CGT: why does share indexing for inflation only apply up to 2002?

Usjes

Registered User
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Hi,

I have held shares for a number of years and will probably sell them this year and have a CGT liability so I have been reading up on how exactly to calculate my gain. Indexing the effective cost price for inflation was something that I always thought was allowable but on reading revenue leaflets it looks like the indexing is only allowable for the years from the acquisition date up to 2002. So if you held shares from 1992 to 2002 you could index the cost price by a considerable amount to allow for inflation but if you held the same shares from 2002 to 2012 you are allowed nothing!
So my questions:
(i) Am I correct that no indexing is allowable for shares purchased after 2002 ? Or did I just look at an outdated version of CGT1 where the indexing table only went up to 2002?
(ii) If indexing is not allowable after 2002, does anyone know why ? I mean if it had always been the case that indexing was not allowable I wouldn't think anything of it, but to consciously move from a fairer scheme to a more unfair one seems very odd. They could now be taxing you for a numerical 'gain' which in real terms isn't really a gain at all. Similarly had this change happened now, it would fit right in with the general trend of 'the country is bankrupt so lets screw the taxpayer' but it looks like it was introduced back around 2002 when everything was booming, so again it makes no sense.
So, can anyone provide any insight ?

Thanks,

Usjes
 
The number of taxpayer directly affected would be small, mostly better off than average - so it was an easy target for the government.
 
Hi Usjes

1) You are correct. Indexation was stopped in 2002
2) IIRC, that was the same year in which CGT rates were cut from 40% to 20%, so the abolition of indexation was a fair price to pay.
 
Budget 2003 saw a few material changes to the CGT regime:

http://debates.oireachtas.ie/dail/2002/12/04/00023.asp

CAPITAL GAINS TAX

Payment Dates
At present capital gains tax is payable on a preceding year basis. The Finance Bill will provide that in future a preliminary tax payment will be made by 31 October each year in respect of gains made up to 30 September in that tax year. Tax due on gains made over the remainder of that tax year will be paid by the following 31 January. This will result in an estimated once-off gain of €250 million for the Exchequer in 2003. In making this move we will be putting CGT on a similar footing to other tax charges.

Roll-over Relief and Loan Notes
It is proposed that no roll-over relief will be allowed for any purpose on capital gains arising from disposals on and from today. Also, it will no longer be possible to defer capital gains tax on share disposals by taking the proceeds in the form of loan notes.

Indexation for CGT
In addition, indexation of the base for computation of capital gains will only be allowed to be calculated up to 31 December 2002.

All these reliefs and allowances made sense when the CGT rates were 40% and 60%. These base-broadening changes will bring in about €20 million in 2003 and about €100 million in a full year.



As Emmet Stagg quipped at the time: They will not even miss it.
 
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