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Government gets inheritance windfall

Michael McGrath, FF

The number of people liable for the controversial inheritance tax applied to gifts following the death of a family member has risen by more than a third over the past five years.

A succession of cuts to the threshold at which the rate tax applies has widened the net considerably, resulting in a significant windfall for the Government.

The level at which an individual has to pay capital acquisitions tax on a gift or inheritance from a parent to a child has been reduced by 54% since 2009. Presently, the levy applies at €250,000 and above, having stood at more than €540,000 in 2009.

Successive cuts to the minimum threshold for group A beneficiaries (instances where the recipient is a child) saw it fall firstly to €434,000 in April 2009 before an additional cut of €20,000 came into effect the following year.

It was subsequently reduced again to €332,000 before the most recent cut reduced the threshold to its current level.

Consequently, the State’s tax yield from the levy has increased every year from 2010 to 2013 — the most recent year for which figures are available.

Whereas the inheritance tax was applied in just shy of 8,500 cases in 2010, 11,370 were ensnared in its net last year — an increase of 34%. The rate of tax has also been increased from 25% to 33%.

The figures were released in response to a parliamentary question put down by Fianna Fáil finance spokesperson Michael McGrath.

“Parents want to be able to pass on the benefit of their hard work to their children and grandchildren.

“Whether this is in the form of the family home or savings it is very important to parents that they are able to provide for the future financial security of their family,” Mr McGrath.

“Recent increases in property values mean that many more families are now potentially drawn into the inheritance tax net.

“In many areas a modest family home could no longer be passed from parent to child without triggering a significant inheritance tax liability,” he said.

In 2005, former justice minister and current Fine Gael TD, Alan Shatter — who at the time was taking a break from politics — described the tax as a “state-sponsored resentment tax”.

“Inheritance tax achieves no beneficial social objective,” Mr Shatter said.

“Essentially, it is a mechanism to facilitate the State to rob the graves of the dead and cruelly deprive bereaved relations of assets to which they are entitled,” he said.

Finance Minister Michael Noonan defended the hikes saying that the measures would ensure those with wealth make a fair contribution to the State.