Remember the heady days when capital gains tax (CGT) soared and the State squandered the money on pay rises for the public sector? An analysis of 2006 figures by Rossa White, then of Davy Stockbrokers and now of the NTMA, showed that capital gains tax on property alone had grown to about €1.5 billion that year.
Five years later and all has changed. The Department of Finance was expecting total income this year of €420 million from across all sectors of the economy, not just from property, but this is looking ambitious. Briefing notes drawn up for the new Minister for Finance Michael Noonan show that the target “looks challenging given the weakness in returns in December 2010 and January 2011”.
It may have been stating the obvious, but the notes went on to say that the “importance of CGT, as a percentage of total tax revenue, has reduced greatly in recent years. CGT is forced to account for just over 1% of total tax revenue in 2011.”
The entire CGT system is expected to be reformed next year as part of the EU-IMF bailout. The types of activity that are liable for CGT are expected to be broadened and reliefs and exemptions will be reduced. The 25% rate will also be increased next year.
