DIRT needs to be adjusted to tax only real gains or at least greatly reduce the rate.

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ardmacha

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There have been a lot of balloons flown in relation to the budget and the rate of inflation and other comments by politicians about banks paying low deposit rates. I haven't heard any mention of DIRT. Depositors can only get a return less than inflation but the government still propose to tax that loss of real value.
DIRT was increased back in the recession when deposit interest rates were decent and inflation low or negative. It now needs to be adjusted to tax only real gains or at least greatly reduce the rate.

Is there any merit in collecting some of the quotes from government politicians about low interest rates and sending these to our TDs stating that people should not be taxed on a real loss, when they have been prudent enough to save some money.
 
Therefore there should be no dirt tax as inflation is higher than interest rates. It's also the case that governments were the biggest beneficiaries of the ultra low interest rate era as they got to borrow money for covid at way lower interest than they otherwise would have. So interest rates were suppressed for so long and they still collect tax on those ultra low interest rates which were below inflation rates. Great points
 
It probably hasn't gotten a mention because it's so small. Based on Revenue data it was the second lowest source of revenue out of a list of about 20 tax heads. It netted the Government a total € 14 million last year. Of course that will likely rise but it's never been a big contributor to tax receipts.

Looking back it was 20% for most of the Celtic tiger years. It's increase coincided with the crash i.e., we were broke and needed every penny we could get. It peaked at 41% in the period 2014-16. It has been reduced a couple of times since then.

Is it having an excessively distortional impact as it stands? Hard to see any signs of it being much of a disincentive as deposit in banks are high and growing. Low returns to households primarily reflect low rates on offer from Irish banks. Irish depositors are just not price sensitive.

Who would benefit from a reduction? DIRT is a relatively progressive tax. So cutting it will benefit the wealthier more so then those poorer households who have less savings. Of course the really well off probably don't keep a lot of their money on deposit.

Hard to see a DIRT cut getting much focus with a budget trying to help those suffering from a cost of living crisis. Likewise it's unlikely to win votes in the same way a change in tax rates/bands or an increase in pensions might do.
 
skrooge said:
It probably hasn't gotten a mention because it's so small. Based on Revenue data it was the second lowest source of revenue out of a list of about 20 tax heads. It netted the Government a total € 14 million last year. Of course that will likely rise but it's never been a big contributor to tax receipts.

Looking back it was 20% for most of the Celtic tiger years. It's increase coincided with the crash i.e., we were broke and needed every penny we could get. It peaked at 41% in the period 2014-16. It has been reduced a couple of times since then.

Is it having an excessively distortional impact as it stands? Hard to see any signs of it being much of a disincentive as deposit in banks are high and growing. Low returns to households primarily reflect low rates on offer from Irish banks. Irish depositors are just not price sensitive.

Who would benefit from a reduction? DIRT is a relatively progressive tax. So cutting it will benefit the wealthier more so then those poorer households who have less savings. Of course the really well off probably don't keep a lot of their money on deposit.

Hard to see a DIRT cut getting much focus with a budget trying to help those suffering from a cost of living crisis. Likewise it's unlikely to win votes in the same way a change in tax rates/bands or an increase in pensions might do.
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It's probably there to funnel money into state savings, because it is so unattractive to invest in other areas due to excessive and punitive taxation relative to peer countries like for example in simple ETFS an awful lot of money ends up on deposit by default which benefits the government.
Because the banks must invest so much of those deposits in government bonds that pulls down the interest rates that government has to pay than in a properly functioning market.
I think 70 billion of Irish government debt is held by Irish financial institutions, 70 billion is held internationally and probably the other 70 billion is held through state savings and prize bonds etc.

If they were to reduce dirt it would increase the attractiveness of international deposits like raisin who are paying alot more interest.

What's really happening is the government is taking advantage of all those savings for their own borrowings and to keep interest rates suppressed
 
Any smart person has already taken their savings out of the Irish banking system.
If the government changed the ridiculous tax regime on Unit Funds they would reap the benefits of taxation on the higher profits they generate.
 
Savings rates are way too high within the Irish economy. The last thing the Government should do is incentivise more savings. The last 15 years has seen a massive transfer and concentration of wealth to older people. They have way more than they need so they save it, taking it out of economic circulation, thus reducing the real living standards of working people. If anything we should be taxing savings more.
 
Purple said:
Savings rates are way too high within the Irish economy. The last thing the Government should do is incentivise more savings. The last 15 years has seen a massive transfer and concentration of wealth to older people. They have way more than they need so they save it, taking it out of economic circulation, thus reducing the real living standards of working people. If anything we should be taxing savings more.
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The counter argument is inflation is high and the economy is potentially close to overheating/at capacity. The government has a role in countering that by encouraging savings/deferring consumption.

On the savings rate I believe it has come down from the levels seen during the pandemic.
 
skrooge said:
The counter argument is inflation is high and the economy is potentially close to overheating/at capacity. The government has a role in countering that by encouraging savings/deferring consumption.
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The best thing they could do is not reduce taxes but that's not populist and the crazy populist opposition and economically illiterate electorate will pounce on them if they do the right thing.
skrooge said:
On the savings rate I believe it has come down from the levels seen during the pandemic.
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Yes, but they are still too high.
 
S class said:
Any smart person has already taken their savings out of the Irish banking system.
If the government changed the ridiculous tax regime on Unit Funds they would reap the benefits of taxation on the higher profits they generate.
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But you still have to pay dirt on it even if deposited outside the country. I think the ntma are aware of this and are raising the interest rates on state savings just enough so it is still not attractive enough to move deposits out en masse. I think they watch all this stuff like hawks because if there was a big move of deposits out well then that would affect the interest rates they have to pay when rolling over the massive national debt
 
My point is exactly as you state. The smart people will have transferred out of Ireland using, for example Raisin. The government will still get their dirt tax, but the investment benefits of the deposits are lost to a different country.

The government should encourage Irish people to keep their wealth in Ireland.
This could be done by making it worthwhile from a tax point of view, to for instance, invest in a scheme to build houses, clean energy etc.
 
S class said:
This could be done by making it worthwhile from a tax point of view, to for instance, invest in a scheme to build houses, clean energy etc.
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Money is not really a constraint anywhere in the economy. The lack of skilled labour is the problem just about everywhere.
 
Scale up the production of factory build houses. Automate the bulk of construction and have minimum skilled labour on site.
This is where lots of investment is needed.
Think about the building methods of Lidl and Aldi supermarkets.
Bring in the prefabricated components and spend a week on site.
 
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That statistic about high savings here is always taken in isolation and never a wider examination of why this is . For example no studies have been done on the level of investments Irish people have outside of property or the size of their pensions in comparison to peer countries. If that was conducted it would show that Irish people have much lower pensions and investments compared to other countries.
With regards to dirt tax we tax savings much higher than many, for example in UK first 1000 pounds of interest is earned tax free, that means you can have 50 k in savings with no savings taxes. Also if you earn below 17k there this threshold of tax free interest goes up to 5000pounds.
Maybe the government should task the esri to do some useful research like this for example rather than alot of the questionable stuff they have done lately
 
joe sod said:
That statistic about high savings here is always taken in isolation and never a wider examination of why this is . For example no studies have been done on the level of investments Irish people have outside of property or the size of their pensions in comparison to peer countries. If that was conducted it would show that Irish people have much lower pensions and investments compared to other countries.
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Ah but we have housing... the answer to all Irelands problems - or at least 2/3rds of it.

Quarterly Financial Accounts | Central Bank of Ireland

The Quarterly Financial Accounts (QFA) contain financial data for all sectors of the Irish economy.
www.centralbank.ie www.centralbank.ie

I'd say any cross country differences would reflect the prevalence, or otherwise, of homeownership.
 
www.statista.com

Countries with the highest wealth per capita 2022 | Statista

Switzerland ranked as the country with the highest average wealth per capita. The United States followed behind.
www.statista.com www.statista.com

Here is another table showing the wealthiest nations per adult, Ireland is on the bottom tier of European countries, it's a lot less wealthy than Switzerland, the US but also the Nordics along with Holland and Belgium. Also surprisingly it's a good bit below the UK and France and a bit above Spain. That is private wealth per adult.

However we know that Ireland is a long way behind our European colleagues in terms of public wealth due to the lack of investment by the Irish state in public infrastructure.

With regards to the central bank publication they are still publishing debt to GDP statistics why are they not using debt to GNP or even GNI*, they keep telling us that GDP is a flawed statistic in relation to Ireland
 
skrooge said:
It probably hasn't gotten a mention because it's so small. Based on Revenue data it was the second lowest source of revenue out of a list of about 20 tax heads. It netted the Government a total € 14 million last year. Of course that will likely rise but it's never been a big contributor to tax receipts.

Looking back it was 20% for most of the Celtic tiger years. It's increase coincided with the crash i.e., we were broke and needed every penny we could get. It peaked at 41% in the period 2014-16. It has been reduced a couple of times since then.

Is it having an excessively distortional impact as it stands? Hard to see any signs of it being much of a disincentive as deposit in banks are high and growing. Low returns to households primarily reflect low rates on offer from Irish banks. Irish depositors are just not price sensitive.

Who would benefit from a reduction? DIRT is a relatively progressive tax. So cutting it will benefit the wealthier more so then those poorer households who have less savings. Of course the really well off probably don't keep a lot of their money on deposit.

Hard to see a DIRT cut getting much focus with a budget trying to help those suffering from a cost of living crisis. Likewise it's unlikely to win votes in the same way a change in tax rates/bands or an increase in pensions might do.
Click to expand...

My basic point was really that any tax should tax real gains and not real losses, it should not just be a question of whether you are able to get away with it. Note the way that tax allowances of all sorts were adjusted for inflation, because otherwise people would pay more tax on the same real income, but the same principle does not apply to DIRT.
DIRT is a tax on middle people, the poorest save nothing and aim to draw the maximum from the state, the wealthy have complex investment provisions. Bu even if relatively poor people save something, there is no allowance or threshold for DIRT.

In the 80s we had the same taxation of regular people on real losses, while all sort of big shots got away with paying no tax at all. When a few regular people evaded the tax with non resident accounts they were hauled into court, while other big shots who evaded millions were not troubled by prosecution.
 
joe sod said:
That statistic about high savings here is always taken in isolation and never a wider examination of why this is . For example no studies have been done on the level of investments Irish people have outside of property or the size of their pensions in comparison to peer countries. If that was conducted it would show that Irish people have much lower pensions and investments compared to other countries.
Click to expand...
1696985888463.png


The category of insurance, pensions and standardised guarantees was the largest instrument in three Member States: the Netherlands (64.9 %), Ireland (46.0 %) and France (34.6 %).
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Households - statistics on financial assets and liabilities - Statistics Explained

EU statistics providing information on the annual stock of financial assets and liabilities held by households in the European Union (EU).
ec.europa.eu ec.europa.eu

1696986564924.png


1696986749958.png


data.oecd.org

Household accounts - Household financial assets - OECD Data

Find, compare and share OECD data by indicator.
data.oecd.org data.oecd.org
 
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