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WITH BUDGET DAY less than two months away, ministers will shortly be going in with their wish lists to Finance Minister Simon Harris and Public Expenditure Minister Jack Chambers.
One area which has caused much debate in recent weeks is inheritance tax, with many in the government parties advocating for reforms.
The party leaders of Fianna Fáil and Fine Gael have expressed strong views on the inheritance tax system, dubbing it unfair in recent years.
However, despite vocal critics of the Capital Acquisitions Tax (CAT) system last year, no changes were made.
The backbenchers in their respective parties have not quietened down this year, and as budget day approaches, are renewing their calls for a shake-up.
Fianna Fáil pledged in its election manifesto that it would increase and adjust the inheritance tax thresholds “in each budget to reflect the wider increase in property prices in the Irish economy in recent years”.
The party said it would also review the inheritance tax thresholds applicable when the deceased does not have children.
The Fine Gael manifesto stated that Ireland already generates above-average revenue from inheritance and gift taxes and pledged to increase Capital Acquisitions Tax thresholds.
It pledged to raise the Group A threshold (for children) to €500,000, Group B (for siblings) to €75,000 and Group C (for others) to €50,000.
However, interestingly enough, no such promises made their way into the programme for government, just a commitment to review the system.
Just a few months later, Tánaiste Simon Harris told the Dáil that changes could cost millions, stating that increasing Group A thresholds to €500,000 from the existing €400,000 would cost €86.6 million.
However, in recent months Harris has said he has concerns about the system as it is, calling it “punitive and difficult at times”.
Last month, Micheál Martin said he was “very conscious” of the position of people without children who have “worked hard all their lives” and want to leave an inheritance to nieces, nephews or other family members.
Martin and Harris have made their views pretty clear, and although they have the power to bring in reforms, a question mark remains over whether any tweaking will be done in this year’s budget.
While opposition parties don’t wield the same power, many have differing views on the issue. Some are calling for an overhaul of the system while others believe no changes should be made.
Finance spokesperson for Sinn Féin Pearse Doherty said the country is in the middle of a cost-of-living crisis, and criticised the government for not having its priorities right.
He said all money the government has earmarked for tax cuts should go to workers. The fairest way to deliver an income tax package for all workers is by cutting the USC, said Doherty.
Only 3% of the population will ever benefit from the inheritance tax cuts being considered.
He said last year, large tax cuts were handed out and workers got nothing.
“We can’t see a repeat of those mistakes,” he added.
Sinn Féin does not support expanding inheritance tax exemptions, said Doherty, who added that it is important that the state maintains the principle of viewing Capital Acquisitions Tax from the perspective of those receiving the gift or inheritance.
Councillor Michael Pidgeon, finance spokesperson for the Green Party told The Journal that the Greens don’t agree with proposed changes.
“It affects a small number of people, less than 3% of all inheritances exceed €300,000, and will leave the State short €537 million in 2027, increasing every year according to Revenue,” he said.
“Asking working people to pay more to support a tax cut for people who happen to have relatives in a position to bequeath to them does not seem fair on the face of it,” he said.
He said the Green Party is in favour of some targeted changes, such as reforming thresholds for people who might be cared for by relatives other than their parents, and who are effectively in loco parentis.
The Social Democrats said the party is in favour of the inheritance tax system being made more equal.
“We would support a system wherein every individual has a single lifetime tax-free threshold for inheritance, regardless of the source(s) of that inheritance. However, we do not want a situation where any reform to the system would result in a significant reduction in the tax take.”
Aontú TD Paul Lawless says inheritance tax is government greed that takes from the families left behind of people who have contributed to the country all their lives.
Calling it a “tax on grief”, he said the tax take has doubled to nearly a billion euro in the past five years, dubbing it a “ghoulish money grab”.
“This is a deeply unpopular tax, as it’s going back and taking from a person who has paid taxes all their life, and now they are being taxed in death. It’s a double taxation.
There is a huge resentment towards it as it is anti-family in how it leaves the adult children with a massive bill and if you can’t pay it you have to sell the family home.
“It’s particularly unfair in a housing crisis, when house prices have spiralled and now ordinary people are getting caught up in it,” he said.
He said the system also discriminates against those without children.
“Along with most people, I don’t agree with inheritance tax at all. People who have worked hard to better themselves try to leave something for their family, but if their family can’t afford the bill, they have to sell the house, instead of keeping it in the family as a home,” said Lawless.
Lawless pointed to comments made by Harris that the system is “punitive”, stating that in the next budget the thresholds should be raised.
He also said the rate of tax at 33% is too high, calling it to be dismantled.
Independent Ireland said the party wants a level playing field for every citizen, whether they have children or not.
The party wants the Group A threshold raised from €400,000 to €500,000, stating it would be welcome for the families it helps.
TD Ken Flynn said: “In many cases that forces the sale of the very home the person worked and paid tax their whole life to own.”
Flynn said they back the End Discrimination in Inheritance Tax (EDIT) campaign and its call for a single, index-linked lifetime tax-free threshold available to every citizen, regardless of their relationship to the person they inherit from.
Flynn said he is bringing forward legislation “to end this discrimination”, stating it is an issue of equality, not a tax cut, and it is long overdue.
“Treat every citizen the same and the problem disappears,” said Flynn.
A Labour spokesperson said before any policy decisions are made by the government, it would like to see detailed modelling and analysis from the Revenue Commissioners and Department of Finance on the long-term impacts of any changes on both the future yield from capital acquisitions tax and critically on economic inequality in Irish society.
They pointed out that the vast majority of people never receive an inheritance that results in a tax bill.
Labour said it wants to see a real net wealth tax in Ireland, “and cuts to inheritance tax are not a priority for the Labour Party, at this time”.
Paul Murphy of People Before Profit has previously said that inheritance tax only impacts a small minority in society, with the vast majority not hitting the €400,000 threshold.
He called inheritance “unearned wealth” and dubbed it a tax break benefiting the most wealthy in society.
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