AN RTÉ PRIME Time debate on inheritance tax came to a head earlier this week when Paul Murphy TD made a surprising claim: that under the current system, 97% of people will not have to pay tax on inheritance when a parent dies.
The debate was aired on Tuesday, the day after the Inheritance Tax Reform Campaign, a group headed by Alan Shatter that seeks to abolish inheritance tax, held its first public meeting.
“The teacher, the nurse, the student — who Paul is talking about — are the people who, when their elderly parents die and who think that when they inherit, think that they may have some financial security for the future, and who are going to discover that part of their inheritance is basically stolen by the state,” Alan Shatter, a former Minister for Justice, said in the debate.
“But 97 percent of them will not be affected by it,” Murphy interjected.
The point was later put to Shatter directly by the host, Miriam O’Callaghan.
“I think a lot of people watching this are going to be listening to Paul Murphy who said ‘it doesn’t impact 97 percent of people’. You’re going to have to beat that point down if you want to believe what you’re saying.”
“I don’t agree with that statistic,” Shatter said in response.
Wealth tax or stealth tax?
— RTÉ Prime Time (@RTE_PrimeTime) September 17, 2024
Former minister and Chair of Inheritance Tax Reform Campaign @Alan__Shatter and People Before Profit's @paulmurphy_TD join @miriamocal to debate inheritance tax. @rtenews | #rtept pic.twitter.com/AMdV3qsJy4
Inheritance tax is paid on money and property that a person receives when someone else dies, either because they are family or are named in a will.
Inheritance is usually from parents to children. It is argued by some that this type of inheritance is inherently unfair, as it rewards people, primarily the children of the wealthy, who may not have done anything to earn it. As such, it is argued that it should be taxed.
Inheritance is taxed through Capital Acquisitions Tax, and inheritance from a parent to a child (including adopted or stepchildren) specifically, is counted as a “Group A” inheritance.
Under this category, each child has a tax threshold of €335,000, meaning that each individual will have to inherit at least this much over their lives before they begin paying taxes.
They can also receive gifts of up to €3,000 a year from a living person tax-free that does not count toward that threshold.
So, a single child who inherits a house worth €340,000 will only have to pay tax (at a rate of 33%) on the €5,000 that is above the threshold — or €1,650 in total.
A million euro split equally between three children would be tax-free, as each child would individually be under the threshold, unless they had already received another inheritance from a parent that bumped them over the limit.
There are numerous other rules and exemptions, such as if a child was living in the family home prior to the parent’s death.
The focus of the Prime Time debate was whether such a tax should be abolished entirely. While Shatter made arguments that such a tax was unfair in principle, Murphy’s claim that 97% of people would never be affected by the tax was seen as a strong counter.
Murphy responded to inquiries by The Journal, saying that his claim came from Assistant Professor in Economics at Trinity College Dublin Barra Roantree.
He also pointed to a release put out by the CSO based on the Household Finance and Consumption Survey (HFCS), ran by the European Central Bank.
This showed that 30% of Irish households surveyed had said that they received an inheritance. It also showed that the median value of these inheritances was €100,600, meaning that half received more than this and half received less.
Based on that median figure, we can say for definite that at least 50% of people who received inheritances were not eligible for CAT – because what they received was worth €100,600 or less, which is far below the €335,000 threshold.
Many others who received between €100,600 and €335,000 will also have fallen short of the threshold to be taxed – though we don’t actually know how many because the CSO did not provide a breakdown.
The economist Barra Roantree, who Murphy cited as the source of the 97% figure, told The Journal that it was derived from the same source as the CSO’s report, the Household Finance and Consumption Survey (HFCS).
Roantree told us that the survey’s microdata included answers to a direct question on how much inheritance people had received. He found that slightly less than 10% of those who had received an inheritance in Ireland would have breached the €335,000 threshold.
But as mentioned previously, only 30% of the entire population in Ireland received an inheritance at all.
Therefore, the fact that only 10% of that 30% reached the €335,000 threshold means that just 3% of the entire population paid Inheritance Tax.
In other words, 97% of the entire population of Ireland did not pay Inheritance Tax in 2020 (the most recent year for which figures are available), suggesting Murphy’s figure is accurate.
However, there are some issues with this derivation.
Firstly, the HFCS survey was carried out in 2020 and released in 2022. So, while Roantree said it was the most detailed data on the subject, it is a few years old.
Secondly, Roantree points out that the survey was of people who had already received an inheritance; however, more people are likely to receive one in the coming years as Ireland’s population ages.
He said that, when just counting elderly people, about 50% of respondents had received an inheritance, compared with 30% for the general population.
“There is actually a large share of people who don’t inherit anything,” Roantree said. “There’s a large share of people who die who don’t have any once their funeral expenses are taken care of.”
Roantree also noted that people were getting richer over time, while house prices were also rising.
“On one hand, people are likely to be richer, but on the other hand, fewer people are likely to own their own home,” Roantree said.
He also noted that a family home could be worth up to €670,000 and still wouldn’t qualify for tax if it was split between two children or more.
Irish people are having smaller families, which would also affect how inheritances would be split, with fewer children meaning that the same pot could split less, filling up their individual thresholds more. However, he noted that these would be long-term trends.
Even taking these issues into account, Roantree said that he would not expect the proportion of people who qualify for inheritance tax to “dramatically change”.
“It might creep up over time,” he said. “I would be surprised if it’s up to 5% of the people who are in their 40s and 50s now, whose parents are getting older, and when their parents die and they receive an inheritance.”
However, from the perspective of this factcheck, a far more serious issue was presented: the HFCS microdata is not publicly available — we cannot directly check Roantree’s work.
However, Revenue, the government agency responsible for collecting tax, has also provided figures to The Journal.
While these figures are much less detailed than the HFCS, they do contain enough data to derive an estimate of the proportion of Irish people who have had to pay tax on inheritance from their parents.
More interestingly, the figures go up to 2023, while the HFCS data was from 2020.
So, in 2023, how many tax returns involved a person paying CAT due to reaching the Group A threshold? 2,490, less than one-twentieth of one percent of the population (or 0.047%), using the 2022 CSO population estimate.
In 2022, the figure was even smaller: 2,162.
(The Revenue figure was for returns, not people. Married couples often file joint returns. However, the only case where that would affect Murphy’s claim is when both individuals reach their threshold in a single year, a very rare circumstance.)
There is not enough detail in Revenue’s response to analyse who these inheritors are or how much they paid, but we know that they paid Inheritance Tax regardless.
What this tells us is that, in a given year, if we select a random person, there is a 0.047% chance that they are affected by tax on a parent’s inheritance.
But Murphy’s claim was not about how many people are affected in a year, but in general.
We can interpret his claim strictly, as meaning that 97% of people won’t be affected over their lifetimes – which is 82.4 years on average, if we split the difference between men and women in a 2021 CSO life expectancy estimate .
By multiplying the chance that a random person will pay tax on a parent’s inheritance in any given year by the amount of years that they will likely live, we can roughly derive the chances that a person will have to pay tax on a parent’s inheritance in their lifetime,
By applying the chances that a person will have to pay tax on inheritance from their parents in their lifetimes to the general population, we can derive what proportion actually do pay such a tax.
So, does the Revenue data indicate Paul Murphy was right? Are 97% of people unaffected by tax when inheriting from their parents?
Using the 2023 figures, the estimate is that 96.15% of people in Ireland won’t pay such a tax.
Using the 2022 figures, we can estimate that 96.66% of people won’t.
Figures for earlier years were not readily available from Revenue.
“The broader point, that the only people who currently pay inheritance tax are people with an abnormally large inheritance, is correct,” Roantree said of Murphy’s claims.
Paul Murphy claimed that 97% of people are not affected by inheritance tax on the death of the parents at the current threshold of €335,000 per child.
This is based on an economist’s analysis of Household Finance and Consumption Survey data. While the data available publicly from that survey is consistent with the claim, the microdata that the estimate was based on is not publicly available.
However, figures provided by Revenue show that a very small number of people had to pay tax on their parent’s inheritance in the years 2022 and 2023. Using that data to estimate how many Irish people will be impacted by such taxes over a lifetime gives a figure less than one percent away from that cited by Murphy.
As such, we rate this as Mostly True. As per our verdict guide this means that the best available evidence weighs in favour of the claim.
The Journal’s FactCheck is a signatory to the International Fact-Checking Network’s Code of Principles. You can read it here. For information on how FactCheck works, what the verdicts mean, and how you can take part, check out our Reader’s Guide here. You can read about the team of editors and reporters who work on the factchecks here.
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