Capital gains tax may hit 25%

CAPITAL gains tax could rise to 25% next year PricewaterhouseCoopers tax partner Anne Fitzgerald fears.

Addressing members of the business community at a post-Budget breakfast briefing yesterday Ms Fitzgerald said that she fears CGT may be increased next year.

The PwC expert acknowledged there was not as much sales activity prior to this year’s Budget as in previous years, because potential taxpayers and their advisers did not anticipate any increases in CGT this year. “While CGT rates did not change this year, 5% may be added to the rate between now and the next election.”

Despite Finance Minister Brian Cowen’s promised to come down on tax avoidance schemes in the next budget following an examination of existing schemes by his department and the Revenue Commissioner, Ms Fitzgerald drew some comfort from Mr Cowen’s assertion that many of the €8 billion in tax avoidance allowances and shelters formed an inherent part of the Irish taxation code.

In particular, she singled out the following extract from Mr Cowen’s speech: “The debate on tax reliefs has attracted much comment in recent weeks. In any such debate, we must be clear which reliefs we are talking about. Firstly, many tax reliefs are in fact inherent in the tax system and others lessen the burden on taxpayers with specific payments or expenses. This is the case for example with mortgage interest relief, medical expenses relief and pension contributions.”

The ESRI’s David Duffey wondered for just how long those on the minimum wage of €7 an hour will remain outside the tax net, as an increase in the minimum wage is scheduled in February of next year.

PricewaterhouseCoopers personal tax adviser, Bill Boohig, noted that in the long list of tax exemptions to be examined by the department and the Revenue there was no mention of tax exemption for patents.

“The message, very unusually from this budget is: There is no bad news,” added Mr Boohig.

At a separate briefing Deloitte tax partner John O’Flynn predicted that in next year’s budget Minister Cowen may introduce a cap on the amount of income that can be sheltered by tax incentives.

Mr O’Flynn said it was important that these incentives that helped the economy were not eliminated.