Seanad Éireann - Volume 171 - 18 February, 2003
Capital Acquisitions Tax Consolidation Bill 2002: Report and Final Stages.
Bill received for final consideration.
Question proposed: “That the Bill do now pass.”
Mr. J. Phelan Mr. J. Phelan
Mr. J. Phelan: I welcome the Minister of State at the Department of Finance, Deputy Parlon, to the House. I welcome this Bill but I have a concern in regard to the area of penalties for breaches of the legislation. I understand that the penalty for failure to make a return will be only €2,500 and if somebody makes a fraudulent return it will be about €6,000 or €7,000. Those sums are not significant enough for people who do not abide by the law. The Government should consider providing for higher fines.
The legislation is complex and lengthy. No doubt, much work has been put into it by the officers in the Department of Finance. I congratulate them on this worthy document.
Dr. Mansergh Dr. Mansergh
Dr. Mansergh: The prime utility of a Bill of this kind is for tax practitioners to advise their clients. I was disappointed to hear today at an informal briefing on the Finance Bill by Department officials that this Bill will be amended again almost as soon as it is passed. This is for technical procedural reasons. They are across the board amendments that apply to all taxes to do with admissibility of claims for repayment. I suggest that when those amendments are made a simple addendum be added to the Bill, so that it is still all together for practitioners and is not out of date almost as soon as it is passed.
I wish to make a few general comments about capital acquisitions tax. In general we have a mild regime compared to most other countries. One area affects rural Ireland particularly, the case of farms. Farms do not always pass from father to son or daughter. They can be passed to brothers, nephews, cousins and so on. While there is provision for a favourite nephew, or niece these days, I am not sure it covers all cases. I remember from my days in the tax strategy group that quite a heavy part of the yield from capital acquisitions tax comes from transfers within the wider family. Obviously, the State needs money but it would help families if some latitude were allowed and the situation eased a little.
Those of us who were around in the 1980s remember great political debates between parties as to how capital and corporation tax yield could be improved. Those on the left of the political spectrum were particularly interested in those improvements. In 1986 capital taxes raised about £34 million. In the Estimate for this year it is over £800 million or €1,100. One of the biggest successes we have had, partly through reduction in the rates but also through general improvements in the economy, is that we now get a substantial contribution from capital and corporation tax. A lot of services would not be running if we did not have the yield we now have from these taxes. I welcome this Bill as a means of more efficient administration of these taxes.
Mr. McDowell Mr. McDowell
Mr. McDowell: My apologies for being late. I want to make a few general remarks about capital acquisition tax. They may came from a somewhat more nuanced perspective than others. Two or three years ago, during a break in the Committee Stage debate on the Finance Bill, the Minister turned to me and said he did not really understand why we were having the debate because he did not believe in inheritance tax and Deputy McDowell – as I then was – did not believe in inheritance. In a sense he was right, at least on the fundamental level.
The current Minister does not believe that we should, as he sees it, double tax people's income. He thinks that once they have earned something, they are entitled to do with it as they wish, be it endow their children or whatever else. My view is that inheritance is the way by which privilege and ownership of property cascade through the generations and effectively our class based system is maintained. Over time both of us have accommodated ourselves to various realities which has brought us closer than the distance between those two extremes.
I now accept that those who earn money, build up wealth and accumulate property expect, at least in part, to be able to pass it on to their children. I assume that at this stage the Minister accepts that there should be some contribution to the Exchequer from inheritance or capital acquisitions. While we disagree on matters of less fundamental principle, there are still very significant differences between the view of the Government and mine. I believe agricultural relief to be excessive, to say the least, but accept that this is of long standing and the Minister is not the one responsible for its introduction.
We need to widen the gap between gift tax and inheritance tax. In dealing with business and property generally, particularly economic assets such as farms, we should be actively seeking to encourage people to gift them to children at an earlier stage. If it is done before death, they can be used, in most cases, more productively than they might otherwise have been. We need to look again at the provision by which children can now inherit several hundred thousand euro in addition to the family home if they have been living there, which amounts to a great deal before tax becomes payable. We should also look at the provision whereby spouses can inherit anything at all. This should be limited to assets and property, of which the couple had enjoyment in common in order that business or economic assets would not benefit from the exemption.
I welcome the Bill which does nothing in terms of the matters to which I have referred as it is not designed for that purpose. I appreciate that this type of consolidation is a difficult job of work. Those responsible for it in the Department of Finance and the Revenue Commissioners are entitled to our thanks. I am quite sure that tax practitioners, in particular, will be grateful to them. I am aware that the Minister for Justice, Equality and Law Reform has indicated that he wants to consolidate criminal law, which I also accept will be a difficult task, but that Department appears to have been less successful to date in its endeavours in this regard. It is important that such information as we are dealing with here is kept up to date and available in all possible forms, electronic and otherwise. Since it is a technical and consolidation Bill I have no difficulty with it. I appreciate that the Minister of State has allowed me some time.
Mr. Parlon Mr. Parlon
Minister of State at the Department of Finance (Mr. Parlon): I appreciate the opportunity to speak on the Capital Acquisitions Tax Consolidation Bill 2002. I wish to inform Senator McDowell that the threshold for capital acquisitions tax for a child is €441,000.
Mr. McDowell Mr. McDowell
Mr. McDowell: And the family home.
Mr. Parlon Mr. Parlon
Mr. Parlon: There will be an opportunity for Senators to raise these issues by way of an amendment to the Finance Bill. In response to Senator Mansergh, the 90% agricultural relief also stands, even though Senator McDowell may not agree with it.
Mr. McDowell Mr. McDowell
Mr. McDowell: It is far too high.
Mr. Parlon Mr. Parlon
Mr. Parlon: I am glad that his view and that of the Minister have matured during the years, although they still continue to differ. The Bill consolidates the law relating to capital acquisitions tax which is contained in the Capital Acquisitions Tax Act 1976 and provisions in subsequent Finance Acts. The new consolidation Bill continues the very successful process of the ongoing modernisation of the tax code. In 1997 the Taxes Consolidation Act consolidated the direct taxes legislation dealing with income tax, corporation tax and capital gains tax. In 1999 the Stamp Duties Consolidation Act consolidated the stamp duties legislation. In addition, the consolidation and modernisation of general excise law on mineral oils were included in the Finance Act 1999 and the consolidation and modernisation of general excise law were included in the Finance Act 2001.
The preparatory process for consolidating capital acquisitions tax followed the same rigorous process as was adopted previously. The aim at all times was to ensure the most accurate consolidation of the existing law, with nothing left out and nothing added. This is what has been achieved in this Bill which was considered by the parliamentary counsel's office and has been duly certified as a consolidation of existing law by the Attorney General.
What Senators have before them today is the culmination of over two years work. Perhaps the greatest benefit which will result from this consolidation will be the restructuring of the capital acquisitions tax code in a clear, coherent and logical way. This will make it more accessible and user-friendly for all users, including Members of the Oireachtas, who have to cope with annual changes to the capital acquisitions tax legislation.
I appreciate the way in which this House assisted in the speedy passage of the Bill. It is important that it is enacted before Committee Stage of the Finance Bill 2003 as any subsequent changes to capital acquisitions tax will be slotted in to it by amendment.
 I express my own and the Government's appreciation of the amount of work which went into the preparation of the Bill. The staff of the Revenue Commissioners and the parliamentary counsel's office are to be congratulated on a job well done. I also thank Senators for their consideration of the Bill.
Question put and agreed to.
Seanad Éireann 171 Capital Acquisitions Tax Consolidation Bill 2002: Report and Final Stages.