Noonan set to act as fears grow over 'tax trap'
Published 22/06/2015 | 02:30
Finance Minister Michael Noonan is considering sweeping changes to the inheritance tax thresholds in order to prevent more families from being hit with huge tax bills.
Government sources confirmed that Mr Noonan is likely to raise the threshold from €225,000 to as much as €400,000 in October's Budget.
Mr Noonan has been told that the issue of the so-called 'inheritance tax trap' is being raised repeatedly by voters, especially in urban areas where property prices are higher.
The Irish Independent has in recent weeks highlighted the concern over the inheritance tax, which is classified by Revenue as the Capital Acquisition Tax.
In 2009, a child could inherit €542,544 from a parent and the balance was taxed at 22pc.
At present, a child can only inherit €225,000 before the balance is taxed at 33pc.
Experts say this means we have one of the toughest inheritance tax regimes in the world. Fine Gael TDs say older voters are particularly concerned that their bereaved children will have to sell the family home in order to settle tax bills with the Revenue Commissioners.
"We have a fairly punitive inheritance regime in Ireland which was necessitated by the collapse in the economy," Dublin Fingal TD Alan Farrell told the Irish Independent last night.
"This is a real concern for families, and not just those in affluent areas. So as the economy improves, it is only appropriate that this is addressed," Mr Farrell added.
A Government source confirmed that Mr Noonan is likely to address the issue through changes to the threshold, rather than slashing the rate.
"Minister Noonan is acutely aware that the thresholds is where the problem lies and he will definitely increase it, perhaps to as much as €400,000 but no figure has been agreed yet," the source added.
Concern over the issue of the inheritance tax trap has heightened as a result of increasing property prices in urban areas, which is also having a knock-on effect on property tax bills.
Mr Noonan is set to deal with the issue of property tax separately and is awaiting a report from Dr Don Thornhill.
Separately, Mr Noonan has been criticised by former minister Pat Rabbitte, who now serves as a Labour Party backbencher.
In his weekly column in the 'Sunday Business Post', Mr Rabbitte said the issue of paying for your home remains "politically problematic for the Government".
The Dublin South-West TD said not enough has been done to improve the plight of the country's 300,000 variable-rate mortgage customers despite pledges from Mr Noonan and other Coalition figures.
"Are the customers who have paid for the banks' mistakes over the past seven years expected to continue to pay interest disproportionate to the cost of funds?" Mr Rabbitte wrote.
"Unless the banks make a reasonable response within existing arrangements, the Central Bank should make an exceptional intervention.
"Otherwise the minister should cause it to happen," he added.