Ireland’s inheritance tax regime already exacerbates income inequality in the State but that did not stop the all-action Taoiseach adding it this week to his already long list of issues that need to be addressed.
Fine Gael has clearly decided that allowing the wealthier in our society to benefit even more from the tax system is a point of difference for the party as the Coalition partners start plotting for an election that many expect will take place in November.
In a post-Cabinet press briefing on Tuesday, Simon Harris referred to “unfairness” and anomalies” in the inheritance tax regime.
He said the current rules had “a real impact on a son or daughter or a nephew or niece trying to move into the family home and at a time when we are trying to come up with a whole variety of housing solutions”.
At play is the category A threshold – which covers the amount a child can receive from their parent without paying tax. It is currently €335,000 and has been unchanged for a number of years, and there is now a move among some elements in Fine Gael to as much as double this sum.
The final part of Harris’s comments is guff. Someone will live in these properties, whether it is family or someone who buys the property. It is a stretch to tie it to the housing crisis.
And there are already provisions for children – or indeed nephews and nieces – to inherit a family home without any tax regardless of the property’s value as Harris and his colleague Neale Richmond, who has been leading the charge on the issue, know full well. The dwelling home exemption is open to families in these circumstances – as long as they do not own any other property.
Over recent years, while the inheritance tax take has been rising, it accounts for a decreasing share of the overall tax take – just 0.6 per cent of the total take in 2023, according to the most recent Revenue annual report. And children pay less than half of the tax collected.
In a 2021 report of inheritance tax worldwide, the OECD found that the gap in Ireland between those who are likely to inherit and those who are not is the highest of all the 37 wealthy countries it surveyed. Tipping the balance further in favour of the wealthy – who are far more likely to inherit at all, never mind inheriting more than €335,000 – seems like a recipe for social division, not cohesion.
If there are real anomalies, well and good, but otherwise the Taoiseach should have more pressing matters to address.
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