It is great to see the Irish Independent today highlighting the Inheritance Tax trap, where ordinary families are being hit by enormous tax charges on even modest inheritances.
The tax free threshold for parent-child gifts and inheritances has been cut by almost 60% since 2009.
Now, increasing property prices mean that more families than ever are being hit by Capital Acquisitions Tax (CAT).
Worse still, CAT is now levied at 33%. This represents a breathtaking 65% hike on the 20% rate that applied up to November 2008.
This is bad news, and not just for those receiving inheritances and gifts:
- The high rates and low thresholds actually stifle the tax take from CAT, as people who hold even modest levels of wealth are discouraged from gifting them to family members until after their deaths.
- Such wealth-hoarding is particularly unproductive in the Irish economy which has suffered a major credit squeeze since 2008.
The situation is actually much worse for those who wish to leave assets to nieces, nephews or other relatives, where the tax-free thresholds are pitifully low.
Our high CAT regime is clearly delaying economic recovery, and must be reformed without delay.