In this NERI Research InBrief No. 94, Tom McDonnell, NERI and Micheál Collins, UCD consider potential reforms to the taxation of wealth transfers (inheritances and gifts) in Ireland.
While there are strong efficiency and especially equity arguments for taxing wealth transfers the reality is that receipts from Capital Acquisition Tax (CAT) amount to less than 1 per cent of total government revenue and to effective tax rates well below those prevailing for other sources of income. In addition, the CAT is notable for the existence of very generous exemptions and reliefs and for differential thresholds depending on the donor-recipient relationship. In this context, we consider the potential for increasing the yield from CAT while addressing the failures of the current tax design from the perspective of horizontal equity.
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