Written answers

Tuesday, 28 July 2020

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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260. To ask the Minister for Finance the estimated full-year revenue in 2021 that would be raised by increasing the rate of capital acquisitions tax by 3% to a rate of 36%.. [18771/20]

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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266. To ask the Minister for Finance the estimated full-year revenue in 2021 that would be raised by reducing the group A tax free threshold, referring to capital acquisitions tax, from €335,000 to €320,000, €310,000, €300,000, €280,000 and €250,000, respectively. [18779/20]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 260 and 266 together.

I am advised by Revenue that the costs of various changes to Capital Acquisition Tax (CAT) thresholds and rates are published on pages 15-16 of the Revenue Ready Reckoner available at link . While not all of the changes proposed by the Deputy are included, these can be extrapolated on a straight line or pro-rata basis from those shown. I am advised that in the case of relatively large changes to rates or thresholds, the estimated cost or yield shown should be considered as more provisional in nature.

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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261. To ask the Minister for Finance the estimated full-year revenue that would be raised in 2021 if intangible assets on shored between 2015 and 2018 were taxed at the current cap of 80%; and if he will make a statement on the matter. [18772/20]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy is aware, the 80% cap on capital allowances for intangible assets applies to all intangible assets acquired on or after 11 October 2017. It was re-introduced in Finance Bill 2017 to effect a smoothing of corporate tax receipts over time. It also supports sustainability of CT receipts by extending the period over which the allowances are used.  

It is important to note that the cap only affects the timing of relief in the form of capital allowances and related interest expenses for intangible assets. It does not affect the overall quantum of relief. This is because any amounts restricted in one accounting period as a result of a cap are available for carry forward and utilisation in a subsequent accounting period, subject to the application of the cap in that period. Therefore, no additional tax revenue would be raised in the long-term through the Deputy's proposal. 

It has been tentatively estimated, based on the levels of capital allowance claims in tax returns for recent years, that there could be a cash flow benefit in the region of €720 million if intangible assets onshored between 2015 and 11 October 2017 were subject to the 80% cap. However, this estimate is based on a number of assumptions and there are a range of factors which would affect its accuracy.  For example, the estimate assumes that the cap would be relevant to all claimants, but this may not be the case where income generated by the assets exceeds the available allowances.  Furthermore, in some cases the cap may no longer be of relevance as the full amount of the relief may have already been claimed.  It should also be noted that this estimate assumes no behavioural change on the part of the companies involved.  

It is also very important to be clear that this simply a timing matter - to present this as potential additional tax for the Exchequer would not be correct. Finally, as the Deputy will be aware, changes to tax law are generally made on a prospective basis, such that they apply only from the date on which they have legal effect.

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