Olivia Mitchell (Dublin South, Fine Gael)
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Question 60: To ask the Minister for Finance the assumptions and methodology underpinning his estimate of the increase in revenue from capital taxes in 2006 (details supplied). [7987/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The assumptions underpinning the forecasts for capital taxes are based on the economic growth estimates in the stability programme update which is published on budget day. These estimates include GNP growth forecasts, projected changes in consumer prices and developments in the construction sector.

The methodology for forecasting receipts from capital taxes in 2006 first required my Department to estimate the outturns for the base year, in this case 2005. These projected outturns were then adjusted to take account of known once-off factors, both negative and positive, likely to impact on the yield in 2006. An example would be the discontinuance in 2006 of the bank levy, the receipts from which come under stamp duties. The figures were then refined to take account of the impact of budget measures. These various steps provide the base upon which the 2006 forecasts were built.

The base is then inflated for projected economic developments in 2006. In the case of capital gains tax and capital acquisitions tax, estimated growth is driven by the forecast change in nominal GNP and in the CPI, respectively. For stamp duties, since the bulk of the yield is from transactions in residential and non-residential property, the forecast for 2006 is largely based on estimated volume and price growth in the residential and non-residential property sectors. The methodologies used continue to be developed and my Department continually reviews any available international and domestic developments in forecasting methodologies in order to improve our approach.

Capital tax receipts are always hard to forecast as they tend to reflect movements in property markets and once-off decisions by buyers and investors. With this in mind, my Department's estimates for revenues in 2006 from capital taxes are as follows: capital gains tax, €2,035 million; capital acquisitions tax, €260 million; and stamp duty, €2,685 million. The capital gains tax estimate represents an increase of 3.8% and the capital acquisitions tax estimate an increase of 4.4% on the respective outturns for these taxes in 2005. The stamp duty estimate represents a decrease of 1.5% on the outturn for stamp duties in 2005 but this largely reflects the non-renewal of the bank levy.

The estimates for all three taxes assume a lower rate of growth in revenues from these sources this year than the significant increases experienced last year. They still assume, however, a reasonably buoyant property market this year, both residential and commercial.