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Raised the opportunity for capital gains tax on the family residence.

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Raised the opportunity for capital gains tax on the family residence.

  • 07 Jul 2023

Senior authorities have suggested doing away with the exemption from capital gains tax that applies to family homes when they are sold.The proposal is one of several ideas for capital gains tax reform put out by the tax strategy group of the Department of Finance.

Currently, taxpayers must pay capital gains tax at a rate of 33% on any item or property that increases in value between the time they buy it and the time they sell it. The family residence is exempt from taxation, though.

Officials laid out potential reforms that would involve the partial or complete elimination of the protection of the family home from taxation when it is sold in a series of documents designed to inform the Minister of Finance and his Government colleagues of the options available before the budget in October.

One of the ideas suggested is to limit the availability of tax relief to residences with a maximum market value or to gains up to a particular monetary level, with tax applied to amounts above that limit.

The officials also suggest that a new, lower capital gains tax rate may be implemented, but it would only be applicable to earnings from the sale of a family's primary residence.

The officials claim that several nations currently limit a family's freedom from capital gains tax. They point out that in Portugal, the sale of a family house is only tax-free if the full earnings is put towards the purchase of a brand-new residence there.

Just one of the four present capital gains tax benefits that are taken into consideration in the study is the removal of the family home's tax-exempt status. The experts caution that making changes to the other three categories would be ineffective or logistically challenging, including assistance for entrepreneurs, retirement relief, and special incentives to aid in the recovery of the real estate market between 2011 and 2014.

No such warning is included in relation to changing the rules on the status of the family home.

Strategic options

The tax strategy group is tasked with researching and crafting tax and levy recommendations within predetermined government guidelines for the budget and the ensuing Finance Bill. It also examines tactical choices for social welfare.

The budget may also change with regard to gambling and cigarettes.

While the tax policy group outlines the financial consequences of an increase of up to €1 on a pack of 20 cigarettes, Ireland currently has the highest rate of excise duty on tobacco goods in the EU.

On the other hand, the report does not recommend applying excise on vaping products at this time, given the difficulties in collecting the excise, and given that many sources consider e-cigarettes to be a cessation tool and less harmful than cigarettes.

Racing industry

The betting industry and the racing industry are at odds over taxes on betting; the former wants more taxes to finance the industry, while the latter is concerned about people switching to other types of gambling.

According to the racing industry organisations, it "might best be levied on the punter" if bookmakers cannot withstand a doubling of the present tax rate to 2%.

The president of Ireland Leo Varadkar's election commitment to integrate USC and PRSI is discussed in the tax strategy papers, along with the "theoretical advantages" and "challenges which would need to be overcome" of doing so.

The benefits include that both PRSI and USC are "individualised taxes, whereas income tax allows for joint assessment of married couples / civil partners"; the tax bases for both are similar, "including most forms of earned and investment income and excluding social welfare income"; and there aren't as many tax credits or reliefs as there are with income tax.

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