Capital gains tax hits 25%

CAPITAL gains tax was increased by a further 3% to 25% in yesterday’s emergency Budget.

Coupled with the 2% rise from the first 2009 Budget, issued last October, it means that the tax has risen by 5% in less than 12 months.

Finance Minister Brian Lenihan said: “It is important we treat all sources of income in a similar manner.”

He said that both the capital gains tax increase and the capital acquisitions tax rise — which is up to 25% also — will come into effect immediately. In addition, the Deposit Interest Retention Tax (DIRT) rate on ordinary deposit accounts has been increased to 25% and to 28% on certain other savings products. The existing 2% levy on non-life insurance premiums rises to 3% while a new levy of 1% is being introduced to life assurance policies.

The capital gains tax increase — on the profit companies make from disposal of assets — is targeted at realising e30 million for the Exchequer over the remainder of this year, and yielding e45m in a full year. The increase in capital acquisitions tax — covering gift and inheritance tax between parents and offspring — goes from 22% to 25% and aims at bringing in e15m this year and e18m in a full year.

Mr Lenihan said “a fair balance” had been struck, given a prediction the economy will sink by 8% this year. That forecast, issued yesterday, is even worse than the Central Bank’s forecast of last Friday, when it upped its forecast for how much GDP would fall by this year from 4.7% to 7%, with a further drop of 3% due next year.