Fianna Fáil Spokesperson on Finance Michael McGrath TD has described as inadequate the increase in the threshold for inheritance tax to €280,000 in Budget 2016.
Deputy McGrath commented, “Inheritance tax has been a bonanza for the government coffers. Fine Gael and Labour have increased the number of people liable to pay inheritance tax by 34% and since 2010 the amount raised has more than doubled. In 2016, the government expects to take in €375m in tax on gifts and inheritances even after the change to thresholds. This is €5m more than the amount they expect to raise in 2015.
“The Coalition have twice reduced the threshold for capital acquisition tax as well as increasing the rate from 25% to 33%. In the 2013 budget, Minister Noonan justified these tax increases by saying “I am introducing a number of measures in the area of capital taxes to ensure that people with wealth make a fair contribution to the State”. The level that will apply in 2016 is still €52,000 the threshold which applied when the government came to power.
“Recent increases in property values mean that far more families are now being drawn in to the inheritance tax net. In many areas, modest family homes can no longer be passed from parent to child without imposing a large inheritance tax liability. This can often result in the forced sale of the property to pay the inheritance tax due. This penalises those who have prudently saved their already taxed income during their working life so that they can pass it on to their children.
“It is every parent’s wish to provide security for their family. This becomes even more important in later years as a parent will naturally want to be able to pass on the benefits of their lifetime’s work to their children, grandchildren and other close family members. This may be in the form of their family home or savings, so that parents are able to help secure the future financial wellbeing of their family.
“Prior to the budget I proposed an immediate increase to €300,000 with a clear commitment to raise the threshold further in future years. I also believe there is a need to apply an annual indexation to thresholds based on the Residential Property Price Index to give greater certainty in the application of CAT. The change made in Budget 2016 was a step in the right direction but further reform of inheritance tax rules are needed in the years. This should also encompass an easing of the restrictions on the Dwelling Home Relief which allows a beneficiary to inherit a house free of inheritance tax if they have resided in the house for three years prior to the disposition and continue to live there for six years afterwards. Currently there is a very strict test that a parent cannot also have lived there during this period unless they are compelled by old age or infirmity to depend on the child,” concluded Deputy McGrath.