and not just in inheritance tax. I accept the point the Senator has made. I will bring it back to the Minister. This is a campaign that is gathering legs. As the Senator knows, campaigns that gather legs may enjoy some element of success in the future. I will bring what he said back to the Minister.