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Monday 24 October 2016

Noonan must keep his word and overhaul inheritance tax regime

Published 14/06/2015 | 02:30

Minister for Finance Michael Noonan
Minister for Finance Michael Noonan

Property is an emotional issue in this country. We have high home ownership rates compared with other European countries - even if this has fallen somewhat during the traumatic financial collapse of the last few years.

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People cite the need for security as the main driver for their wish to own their own home.

And more than four out of 10 people want to be able to bequeath a property to their children, according to the findings of a survey commissioned by Aviva Home Insurance and carried out by Empathy Research.

Policymakers would like us to become a nation of renters, as is the situation in other European countries.

But that is unlikely to catch on.

The powerful attachment we have for property helps to explain the strong reactions from ordinary people to the strict inheritance tax regime we have - a regime that now needs a major overhaul.

Many ordinary people are now finding that they are being hit with large tax bills after inheriting a home from a parent, when the well-to-do can afford the sort of tax advice that can ensure they avoid such bills.

The tax rate for inheritance sky-rocketed during the recession, while the threshold for tax-free inheritance was halved.

The tax, called capital acquisitions tax (CAT), is imposed at a rate of 33pc on amounts over €225,000 for a son or daughter.

The rate has gone from 20pc back in 2008.

Sharp rises in property values mean many middle-income PAYE workers are being caught in the inheritance tax trap.

Farmers and business owners have generous reliefs they can apply to their farm or business assets.

PAYE workers feel they are paying for pretty much everything already. They have been clobbered by pay cuts, income tax changes, the introduction of the Universal Social Charge, property tax, water charges, and a string of other charges and levies.

And many have little or no pension to look forward to, if they are in the private sector.

A small inheritance was something they were hoping would make life easier as they entered their 50s and beyond.

Fianna Fail finance spokesman Michael McGrath argues that inheritance tax is a form of stealth tax. He has called for a major overhaul of the tax regime.

Finance Minister Michael Noonan has promised to examine the issue around the inheritance tax trap, which is forcing many to sell their parents' homes in order to settle their tax bills.

He certainly needs to keep his word if he is not to disappoint the large number of people annoyed about inheritance tax who have contacted this journalist.

Charlie Weston tweets at @CWeston_Indo

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