The Gazette 1988

GAZETTE

DECEMBER 1988

of the Incorporated Law

Society of Ireland on the 1989 Budget

The following is the text of the Law Society's submission on the 1989 Budget

prepared by the Taxation

Committee.

1. Simplification of the Tax

System

The greatest advantage a tax

system can have is its simplicity

and its simplicity is the greatest

encouragement to compliance. In

general everything possible should

be done to simplify the Tax Code

w i t h a v i ew to boos t i ng the

Revenue yield and at the same time

to enhance economic activity. A

(b)

particular emphasis should be

placed on compliance w i th a view

to minimising compliance costs,

both for the Revenue and for the

taxpayer.

(c)

2. C.A.T.

The current high level of the top

rates yields very little tax while at

the same time those high rates

serve to make the country un-

attractive to capital, both domestic

(d)

and foreign. The psychological

negative impact of the current top

rates is far out of proportion to the

yield from those rates.

Because of the level of U.K.

taxation, currently the max imum

rate is 4 0%, it is essential that this

country takes measures to improve

its position. Ideally, our top rates

should be below the British rate

(e)

w i t h a view to making this country

attractive to free floating capital

f r om such locations as South

Africa and Hong Kong.

Consequently, it is submitted and

recommended that the flat rate be

3 5% w i th more generous personal

allowances. This recommendation

would leave most normal estates in

the country unaffected to a large

extent insofar as their payments to

the Revenue are concerned.

In addition to the reduction in

rate to 35%, it is submitted that the

f o l l ow i ng specific changes be

considered w i th a view to relieving

hardship and, in some areas, for the

sake of consistency,

(a) At present, there is no time

limit put on the period over

(f)

w h i c h a g g r e g a t i on t a k es

place. This puts a heavy

burden on the Revenue and

the taxpayer as full records

must be kept,

infinitum,

e i t her

ma n u a l ly

computer. Neither method is

suitable for keeping records

over an indefinite period. It is

submi t t ed t hat an aggre-

gation period of seven years

would be sufficient for this

tax.

It is submi t t ed that gifts

between spouses should be

exempt from Gift Tax. This

(g)

would make the tax con-

sistent as it affects spouses.

It is submitted that, in the

interest of Equity, thresholds

be index linked and the new

t h r e s ho l ds be a n n o u n c ed

each Budget Day by the

Minister for Finance. This is

the position in the U.K.

The small gift exemption of

£ 5 0 0 has r ema i n ed un-

changed since 1978. It is

submitted that this exemption

be increased to £1,000 and be

applied to inheritances, as

we l l. Th is w o u l d relieve

Personal Re p r e s e n t a t i v es

f r om

ma k i ng

i n - d e p th

enquiries into trivial cases.

Nephews and nieces are

given favourable treatment in

certain circumstances under

t he p r o v i s i ons of Par. 9,

Second Schedule - First Part

of the Capital Acquisitions Tax

Act, 1976. In the circum-

stances set out there, they

will be treated as children for

tax purposes. Grandchildren

are of closer relationship, both

in terms of blood and in terms

of affection and are likely to

be working in the circum-

stances set out in that Para-

graph. It is submitted that

grandchildren be given the

same favourable treatment as

the nephew or niece in the

same circumstances.

Agricultural property is rightly

given special treatment in

Sect. 19 of the Act wh i ch

relieves the burden of tax on

s u ch p r ope r t y. Non - ag r i-

cultural business is not so

relieved although an employer

in t hat t y pe of business

p r o b a b ly emp l o ys

mo re

people than the farmer. Such

business could be run, either

personally or t h r ough the

medium of a company. It is

submitted that non-agricultural

business be given the same

relief as Agricultural Property.

A basic principle of taxation is

that it should be fair. In the

Act, the Oireachtas accepted

that acquisitions from close

family members would be

given more relief than acquisi-

t i o ns f r om mo re d i s t a nt

relationships.

O t h er

ma t t e rs

w h i c h

should be taken into account

are:

(i) the degree of hardship

inflicted by the tax;

(ii) that the individuals and

their families be encour-

aged to support them-

selves out of their own

resources, where poss-

ible, and the State should

not deprive individuals

of assets given or saved

t o p r o v i de

s u p p o rt

during decrepitude or

old age, particularly if

the effect is to make

such person a candidate

for State assistance

This type of hardship can take

a number of forms:

(i) Frequently a house is

shared by t wo or more

s i ng le

w i d o w ed

relatives and there is a

relationship of mutual

dependence going back

many years. In most

cases there is no other

wealth other than the

house. The succession

of one (or more) of t hem

to the house can cause

severe financial hardship

and force the survivor(s)

to sell the house.

337