The Department of Finance rejected a proposal that would have allowed wealthy people to donate at least €1 million in their will without paying any tax.
The plan had been put forward by the Department of Rural and Community Development to “foster a more philanthropic culture” amongst the wealthiest in Ireland.
However, in advance of Budget 2025, officials said it would create a two-tier system for inheritance tax that would only benefit people with a high net worth.
They said it would lock out less wealthy people who would like to donate to a good cause and cause significant “taxpayer equity issues”.
It said high net worth individuals could use the scheme to direct money otherwise owed to the state to “their chosen philanthropic organisation.”
At the same time, the majority of taxpayers would not have this option and any gifts they made would be liable for tax.
A pre-budget submission said: “The proposal would afford wealthy individuals a choice not afforded to all taxpayers.”
A second similar scheme around earnings from capital gains tax was also put on ice by the department where companies or individuals could redirect certain profits to charity.
However, officials said this too would create a two-tier system that would only be available to big companies and the very wealthy.
The pre-budget submission said: “An initial comparison may be a [smaller company] not receiving relief on a relatively modest gift to a local charity while a large [firm] willing to provide a gift of over €1 million could avail of the relief.”
The Department of Rural and Community Development proposal would have covered profits earned from the sale of land and shares.
Capital gains tax normally applies to these transactions but under the new scheme, full relief would be available for a qualifying donation.
In internal discussions, it was suggested the capital gains tax scheme would have cost in the region of €45 million while €14 million would be the cost of the similar plan for inheritance tax.
However, the Department of Finance said there wasn’t enough data available to know how accurate these figures would prove.
The pre-budget submission said: “Both the capital tax proposals require further careful consideration to assess their impact on the respective tax bases and the broader implications for taxpayer equity before a recommendation can be arrived at.”
Officials said both options should be ruled out pending a broader analysis while small technical rules made around charitable donations should go ahead.
These would allow charities to accumulate funds over an extended period where they were hoping to work on “longer term projects for sustainable activity.”
A separate change was also made around eligibility for new charitable institutes where previously they would need to be established for two years before qualifying for tax relief on donations.
The submission said: “As there is now oversight and governance provided for by the Charities Regulator, Revenue is of the view that the two-year waiting period could be removed.”
