Simon Coveney (Cork South Central, Fine Gael)
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Question 136: To ask the Minister for Finance the basis on which forecasts of capital tax are made by his Department; and the assumptions in respect of the number of taxable transactions and the trend in house prices that underpinned the 2006 Estimate. [33218/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The assumptions underpinning the 2006 capital taxes forecasts were based on economic growth estimates in the Stability Programme Update which was published on Budget day, December 2005. These estimates included GNP, projected changes in the consumer price index and developments in the construction sector.

The methodology for forecasting capital taxes in 2006 firstly 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 is the discontinuance in 2006 of the bank levy, the receipts from which came in under stamp duties. The figures were then refined to take account of the impact of Budget measures. These various steps gave the base upon which the 2006 forecasts were built.

The base was then inflated for projected economic developments in 2006. In the case of capital gains tax and capital acquisitions tax, estimated growth was 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 commercial property, the forecast for 2006 was largely based on estimated volume and price growth in the residential and commercial property sectors.

The capital gains tax estimate represented an increase of 3.8 per cent and the capital acquisitions tax estimate an increase of 4.4 per cent on their respective 2005 outturns. The stamp duty estimate represented a decrease of 1.5 per cent on the 2005 outturn but this largely reflected the non-renewal of the bank levy.

The estimates for all three taxes assumed a lower rate of growth in revenues from these sources this year than the significant increases experienced in 2005. However, they still assumed a reasonably buoyant property market this year, both residential and commercial.