Sharon Keogan says CAT thresholds discriminate against childless

I rise today to address a matter of significant concern for many of our constituents, the current capital acquisition tax thresholds and their potentially discriminatory impact on childless, adults and non-nuclear families in Ireland. As we know, the capital acquisition tax threshold determines the amount of an inheritance or a gift that can be received tax-free based on the relationship of the disboner, i.e. the giver of the inheritance or gift to the recipient. As of the last budget, the categories were reformed as follows, 400,000 can be inherited or given tax-free to children who are category A, while 40,000 can be given to siblings, nieces, nephews and linear descendants who are category B and, finally, 25,000 for all other cases category C. Ignoring the last category for a moment, let us focus on the sheer disparity between the first two categories. The tax-free allowance of category B is a tenth of A. To put it in more concrete terms, if I gift or will a house worth, let us say, 300,000 to my son, he would pay no tax on that, whereas if I willed it to a grandchild, they would have to pay 82,500. These thresholds create a hierarchy that favours parents over childless adults and grandparents who cannot pass on the same value of their assets tax-free to their loved ones. This issue has been brought to my attention by constituents who feel that the current system is discriminatory and unfair. I would like to share the story of a constituent who inherited his parents' house and paid £165,000 in inheritance tax. This constituent, who is single and childless, now wishes to pass on the house to his nephews or nieces, but faces the possibility that they will be unable to afford to inherit it due to the tax burden they would face. If he had children, there would be no inheritance tax due, which highlights a truly unacceptable disparity and unfairness in our system. In another case, a young man and his partner have recently moved into their first home, which he inherited from his grandmother. However, what could have been a very happy occasion in his life was overshadowed by the fact that he now must face paying off a loan for the next 10 to 20 years to cover the tax bill. This is because he happened to be two generations removed from the disboner instead of one. The principle of equality before the law is enshrined in our constitution. It is our duty to ensure that all citizens are treated equally, regardless of their parental status. The current CAT threshold appears to violate this principle, discriminating against people and creating huge financial hardships for the loved ones simply because they are not immediate children. It leads to the state extracting huge amounts of wealth from the assets that have often been saved and invested in over the lifetime of childless adults, in a time when many families have changed from the straightforward nuclear model and relations are no longer as clear-cut or uniform as they used to be. I urge the Minister for Finance to answer if any action or investigation is being undertaken to review whether the current CAT inheritance tax categories constitute a form of unconstitutional discrimination. Furthermore, I ask if the Government is taking steps to reform the tax system to ensure that real fairness and equality for all citizens. Last year's reforms simply do not cut it. This is a time for us to address the issue and ensure that our tax system reflects the value of equality and fairness. I look forward to the Minister's response and I hope that we can work together to bring about meaningful reform for the benefit of all our constituents. Thank you. Firstly, I would like to thank the Senator for her question and note the concerns and the cases raised and have been provided. I am taking this commencement on behalf of the Minister for Finance, Pascal Donoghue. As you stated, capital acquisition tax is a beneficiary-oriented tax that is payable by the recipient of a gift or inheritance, as opposed to a person providing that gift or inheritance. For capital acquisition tax purposes, the relationship between the person giving a gift or inheritance, the disposer and the person who receives the beneficiary, determines the maximum amount known as the group threshold, below which CAAT does not rise. The Group A threshold, which is currently €400,000, applies where the beneficiary is a child of the disposer. For clarity, it is useful to note that the definition for children for capital acquisition purposes includes a stepchild, an adapted child or certain foster children. All can avail of the Group A threshold in respect of gift and inheritance received from the disposer. The Group B threshold is currently €40,000 and this applies where the beneficiary is a brother, sister, nephew, niece or a linear ancestor or a linear descendant, such as a grandchild of the disposer. The Group C threshold is currently €20,000 and this applies in all other cases where a person received a gift or inheritance that is in excess of the relevant tax-free threshold, capital acquisition tax at a rate of 33 per cent applies on the excess benefit. There are a number of exemptions and reliefs from this tax that may apply depending on the circumstances of the case, some of which do not require that any specific family relationship applies. One such exception to the capital acquisition tax is a dwelling house exemption where a person takes an inheritance of a dwelling house. That person may be able to avail of the dwelling house exemption. To qualify for the exemption, the inheritance property must have been the disposer's principal private residence at the date of death. The beneficiary must also have lived in the house for three years prior to the date of the inheritance and must continue to live in the house for six years after that date. In addition, the beneficiary must not be of beneficial interest in any other residential property. Detailed guidelines of the dwelling house exemptions are also published on the revenues website. In addition, nieces or nephews of that disposer may qualify for favoured niece or favoured nephew relief in respect to gifts or inheritance of business assets. The relief allows a niece or nephew who qualifies for the relief to avail of Group A threshold. High nieces or nephews are those who have worked substantially on a full-time basis for a period of five years prior to the gift or inheritance being given in carrying out or assisting in carrying out the trade business or professions of the disponer. In conclusion, it should be noted that the existing capital acquisitions tax regime, as with all legislation, was created with the benefit of advice from the Attorney-General. In this regard, all legislation is presumed constitutional unless the courts determine otherwise. Superior courts review the constitutionality of legislation when specific cases are presented. Therefore, we do not believe that the current capital acquisition tax is unconstitutional. Thank you for your reply and repeating everything we know about the capital acquisition tax households is not addressing the discrimination faced by childless couples. This is not advocating for anything to be taken away from the adults with children. This is about giving a voice in these houses for equality for couples and single people with their children. Everyone should have the same level of control over how their fully taxed assets are passed on. All citizens should be treated equal. This is definitely not the case. So let's be honest. Why should the children of my children, the children of Micheál Martin, the children of Simon Harris, be treated differently from, let's say, the nephews and nieces of Senator Victor Boyan or Deputy Ken O'Flynn or Deputy Roderick O'Gorman? It's wrong. It's discrimination. It is wrong and it's discrimination and I really want you to reflect on that and see what you could do in relation to this. I definitely don't believe it is unconstitutional and I'm sure there will be a case taken against you. And also, getting somebody to move in with you three years beforehand. You may end up getting sick and somebody might have to move in. You know, somebody in their 30s and 40s and 50s can get cancer and a relative might have to move in. They won't have that three-year grace. So the legislation needs to be changed as far as I'm concerned. I will get that. Again, I just want to thank the Senator for her contribution on this issue and certainly I note the concerns raised by the Senator in her contribution on this debate. However, the Minister for Finance and his department are satisfied as to the constitutionality of the existing capital acquisition tax legislation. It should also be noted that, contrary to her arguments, there are exemptions in place currently for CAAT, where dwelling houses can be provided to individuals of those who have passed on, who have lived in the dwellings in question for a specific period of time before the inheritance. It also will continue to live in the house for a specific period afterwards. There are exemptions in place at the minute. There are no proposals at this time to make any changes to the existing arrangements to address the particular matters. You should also be aware that there would be a significant cost indeed in the Budget 2025. We have increased the thresholds across Groups A and Group B to the tune of €88 million. We will continue to review that. Also options are available for setting cap thresholds, must be balanced against competing demands. As with all tax matters, the Department of Finance will, of course, consider the capital acquisitions tax exemption levels and related group thresholds throughout the process and will advise the Minister accordingly. of course, of course, of course, in the case, the National Institutes have been