A proposal that would have allowed wealthy people to donate at least €1 million in their will without paying any tax was rejected by the Department of Finance.
The plan had been advanced by the Department of Rural and Community Development to “foster a more philanthropic culture” among the wealthiest in the State.
However, in advance of Budget 2025 last October, officials said it would create a two-tier system for inheritance tax that would benefit only people with a high net worth. They said it would lock out the less wealthy who would like to donate to a good cause and cause significant “taxpayer equity issues”.
It said rich people could use the scheme to direct money otherwise owed to the State to “their chosen philanthropic organisation”.
At the same time, the majority of taxpayers would not have this option and any gifts they made would be liable for tax.
A pre-budget submission noted: “The proposal would afford wealthy individuals a choice not afforded to all taxpayers.”
A second similar scheme around earnings from capital gains tax was also put on ice by the department where companies or individuals could redirect certain profits to charity.
Officials said this too would create a two-tier system that would be available only to big companies and very wealthy people.
The pre-budget submission stated: “An initial comparison may be a [smaller company] not receiving relief on a relatively modest gift to a local charity while a large [firm] willing to provide a gift of over €1 million could avail of the relief.”
The proposal from the Department of Rural and Community Development, where Fine Gael’s Heather Humphreys was minister at the time, would have covered profits earned from the sale of land and shares. Capital gains tax normally applies to these transactions but under the proposed scheme, full relief would be available for a qualifying donation.
In internal discussions, it was suggested the capital gains tax scheme would have cost the State in the region of €45 million while €14 million would be the cost of the similar plan for inheritance tax. The Department of Finance said there was not enough data available to know how accurate these figures would prove to be.
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“Both the capital tax proposals require further careful consideration to assess their impact on the respective tax bases and the broader implications for taxpayer equity before a recommendation can be arrived at,” said officials.
Officials said both options should be ruled out pending a broader analysis while small technical rules made around charitable donations should go ahead.
These would allow charities to accumulate funds over an extended period where they were hoping to work on “longer-term projects for sustainable activity. A separate change was also made around eligibility for new charitable institutes where previously they would need to be established for two years before qualifying for tax relief on donations.
“As there is now oversight and governance provided for by the Charities Regulator, Revenue is of the view that the two-year waiting period could be removed.”
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