Denis Naughten (Longford-Roscommon, Fine Gael)
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Question 291: To ask the Minister for Finance further to Parliamentary Question No. 231 of 30 November 2004, if he will introduce roll over relief on capital gains tax for landowners who have had their lands purchased for road construction; and if he will make a statement on the matter. [21894/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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As previously advised to the Deputy in a reply to a parliamentary question on 30 November 2004, capital gains tax is a tax on a capital gain arising on the disposal of assets. A 20% rate of CGT now applies on the gains arising on the disposal of assets, including land which is the subject of a compulsory purchase order.

It was announced in the 2003 budget that no roll-over relief would be allowed for any purpose on gains arising from disposals on or after 4 December 2002. This relief was introduced when CGT rates were much higher than current levels. In effect, it was a deferral of tax to be paid, where the proceeds of disposal were re-invested into replacement assets. The taxation of these gains would take place following the eventual disposal of the new assets without their replacement.

The abolition of this relief was in accordance with the overall taxation policy of widening the tax base in order to keep direct tax rates low. Reliefs and allowances made sense when CGT rates were 40% and above. In budget 1998, the rate was halved from 40% to 20%. Taxing capital gains when they are realised is the most logical time to do so, and this change brought CGT into line with other areas.