Friday 22 September 2017

Batty tax plan would hit families and make crisis worse

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Charlie Weston

Charlie Weston

Mad-cap is the only way to describe proposals to tax the family home if it is sold by its owners.

A family home is about the only asset you can make a gain on in this country, and not have to pay tax on that gain.

In any other circumstances you pay what is called capital gains tax. And the tax is mighty high, at 33pc of the value of the gain.

Capital gains tax is different to capital acquisitions tax which applies when there is an inheritance.

Inheritance, or capital acquisitions tax, applies when someone dies and leaves a bequest.

With inheritance tax, parents can leave a home to a son or daughter when they die and the exemption limits mean no tax applies up to €310,000 per child.

Capital gains tax applies when there is a profit from holding an asset while people are alive.

Suppose you buy shares and it turns out the company is winner. The value of the shares surge, so you decide to sell. You will pay tax at 33pc on the profit, which is the difference between the price you paid for the asset and the price you sold it for.

But gains on the disposal of property owned by you, such as a house or apartment, which was occupied by you or by a dependent relative as a sole or main residence are exempt. Proposals made by officials in the Department of Finance, ahead of the Budget, would change this and mean any gain from the sale of a home would be taxed, probably at 33pc.

The proposal is bonkers and would only make the housing crisis worse.

Charging the tax on the sale of family homes would impact those moving house who need a larger property for a growing family.

It would also mean older "empty nesters" who decide to downsize would be hit with a massive tax bill.

These groups would react by staying put in their homes to avoid any tax charge.

So empty nesters, who are currently rattling around in a large home, would not want to downsize.

The losers here would be families that need a larger home for an expanding household. The tax could be designed to ensure it did not impact on families moving home as long as they use all of the proceeds of the family home sale to buy another home.

But older people downsizing would be unlikely to escape.

Instead, they would see a nest egg they get from a house sale, to be used to fund their care in later life, being taken by the taxman.

Older people in the Fair Deal nursing home support scheme are already losing a chunk of their home's value to fund their care.

Implementing a tax on family homes would be so unpopular that it is likely to bring people on to the street.

Fianna Fáil's finance spokesman Michael McGrath said his party would not be supporting any move to tax family homes when they are sold. He said the proposal, if implemented, would deter people from selling a family home, making our housing crisis worse.

One wonders why Department of Finance officials do not think these batty ideas through before proposing them in the first place.

Irish Independent

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