147. Deputy Edward Timmins asked the Tánaiste and Minister for Finance if he will reintroduce indexation for capital gains tax to eliminate this annual stealth tax; and if he will make a statement on the matter. [39883/26]

Sentiment score: 0.10

Indexation for capital gains tax relief was abolished in 2003. Will the Minister of State consider reintroducing this indexation, something that, at the moment, is effectively an annual stealth tax because there is no indexation?

Sentiment score: 0.39

I will give a simple example to illustrate this better. If you had €10,000 in savings, you bought shares today and they gained by 20% over the next five years, say, 4% per annum, that would mean they would be worth €12,000 in five years' time. If inflation is a similar rate, which may well happen - 20% over the next five years - your €12,000 in five years is worth the same as €10,000 today because the 20% inflation has wiped out that 20% gain. You have no real gain, in effect, but if you go to sell those shares in five years' time, you are deemed to have made a gain of €2,000 because you bought the shares for €10,000 and sold them for €12,000. However, you are actually no better off because the €12,000 in five years' time is worth the same as the €10,000 today. Yet, you have to pay a tax on that €2,000. That is my whole point. It is effectively an annual stealth tax.

Sentiment score: 0.44

I understand this is a tall order because the position has not changed since 2002. That is 24 years. It has been an issue every year since then but various finance Ministers have chosen not to act. I would also argue that capital gains tax is different from income tax, gift tax and inheritance tax. In fact, tax credits and bands have increased considerably over the past 20 years. The exception has been capital gains tax, where there has been no indexation whatsoever, unlike all other taxes. When indexation was abolished, one of the reasons was capital gains tax was 20% at the end of 2002 and for a few years prior to that. That was given as a reason - we did not need taxation because it was being taxed so little. Since then, it has steadily increased, as the Tánaiste said in reply to an earlier question, and is now up at 33%.

Sentiment score: 0.18