Kevin O'Higgins Solicitors

IRELAND has the highest death taxes of any of the world's major economies, according to a new study

Tuesday, 22 July, 2014
The Sunday Independent
by Louise McBride

The report, by the global accountancy network UHY, found that Ireland's inheritance tax was more than three times the international average and far higher than that charged by other countries in the European Union.

A couple who inherit a property worth €2.16m in Ireland will lose 26 per cent of this to inheritance tax, according to the study.

This is more than six times the tax bill that would be faced on a similar inheritance in Italy and more than twice the bill paid in Germany.

The savage Irish inheritance tax is stifling entrepreneurship and discouraging people from earning more money, according to Ladislav Hornan, chairman of UHY.

"High levels of inheritance tax can be seen as undermining the ambitions of entrepreneurs," said Hornan. "Big inheritance tax bills can reduce the incentive to keep creating wealth in order to pass it on to your family. They can also deprive the next generation of capital that traditionally has been key to funding the establishment of new businesses. Inheritance tax has become a big earner for the governments of some countries."

Oonagh Casey, an expert in inheritance tax and partner with Fagan & Partners, said the hefty death tax was a big concern amongst older people.

"We are seeing more concern about the tax, particularly amongst older clients," said Casey. "They are worried about the tax bill that could arise from their inheritance after they die."

The recovery in the property market in certain parts of the country has also sparked further worries about inheritance tax.

"A lot of the wealth of Irish people is tied up in property," said Casey. "More people are worried about property values now because the tax-free thresholds have remained the same [despite the recovery], so there's more of a likelihood that people will be hit for inheritance tax."

The thresholds for inheritance tax, which allow you to inherit a certain amount of money or property tax-free, have been slashed over the last five years. In early 2009, a son or daughter could inherit €542,544 tax-free from a parent – that has since been chopped to €225,000.

"The inheritance tax rate has increased dramatically over the last few years, from 20 to 33 per cent," said Michael Gaffney, partner with KPMG.

"It can be particularly tough where the inheritance includes a house in an expensive area, which might not even be a particularly large house."

A spokesman for the Department of Finance said the Government's approach to taxation "is to keep taxes on labour and the activities that generate economic growth and jobs as low as possible".

"In this regard, there has been no increases in income tax or the universal social charge in Budget 2012, 2013 or 2014," said the spokesman.

"There are no plans to change this approach or to shift the burden of tax away from wealth and on to work."

 

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