The standard rate of capital gains tax is 33pc. Photo: Getty
Former Tánaiste Michael McDowell has called for Capital Gains Tax to be reduced from 33pc to 20pc.
He says he knows people who have gone to live in Portugal because they do not want to pay a CGT liability on the disposal of an asset on which they stand to make a significant profit.
Mr McDowell was speaking in the Seanad on the Finance Bill, which is to be guillotined through the upper house later tonight.
The Bill has already been passed through the Dáil and will go to the President for early signature ahead of the dissolution of parliament planned by Taoiseach Simon Harris.
Mr McDowell said that in 1997, the former Finance Minister Charlie McCreevy halved CGT from 40pc to 20pc,
“The gain from capital gains tax increased by 500pc,” he said.
“So they got five times more money in from capital gains in the year that followed, than they obtained from capital gains tax rate of twice as much.”
The McCreevy rate of 20pc has since increased to 33pc – which Mr McDowell said was dampening revenues because individuals were taking legitimate steps to avoid paying.
“The point I’m making is that it’s easy to be ideological about this. It’s long been stated that the art of being a finance minister is to be able to pluck the goose without it squawking too much,” he said.
“But if you can actually yield the increase the yield from a tax by 500pc by halving its rate, you have to ask yourself, in terms of social justice, where does that money go, and what is it available to do in terms of social welfare and redistribution.”
Mr McDowell said he didn’t believe that reducing 33pc down to 20pc would again yield a five fold increase, “but I’m absolutely confident it would probably yield a two or three- fold increase.”
He added: “Because of the immense efforts of the accountancy profession, God bless them, people who know they’re about to make a capital gain go and live in Portugal.
“This is what happens. I’ve seen it myself in people that I’ve come across in life who just emigrate to avoid capital gains. And that’s wrong.
“They wouldn’t do it if CGT was 20pc.”
