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Financial Resolution No. 14: Capital Acquisitions Tax (Continued)

Wednesday, 5 December 2012

Dáil Éireann Debate
Vol. 785 No. 2

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(Speaker Continuing)

[Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming] This will produce approximately €50 million in any year and we broadly support it. We recommended such a measure in our budget proposal because a gap of €3.5 billion cannot be closed without some additional taxes. As I indicated earlier, we agree with the principle of closing the €3.5 billion gap, so it would be irresponsible to vote against every specific detail. We will put our money where our mouth is by saying we support this increase in capital gains tax.

Some people may believe we should tax all capital out of existence but a capital gains tax of 33% is reasonable enough. It is a significant increase on the existing rate, which is moving towards the marginal rate rather than the lower rate. We could talk forever about the reduction in capital gains tax from 40% to 20% effected by my former colleague. It led to a phenomenal increase in yield, although the economy may have been improving at the time so more transactions were always going to happen.

Deputy Ruairí Quinn: Information on Ruairí Quinn Zoom on Ruairí Quinn It was the beginning of a disastrous slide to a zero tax base.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming Yes, or maybe it encouraged more activity.

Deputy Ruairí Quinn: Information on Ruairí Quinn Zoom on Ruairí Quinn In ghost estates.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett It was the wrong kind of activity.

Deputy Sean Fleming: Information on Seán Fleming Zoom on Seán Fleming I agree that at this time in the economic cycle, this measure is appropriate. We need cash and if it is available from the sale of property, other capital assets, shares or investment, the taxpayer should be entitled to get a reasonable dividend with an increase in the rate by 3%.

Financial Resolution No. 13 concerns capital acquisitions tax, with the current rate of 30% being increased by 3% to 33%. That applies to gifts after midnight and is expected to yield €27 million in a full year. We broadly support that measure, which is broadly in line with what we had in our budget proposals. Financial Resolution No. 14 is the last one to be dealt with tonight. Tax-free thresholds with regard to capital acquisitions tax are being reduced by 10%, and that will affect people transferring property. It can apply to farm land and other assets. We did not specifically include this measure in our proposal but it is generally in line with the previous three resolutions. I am not particularly gone on this one.

There are a number of resolutions being taken together. We have no problem supporting Financial Resolutions Nos. 10 to 13, inclusive, and I will not oppose Financial Resolution No. 14. In general, we are supportive of this group of resolutions.

Deputy Pádraig Mac Lochlainn: Information on Pádraig MacLochlainn Zoom on Pádraig MacLochlainn We have concerns about Financial Resolutions Nos. 10 and 11. These will allow the Government to tax savings and use the revenue to pay for the promissory note. We need to encourage people to put those savings into the economy. We will vote against those resolutions.

With regard to Financial Resolutions Nos. 13 and 14, Sinn Féin proposed a 10% increase in capital gains and capital acquisitions tax, moving the rate from 30% to 40%. We proposed to reduce the tax-free threshold by 25%. In total, from the estimation of the Department of Finance, this would have raised over €300 million. According to colleagues on my left, the Department only contains amateurs and clowns, and we should disregard any opinion given by the Department in replies to parliamentary questions. Apparently, when parliamentary questions are asked and Departments give a response, they can only be amateurish and the work of clowns.

Deputy Arthur Spring: Information on Arthur Spring Zoom on Arthur Spring Nobody said that.

Deputy Kevin Humphreys: Information on Kevin Humphreys Zoom on Kevin Humphreys That was never said. The Deputy knows that well.

Deputy Pádraig Mac Lochlainn: Information on Pádraig MacLochlainn Zoom on Pádraig MacLochlainn It is a desperate chorus of people who were clearly defeated by Fine Gael in negotiations when that party clearly defended the interests of the wealthy. Fine Gael could have considered the reality on the ground and done much more. The Labour Party lost out but rather than acknowledging that it did not get what it wanted in negotiations and the wealthy have been protected overall, we hear nonsense from members about how Department of Finance feedback is not reliable or the way to do business. Nobody will buy that absolute nonsense outside the House.

We will support Financial Resolutions Nos. 12 to 14, inclusive, begrudgingly. There was an opportunity to raise more than €300 million but the Government will raise approximately €100 million. The figure in question - roughly the same as what will be brought about by the property tax - could have been achieved by asking the wealthy to pay their share, thus undoing the damage done by Champagne Charlie when he was around. This is all about choices and winning negotiations. The Labour Party lost to Fine Gael but it should not blame us or the Department of Finance when it provides answers to questions, as it is required to in our Irish democracy.

Deputy Alex White: Information on Alex White Zoom on Alex White The Deputy has just proven a point.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett None of us wants to drag out this process at this stage. Broadly speaking, these measures are reasonable.

Deputy Ruairí Quinn: Information on Ruairí Quinn Zoom on Ruairí Quinn Could we have that in writing, preferably engraved in stone?

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett The Minister might be surprised to hear that I have said that now on three occasions tonight.

Deputy Arthur Spring: Information on Arthur Spring Zoom on Arthur Spring We should not get carried away.

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett Despite the attempts by certain people on the other side of the House to caricature this side, we take these issues seriously, considering the detail as much as possible in the short time available. I have a concern but I am unsure what to do about it given that, broadly speaking, these are progressive measures. Some of the increases do not distinguish between the small and big saver. I know the vast majority of people who will be affected by these increases in tax will be people who have plenty of money to save, and the people we wish to protect or give relief to do not have much in the way of savings these days. Broadly speaking, these resolutions are right. There are ordinary people with relatively modest amounts of savings, and it is unfortunate that they will get caught in what is a broadly progressive measure. The Government should think about it.

There is a more marginal point. We are a country with a high degree of home ownership, although in a way different from much of the rest of Europe. There is a difference in the way property is passed to the next generation when it is not necessarily about passing on significant amounts of wealth. Although it may not be done now, we should examine the process of imposing taxes on capital gains and acquisitions, as well as taxes on savings.

I will not labour the point but the Government could have gone much further in going after the major inequalities. It is fair to say everything could have been costed by the Department of Finance. As the new people on the block, we thought the parliamentary question process was the way to get information from the Department of Finance. That is how we got some of our information. There was nothing amateur or half-hearted about our efforts in putting together our document. Most of it stands up to scrutiny. The income tax element has been taken directly from a spreadsheet provided by the Department; when the effective tax rate is adjusted, the relevant figures pop up on the screen. It is very interesting and Deputies should look at it. I thank the Department of Finance for that information.

It would not have helped to have the issue of corporation tax costed because the Minister for Finance told us it was too complicated to calculate. That is not much of an answer to our first question. A second question asked for the bands of the different levels of profits of companies, and it was only then that we got the figures to show how much gross pre-tax income of companies was available, how much tax was paid and the various allowances that facilitated the taxable amount to be written down. The response that the process was too complicated was not satisfactory.

Deputy Ruairí Quinn: Information on Ruairí Quinn Zoom on Ruairí Quinn Was that a reply to a parliamentary question?

Deputy Richard Boyd Barrett: Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett Yes. The response from the Minister for Finance was that the process was too complicated.


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