Alan Shatter (Dublin South, Fine Gael)
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Question 146: To ask the Minister for Finance his plans to introduce amending legislation regarding probate values given to homes in the 2006 and 2007 period which are grossly unrealistic and over-valued and which have, since the furnishing of such valuations, proved impossible to sell at the valuation price to the detriment of testamentary beneficiaries who have been fixed with inheritance tax liabilities which they are incapable of discharging based on the unrealistic values; if he will make provision for inheritance tax to be charged on the basis of the price obtained from the sale of such property where such property is sold within seven years of the grant of probate for a sum below the probate valuation; and if he will make a statement on the matter. [18182/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In a falling property market, a person who inherits a property on a particular date which has a certain value may not be able to subsequently realise that value on the open market. The opposite is true in a rising property market – properties may sell for amounts in excess of their probate value. In these situations, the person inheriting the property benefits from a rising property market and the tax system never sought to secure this benefit which arose from the rising property market. It follows, therefore, that the tax system cannot seek to address the problems created by a falling property market.

I do not agree with the Deputy's description that the values given to the properties when applying for probate were "unrealistic" – the values would have been based on similar properties changing hands for those prices at that time. If the valuations now appear to be out of kilter with prevailing prices, this reflects the passage of time since probate and market conditions, rather than the use of "unrealistic values".

It should also be noted that Capital Acquisitions Tax (CAT), which includes gift tax and inheritance tax, is charged on the amount of a gift/inheritance above a tax- free threshold. The thresholds are broken into three Groups, A, B and C, based on the relationship between the disponer (the person making the gift or inheritance) and the donee or successor. For the years in question, 2006 and 2007 the tax-free thresholds are as set as follows:

CAT is paid on the asset amount in excess of the threshold. The tax rate for 2006 and 2007 was 20% in comparison with the current rate of 25%. In addition, the tax-free thresholds in 2006 and 2007 were more generous than the current levels which are: Group A €414,799; Group B €41,481; Group C €20,740.

If a child had inherited a property worth €500,000 from a parent in 2007, her/his CAT liability (assuming no other prior gifts or inheritances from parents) was €635.20, 20% of the amount above the then Group A threshold (€500,000 minus €496,824 equals €3,176; CAT due at 20% equals €635.20). A person receiving a similar inheritance today would have a CAT liability of €21,300 (i.e. €500,000 - €414,799 = €85,201 @ 25%) – this is €20,664.80 higher than the €635.20 due in respect of a €500,000 inheritance in 2006/07.

Even taking account of property values over the 2006 – 07 period, the Group A thresholds were higher for those years than average house values. Also, where two or more children jointly inherit a property, each one is entitled to the full tax-free threshold.

I am advised by the Revenue Commissioners that taxpayers in difficulty should communicate with their local Revenue office to see what accommodation might be made within the present legislative framework. On its website, Revenue has published the steps it is able to take to assist taxpayers in the present economic circumstances. The CAT Consolidation Act makes provision for payment of tax by instalment and for postponement, remission or compounding of tax in cases of hardship. The Deputy may also be aware that beneficiaries who have inherited the property in which they reside can qualify for dwelling house relief from CAT.

I do not propose to change the position that the CAT liability is determined by the value of inherited or gifted property on the valuation date. However, in common with all taxation matters, it will be considered in the context of the annual Budget and Finance Bill. ^^ Tax Code. ^^

Seán Barrett (Dún Laoghaire, Fine Gael)
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Question 147: To ask the Minister for Finance if he will consider amending the Finance Bill 2010 to list the sale of affordable housing and operation of the shared ownership scheme as non-taxable services; and if he will make a statement on the matter. [18187/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I would point out that the European Court of Justice ruled, in the case C-544/07 against Ireland on 16 July 2009, that Ireland should amend its VAT legislation to provide that services provided by State and public bodies are in general subject to VAT. The Finance Act 2010 provided that the services of public bodies, including local authorities, would become subject to VAT from 1 July 2010.

The shared ownership scheme, as a financial service, would be exempt from VAT.

In relation to whether the sale of affordable housing operated by local authorities should become subject to VAT, I would point out that the ECJ Judgement, and the EU VAT Directive, provide that services supplied by State bodies in the case of their regulatory capacity as a public authority would remain outside the scope of VAT to the extent that their treatment as non-taxable would not lead to a distortion of competition. The supply of affordable housing would be considered a regulatory function of local authorities in this regard, however, the extent to which those services are in competition with private developers is currently being considered.

I would also like to draw to your attention that where a service is made subject to VAT, the provider of the service is entitled to claim VAT on inputs in the provision of that service, where the VAT on inputs arise after the date the service is made subject to VAT.

Thomas Byrne (Meath East, Fianna Fail)
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Question 148: To ask the Minister for Finance if there is an exemption for stamp duty on bank credit and debit cards or bank cards for old age pensioners; and if he will make a statement on the matter. [18200/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Stamp Duty on cheques, bills of exchange and promissory notes has existed for many years and when electronic means of money transfer such as credit cards, debit cards and ATM cards were introduced, it was gradually extended to those products. The Stamp Duty on the various bank cards subject to a stamp duty charge is a charge payable by banks. The relevant legislation provides that a bank is entitled to charge the amount of the Stamp Duty to the relevant account-holder.

The Stamp Duty on credit cards, debit cards and ATM cards arises irrespective of the personal circumstances of an individual. If a Stamp Duty exemption was introduced for one group of people, such as senior citizens, there would be demands for similar treatment for others. I have no plans at this time to introduce exemptions from Stamp Duty for any category of individual.