Higher capital gains tax rate options examined for higher earners

A higher rate of capital gains tax levied on people with higher incomes could raise more than €50 million each year for the exchequer, according to an analysis in the Tax Strategy Group papers. The Minister for Finance, Paschal Donohoe, undertook to consider the idea of an increased rate of capital gains tax (CGT) for high-income individuals during the committee stage of last year’s Finance Bill,

If the headline rate of CGT was increased from 33 per cent to 40 per cent for individuals earning more than €200,000 it would be expected to yield an extra €53 million each year for the exchequer, according to tentative calculations by the Tax Strategy Group. If the income limit was set at €300,000 the potential additional yield is put at €36 million.

The papers underline that it is impossible to judge exactly the likely yield, given the possible change in behaviour of the individuals involved. Some other jurisdictions do have varying rates of capital gains tax, it said, though, in the UK, the threshold for the higher rate is the size of the gain and not the income of the recipient.

In terms of stamp duty, the papers say that work is ongoing on proposals for a levy on the construction sector to apply from 2023 to meet some of the cost of defective blocks supplied by the industry and containing mica and pyrite. The Government had previously indicated that the issue of a levy would be examined, and the paper says that “significant technical work” is under way to design an appropriately targeted charge. No estimate is given of the likely amount this would raise.

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The papers also reveal that the exchequer has raised €9.1 million in stamp duty due to the new measures introduced to make it more expensive for investment funds to buy up houses in bulk of a housing estate. A rate of 10 per cent has applied since May 2021 to any acquisition of 10 or more properties in a 12 month period. Apartments are excluded.

The acquisition of 345 houses were covered by 243 returns up to April of this year, indicating that some purchases by funds are continuing despite the stamp duty charge. The papers say that it is important to note that the charge is just one of the measures introduced by the Government in the housing market.

In the area of corporation tax the papers say that a review of the Knowledge Development Box, a special tax incentive introduced to try to get SMEs to invest in research and innovation, is now under way. The scheme was introduced in 2016 and has had a very low uptake.