Abolish Capital Gains Tax Exemption for Principal Private Residences?

J

Joe_90

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Should consideration be given to getting rid of or reforming the Capital Gains Tax Exemption for Principle Private Residences?
 
Given the current situation with the National Finances I think that we should consider abolishing the CGT exemption on Principle Private Residences.

This will not have a major impact in the short term given the low value of houses but I think now would be a good time to get rid of the exemption.

While there are lots of house buyers who bought in the last 5 - 10 years who have seen the value of property fall there are lots of people who bought before that who are sitting on large increases which are untaxed under the current system.

Looking longer term, why should people with gains from PPR not pay CGT.
Please let me know your views.
 
As with all of these proposals (and no offense meant to the OP), I would much prefer it if the government focused on slashing its costs rather than raising taxes. If we had a few decent, international reports saying how lean our government was and we then had a tax shortfall, by all means let's look at ways to increase taxes then. Until then, stop feeding the beast!
 
I think we can do both - increase taxes and reduce expenditure.

The proposal to abolish the relief on PPRs is an interesting one.

It would make people much more reluctant to trade down or trade up.

Although, I suppose you could allow people to defer the payment of CGT if they bought another house, so trader uppers would not be dicouraged.

Brendan
 
"Roll Over Relief" was formerl made available to businesses who re-invested all/part of the sale proceeds into new assets. This type of relief could be applied as an alternative to full exemption. However, we are currently somewhat reliant on positive movement in the property sector, in order to get te markets moving again. Any CGT on PDH's will not apply for many years, and I think this is perhaps something for the "long finger"!
 
Firefly said:
As with all of these proposals (and no offense meant to the OP), I would much prefer it if the government focused on slashing its costs rather than raising taxes. If we had a few decent, international reports saying how lean our government was and we then had a tax shortfall, by all means let's look at ways to increase taxes then. Until then, stop feeding the beast!
Click to expand...

Fair point, but I suppose we're talking about means of broadening the tax base, which can facilitate reducing rates. Obviously in the real world, particularly with the state of the exchequer these days, that's unlikely to happen though.

In response to the OP - I would have thought that by having a property tax based on valuation, which is where we seem to be headed, we will effectively be taxing the unrealised appreciation in a PPR's value, as the tax will increase in line with the property value.

Investors will effectively be hit with a double taxation; the annual charge, followed by the CGT on the eventual disposal... so the question is whether preferential treatment should continue to be afforded to owner occupiers in such a system?

I'm not expressing a view here, I'll stay on the fence awaiting the opinions of the wiser and more worldly posters' opinions to inform my own...

Rollover relief might be something that would make it more palatable, but could be a nightmare to administer, when you think about situations like where people buy a second property and keep the first either for investment or as a second home etc. and you're talking about rolling over for decades - it could get messy.
 
Changing that exemption wouldn't worry a lot of people I guess and while they're at it how about a rebate on stamp duty where your property loses value.
 
I dislike any taxes that negatively impact the mobility of the workforce. If the jobs are in Cork, enable people to move to the same type of property with minimal cost. Rollover relief may facilitate this.
 
Overall I see some merit in the relief but 2 points come to mind.

1) It was abused during the boom. I know for example of a person who purchased a site built a house and lived in it for 2 months before selling it and making €200,000 which was exempt from tax. His trade was a builder.
2) Why should the gain be exempt? if I buy a house today and SAY it increased in value by €50,000 in 10 years when I sell to trade up. I have 50k tax free. If I'm competing with Bob and Bobette who are FTB they will have to earn 100k in income to pay back the 50k.
 
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