The Government has moved to cut capital gains tax on offshore trusts held by Irish residents, following complaints they were being double taxed. The concession came after submissions from the Institute of Taxation and the Law Society. The Department of Finance has denied that any individual lobbied it.
Under Section 579 of the Taxes Consolidation Act, Irish residents with offshore trusts are currently subject by the Revenue to 20 per cent capital gains tax on profits. In February 2000, the Minister introduced Section 579A. However, this made beneficiaries liable to another round of capital gains when the trust actually distributes funds.
The Minister now proposes that beneficiaries should pay capital gains only when the trust distributes funds, and not when it actually generates the profits.
In a detailed pre-Budget submission to the Department of Finance, the Law Society said the combination of Section 579 and Section 579A gave rise "to serious double or treble tax problems". "The provisions apply without discrimination ... The double tax sought to be raised by this particular section is opportunistic and unjust," it went on. Urging change "as quickly as possible", the society said: "It is believed that the adoption of the proposals would involve no loss of revenue to the Exchequer." One of the authors of the submission, Dublin-based solicitor Mr Brian Bohan, said he had wealthy clients who feared they would be taxed twice.
Ironically, the problems follow the attempt by the Department of Finance in 1999 to encourage wealthy Irish people to remain within the tax net. The Department's decision to backdate the abolition of Section 579 to February 11th, 1999 is an acknowledgement a mistake had been made, experts said.
