CAPITAL GAINS TAX FACING 8% BUDGET HIKE; Lenihan in bid to plug EUR16bn shortfall.

Byline: AINE HEGARTY

THE Government is considering a plan to raise capital gains tax in the coming Budget, the Irish Daily Mirror has learned.

The current rate is 22 per cent but Finance Minister Brian Lenihan is looking at a proposal to hike it to 30 per cent to help plug the EUR16billion black hole in public finances.

If the proposal is given the green light, it will mean a 10 per cent rise in the tax since last year as Mr Lenihan has already increased it by two per cent in the October Budget.

The Government is under pressure to hike the rate as capital gains revenue has plummeted by 73 per cent due to the property slump.

During the boom years, billions poured into state coffers through house sales.

With the property market now at a standstill, the Government has only taken in EUR141million so far this year, compared to EUR515million in the same period last year.

And dire Exchequer returns for March, to be published tomorrow, are expected to show a further dramatic drop in capital gains returns.

Increasing the rate by eight per cent to 30 per cent could raise up to EUR640million.

Capital gains tax is charged on profits made on the disposal of assets such as property, land, shares, commercial property, off-shore funds and foreign life policies.

A property is exempt from capital gains if it is a main residence or if it is being transferred to a spouse through separation or divorce.

Last week it emerged businessman Gerry McCaughey used a legitimate loophole to avoid paying capital gains of EUR4.7million.

He resigned as Dublin Docklands Development Authority chairman after it was revealed his wife moved to Italy for a year to avoid paying tax on profits from the sale of his building empire.

CAPTION(S):

PROPOSAL Lenihan set to raise capital gains tax