Adrian Bourke, the brother of ex-president Mary Robinson, will presumably make a nice capital gain from the sale of his Ballina premises to Mayo County Council.  It’s supposed to be bought for €665,000 and be used as Ireland’s first presidential library, housing his sister’s papers.  However  recent reports suggest that the sale has stalled for reasons unknown.

In fact the whole project has come under fire recently, with RTE’s Prime Time last week raising various questions about whether this is a good use of public money, and historian Diarmuid Ferriter writing “If Robinson wants to encourage research into her career, or assessments of her legacy, she should follow the practice of her predecessors and donate her papers to the National Library, the National Archives or one of the national universities, without any need for tax credits or valuations by auctioneers and with no excessively expensive, publicly funded vanity centre.”  Ouch.

And Michael McDowell has raised similar concerns in his most recent Sunday Business Post contribution:  “Are all former office-holders to benefit by tax holidays based on donating their papers, documents and memorabilia to publicly funded ‘libraries’ in future? Or is this to be a one-off?   In my judgment, the Ballina scheme should be called off before it does further damage to Irish public life. And before it needlessly damages the presidency – not to mention damage to her own place in our history.”  Double ouch.

I’m tempted to ask why it has taken so long for these worthies to train their gaze on this project, which is being funded by the public purse to the tune of about €5 million.  Yours truly was a lot quicker into the fray, asking a few pertinent questions 11 months ago.

Mrs Robinson has also been in the news recently as she is selling her home in Mayo. The plug for the house in the Irish Times reveals that “Former president Mary Robinson and husband Nick are selling their Co Mayo home for €2.75 million. Massbrook, a 113 acre estate on the shores of Lough Conn, is located about 20 minutes from Mrs Robinson’s childhood home of Ballina, and has served as the couple’s primary Irish base since they purchased it in 1994.”

Those of you who (unlike me) are familiar with tax matters will be aware that the sale of one’s principal private residence is exempt from Capital Gains Tax (CGT).  However, the relevant legislation, section 604 of the Taxes Consolidation Act 1997, provides that the exemption only applies to the residence plus its “garden or grounds up to an area (exclusive of the site of the dwelling house) not exceeding one acre“, so Mrs Robinson is presumably looking at a CGT bill, calculated at 33% of any gain she and her husband make on 112 of the 113 acres.  Based on an apportionment of the sale price being asked, I’m guessing that the gain might be in excess of €1 million, since the 1994 purchase price allowed as an offset would have been quite small.

However as the State has given her a tax credit of €2 million for “donating” her archive, she will not have to worry about handing over any of the sale proceeds to the Revenue Commissioners.  She will also presumably have plenty of tax credit left over to cover other tax liabilities – such as her Presidential pension, for instance?  On the other hand, wouldn’t it be great if she could let her brother share in the tax credit, so as to cover the profit he will make on the sale of his premises in Ballina?





With all the fuss about the release of the Government’s budgetary plan to German politicians, one aspect of the plan seems to have escaped with little or no comment.  There is apparently a statement that €100 million would be raised from a reform of capital gains tax (CGT).  For “reform”, presumably we can assume an increase is planned, probably a large one.

I’m puzzled as to how the Government expects to generate additional tax revenue by increasing the rate of CGT from its current rate of 25%.  The opposite effect is in fact likely.  (Increasing Capital Acquisitions Tax on legacies would no doubt increase the yield from capital taxes somewhat, although there would be significant leakage as estate planning strategies would become more cost effective, and thus more prevalent – more fees for lawyers and accountants).  CGT is largely a voluntary tax which very often can be avoided by the simple expedient of deferring the sale of the asset in question.  If the gain is large enough, one has the option of leaving the country to legitimately avoid the associated tax (as Denis O’Brien did when he sold Esat).

A Joint Economic Committee of the United States Congress in 1999 said this in the foreword to their report “Cutting Capital Gains Tax Rates: The Right Policy for The 21st Century“:

Proper taxation of capital gains is a complex issue. Capital gains differ from ordinary income in several respects. Because capital gains occur over time, their size is influenced by inflation. And, unlike most ordinary income, the realization of capital gains is largely a matter of choice.

In addition, there is a concentration issue – most people realize sizeable capital gains on only a few occasions such as when they sell a business or farm. As a result of these factors, capital gains are more sensitive to the rate of taxation than ordinary income.

The tax treatment of capital gains is particularly important since they are derived from entrepreneurial ventures. In modern high-tech economies, these activities are the engine that propels economic growth.

The report concluded (see its executive summary) that:

The optimal tax rate is the rate that is best for the economy, and it is lower than the rate that provides the government with the most tax revenue. The current top statutory rate of 20 percent significantly exceeds the optimal tax rate.

Here in Ireland, the 1997 Budget reduced the rate of CGT from 40% to 20%. The then Minister for Finance, Charlie McCreevy, was heavily criticized on the grounds that this would reduce revenues. He argued that revenues would rise substantially as a result of the lower rate. McCreevy was proved right (for once!) and revenues almost trebled , greatly exceeded official predictions.

Increasing the rate of CGT to 30% (as Fine Gael have proposed), or even higher, is unlikely to raise additional tax revenue in the medium term, and will reduce it in the long term. It would be a purely optical change, designed for political reasons to pacify left-wingers and give a spurious impression of greater fairness.