Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy may be aware the purpose of this amendment was to make a change to section 40 of the Capital Acquisitions Tax Consolidation Act 2003, which provides for a charge to capital acquisitions tax in relation to the free use of property.

The central thrust of the amendment was to change the methodology for valuing the free use of cash in the form of an interest-free or low interest loan for CAT purposes from a practice whereby Revenue accept the current best financial institution deposit interest rate as the best price obtainable in the open market at the end of each year, to one which would be the cost of borrowing an equivalent amount on the open market. In other words, the basis for calculation would be changed from what it costs the disponer to make the loan to what it would cost the beneficiary to borrow this money on the open market.

In response to the Deputy’s question, I do not believe that if section 62 remained in the Finance Bill it would have a negative impact on the housing crisis and this is not the reason that it is being withdrawn. It is important to note that the reason that I am withdrawing this section is that I believe greater consideration needs to be given to the proposal. It has been pointed out to me that the current drafting has the potential to create inconsistencies as to how it will be applied, with the potential for variation in rates being used. For instance, determining the value of an interest-free loan to buy a house could prove challenging in the context of the variety of competing financial products that are available in the market, and the different conditions that could impact on the appropriate borrowing rate to be used, depending on the particular circumstances of a case.

In summary, this issue is complex. Therefore I believe more time needs to be given to determining whether this change is warranted in the first place, and if it is, to decide on how this issue can be appropriately addressed in legislation in such a way that it gives people certainty as to the rates to be applied.