# Why are Capital Gains taxed at a lower rate than Income?



## Brendan Burgess (2 Aug 2022)

Why should capital gains be taxed any differently from income?

Index the acquisition costs for inflation so you tax the real gains.

Why should a person who does not earn enough to pay Income Tax, pay CGT on their gains?

Why does someone who pays 52% tax on their income pay only 33% on their capital gains?

Is it to encourage savings and investment?  But surely the same could be said for Income Tax. It should be lowered to encourage working and earning.

The UK's policy on this has changed a lot over the years.

In the 70s unearned income was taxed at 98%
But now a person can put £20,000 a year into an ISA. The dividend income and capital gains are not taxed in an ISA. (I don't think that there is a limit on this. Over 20 years, you could put £400k into an ISA.)
Even outside an ISA, you have a CGT allowance of £12,300 a year.  And the CGT rate after that is 20% on shares and 28% on property.
Ireland already has one of the highest rates.


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## Brendan Burgess (2 Aug 2022)

An argument is used that a lower rate of CGT increases the overall tax take. 

I doubt that is true.  It might change the timing of it.  If the rate were reduced to 20% in the morning, people would probably realise some gains. But these gains would be taxed eventually.

Brendan


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## Brendan Burgess (2 Aug 2022)

The Department of Finance's Tax Strategy Group had a paper on the topic, but it was inconclusive. 



			https://assets.gov.ie/87003/0bd8793d-3466-4870-8b57-70155844307d.pdf


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## Bluefin (2 Aug 2022)

Brendan Burgess said:


> An argument is used that a lower rate of CGT increases the overall tax take.
> 
> I doubt that is true.  It might change the timing of it.  If the rate were reduced to 20% in the morning, people would probably realise some gains. But these gains would be taxed eventually.
> 
> Brendan


Wasn't there a substantial collection of CGT when the rate was reduced by Charlie McGreevey? 

If CGT rate was the same rate as income tax, where is the incentive to invest in equities when one considers risk and costs ? 

People are slow enough to cash in equity gains as it is when paying 33% rate... I'd imagine people would fail to realise gains and miss out on potential benefits and government's miss out on potential tax..


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## T McGibney (2 Aug 2022)

Bluefin said:


> Wasn't there a substantial collection of CGT when the rate was reduced by Charlie McGreevey?
> 
> If CGT rate was the same rate as income tax, where is the incentive to invest in equities when one considers risk and costs ?
> 
> People are slow enough to cash in equity gains as it is when paying 33% rate... I'd imagine people would fail to realise gains and miss out on potential benefits and government's miss out on potential tax..


+1, on all counts.

Besides, almost nobody is paying an effective income taxes (plural) rate of 33%,


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## Brendan Burgess (2 Aug 2022)

T McGibney said:


> Besides, almost nobody is paying an effective income taxes (plural) rate of 33%,



Good point. 

But why not combine them?  Treat Capital Gains as Income and subject to the same taxes. 

The effective tax rate on combined income and CGT would be less than 52% 

Brendan


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## Bluefin (2 Aug 2022)

It's all down to risk Brendan... 

I've worked in the MN sector for over 30 years... I've felt there was very little risk of unemployment if I was flexible to industry type /location/ position .. I'm afraid I can't say the same in relation to my equity holdings.. A thrid doing well, thrid breaking even and rest down 40% and all investments in A+++ companies and this is before costs, time spent and now inflation.. 
I'm not one of those unrealistic investors.. I'd consider a return after all taxes /costs of 4/5 % a very good day..


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## T McGibney (2 Aug 2022)

Brendan Burgess said:


> Good point.
> 
> But why not combine them?  Treat Capital Gains as Income and subject to the same taxes.


33% CGT is bad enough Brendan. 52% would be a disastrous disincentive against investment in anything. Remember we already have a grotesque housing shortage, a grossly undercapitalised indigenous business sector, and severe underinvestment in built property, a lot of it literally falling down. The higher you raise CGT, the more people will realise that taking a punt on something is just not worth it.


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## Brendan Burgess (3 Aug 2022)

_I have separated this out from the other thread as they are dealing with different issues. _

Let me tease this out a bit further. 

If I have never worked a day in my life but inherited my wealth so I am living off my investment income. 

Why should it be taxed at 33% while those who are working pay 52% on their marginal income? 

OK, if I go to work, I am not taking any risk. I will get paid at the end of the month.

If I invest in a property or shares I am taking risk.  So it is argued that I should be rewarded for that risk by paying less tax. But doesn't the reward for taking risk come from the expected higher returns? 

Brendan


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## ashambles (3 Aug 2022)

In comparison to income tax, CGT is under much more competition.

You can sometimes choose when and where CGT gets paid, if you're living off inherited wealth - you can live anywhere you want.

If someone had built up large profits on a share portfolio you might move to Belgium for a few years and turn them to cash there at 0% CGT.


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## T McGibney (3 Aug 2022)

Brendan Burgess said:


> Good point.
> 
> But why not combine them?  Treat Capital Gains as Income and subject to the same taxes.
> 
> ...


Brendan, the effective rate is irrelevant in any decision to dispose of an asset or otherwise realise a capital gain. If the person making the disposal is earning over €40k per year (which I would guess be typical of most CGT payers), they're almost definitely facing 52% tax on the resulting gain. They have already used their tax credits and lower tax band to cut the tax charge on their income.


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## T McGibney (3 Aug 2022)

ashambles said:


> In comparison to income tax, CGT is under much more competition.
> 
> You can sometimes choose when and where CGT gets paid, if you're living off inherited wealth - you can live anywhere you want.
> 
> If someone had built up large profits on a share portfolio you might move to Belgium for a few years and turn them to cash there at 0% CGT.


You can also choose never to sell an asset if you want to avoid paying CGT.  In 1980s Ireland it wasn't unknown for 70 year old men to be still working on their parents' farms, so Retirement Relief was introduced to incentivise over-55s to dispose of farms and other business assets. That pattern is now repeating itself in relation to housing where children are being reared in homes owned by grandparents who can't afford to dispose of them.


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## joe sod (3 Aug 2022)

But if you are an income tax payer you get a paye and a personal allowance which means you earn circa 18k tax free  ,then only 20% up to now 37k. The government has also been moving these bands upwards in order to protect income tax payers somewhat from inflation. 

With CGT you can only earn 1270euros tax free as opposed to 18k for income tax and this has been stuck at the same level for decades now.  Aswell all gains are then fully taxed no account or indexation is made for inflation now at 9% per annum.  Therefore that reduction in real value of investment by inflation is also taxed thereby actually taking away from the initial capital invested. As it is ireland has one of the most onerous regimes in Europe for investment gains and income


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## Steven Barrett (3 Aug 2022)

Brendan Burgess said:


> _I have separated this out from the other thread as they are dealing with different issues. _
> 
> Let me tease this out a bit further.
> 
> ...


I imagine it goes back a long way when only the wealthy were able to afford for public office and they shaped the legislation to benefit themselves. 

That is not to say it should be equalised upwards though. Much more people have private investments now and there are a million threads on this site giving out about 41% exit tax on funds/ etfs. The top rates of tax in Ireland is already high (11% USC for the self employed earning over €100k!! ).

I wonder how many people have never worked a day in their lives and just lived off inherited income? I wouldn't say it is that many and a lot less to those who don't work and get all their income directly from the State. Should we have legislation to specifically catch them? Would this not be disproportionate?


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## Brendan Burgess (3 Aug 2022)

Steven Barrett said:


> I wonder how many people have never worked a day in their lives and just lived off inherited income?



That is a very good point.  It's probably very few. 

Brendan


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## DazedInPontoon (3 Aug 2022)

Brendan Burgess said:


> But these gains would be taxed eventually.


Not necessarily in Ireland though. The higher the rate the greater the motive for people with unrealised gains to relocate before realising them.


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## Bow tie (3 Aug 2022)

Brendan Burgess said:


> That is a very good point.  It's probably very few.
> 
> Brendan


Whatever I have to leave to my kids, I will already have paid Tax, USC+ PRSI on the earned income used to buy it- all at higher tax rates.
If property (which is most of us) we will have paid other taxes too- Property etc.
If it goes above the limits, they will pay an additional 33% on anything inherited- I think that's absolutely enough.


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## Protocol (3 Aug 2022)

If an asset is bought out of already-taxed income, should any gains from the asset be taxed again at regular income tax rates?

I'm not sure what economic theory says about this question.


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## Brendan Burgess (3 Aug 2022)

In 2006, The OECD published a paper on CGT tax policies here which is very long but quite interesting:









						Taxation of Capital Gains of Individuals: Policy Considerations and Approaches | READ online
					

This book investigates policy considerations in the taxation of capital gains of individuals and design features of capital gains tax systems.  Perspectives on these are reported for 20 OECD countries.  Descriptive information on aspects of capital tax rules for gains on domestic assets of...




					read.oecd-ilibrary.org
				




The different approaches are amazing.

On death
1) Some exempt capital gains as Ireland does
2) Some deem it as a disposal so CGT becomes due
3) Some deem the beneficiaries to have acquired the assets at their original cost to the benefactor

A big concern that the paper has is over "lock-in effects".  That is where people hold onto assets to avoid paying CGT.
Some tax Capital Gains on an accrual basis, rather than on a realised basis. Ireland, for example, taxes gross roll up funds on an accrual basis with deemed disposal every 8 years.


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## Brendan Burgess (3 Aug 2022)




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## Brendan Burgess (3 Aug 2022)




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## Brendan Burgess (3 Aug 2022)




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## Brendan Burgess (3 Aug 2022)




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## Brendan Burgess (3 Aug 2022)




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## Brendan Burgess (3 Aug 2022)




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## Horatio (3 Aug 2022)

DazedInPontoon said:


> Not necessarily in Ireland though. The higher the rate the greater the motive for people with unrealised gains to relocate before realising them.


Yes, exactly. If you have gains in the millions it is well within your self interest to head off to a favorable jurisdiction & take up tax residence there before you cash out. In fact you wouldn't even have to be in the million bracket.


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## T McGibney (3 Aug 2022)

Horatio said:


> Yes, exactly. If you have gains in the millions it is well within your self interest to head off to a favorable jurisdiction & take up tax residence there before you cash out. In fact you wouldn't even have to be in the million bracket.


Only works if the gains are derived from non-Irish situated assets.


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## DazedInPontoon (3 Aug 2022)

A good reason to have non-Irish situated assets.


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## T McGibney (3 Aug 2022)

DazedInPontoon said:


> A good reason to have non-Irish situated assets.


Then again, by doing that you could be limiting loss relief.

Nothing is simple when it comes to CGT.


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## Bow tie (3 Aug 2022)

Brendan Burgess said:


> Hi Bow tie
> 
> If your argument is valid, then it would be an argument against Capital Gains Tax itself.
> 
> ...



I'll lay my cards on the table- if the assets are for corporations, REITs etc. then there should possibly be a more punitive tax on profits. 
If the asset is a PAYE worker pension, a PPR/farm left to children etc. then yes, the family/ social nature of the wealth should be left alone to distribute. 
I think corporate Ireland has gone far enough at this stage, and personally inherently disagree with multiple punitive taxes until much of a persons cumulative wealth reverts to the state.


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## Bluefin (3 Aug 2022)

What you seem to miss Brendan is fairness has to be associated with any tax... CGT/CAT/Inheritance taxes are clearly unjust in this country... CGT allowance of €1280 is a clear example of this. With the demands that will be placed on the exchequer over the next couple of years, you might seek fairness between these taxes and income tax but most people on here would see no adjustment to income tax but cgt moving to the same level..


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## Brendan Burgess (3 Aug 2022)

Bluefin said:


> CGT/CAT/Inheritance taxes are clearly unjust in this country... CGT allowance of €1280 is a clear example of this.



Why? 

"justice" and "fairness" or subjective. 

I might suggest that paying 52% tax on marginal income is very unjust. It certainly seems more unjust that someone paying no CGT just because they die.

Brendan


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## T McGibney (4 Aug 2022)

Bow tie said:


> I'll lay my cards on the table- if the assets are for corporations, REITs etc. then there should possibly be a more punitive tax on profits.
> If the asset is a PAYE worker pension, a PPR/farm left to children etc. then yes, the family/ social nature of the wealth should be left alone to distribute.


The tax system should never ever be used as a tool to punish anyone. You do realise that you're probably advocating punitive treatment of your own pension fund?


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## Brendan Burgess (4 Aug 2022)

T McGibney said:


> The CGT code as presently constituted is riddled with injustices,



Hi Tommy

I look forward to reading your submission. 

Brendan


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## T McGibney (4 Aug 2022)

Brendan Burgess said:


> Hi Tommy
> 
> I look forward to reading your submission.
> 
> Brendan


Submission to what, Brendan?


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## Brendan Burgess (4 Aug 2022)

T McGibney said:


> The CGT code as presently constituted is riddled with injustices,



Hi Tommy

You should make a pre-Budget submission on this to highlight them. 

Most of the submissions are from representative bodies calling for less tax or more spending.

I am going to make a submission which will be overall tax neutral - calling for elimination of anomalies. 

Brendan


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## T McGibney (4 Aug 2022)

Brendan Burgess said:


> Hi Tommy
> 
> You should make a pre-Budget submission on this to highlight them.
> 
> ...


You seriously think I've the time for that, Brendan?  And others have been highlighting them for years. 

Your suggestion will, if it's seen at all, will be welcomed by the "more tax" lobby. In Ireland, there is never such thing as a tax-neutral tax change.


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## Brendan Burgess (4 Aug 2022)

Hi Tommy

All it takes is an email.  You don't need to write to write a comprehensive review. 

Even if you just pick the most glaring injustice and send an email to Minister@finance.gov.ie it will actually be considered. 

If others make a similar suggestion, then it might prompt some action.

You have nothing to lose but the  5 minutes it takes you to write the email.

Brendan


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## T McGibney (4 Aug 2022)

It's ok Brendan, I don't intend to participate in and thus legitimise a charade. It's been obvious ever since Brian Cowen was Finance Minister that Revenue pretty much write each annual Finance Bill.


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## Horatio (4 Aug 2022)

DazedInPontoon said:


> A good reason to have non-Irish situated assets.


I'd like to clarify this. By situated I guess you refer to physical property rather than say stocks or shares or funds purchased via an Irish Broker, right?


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## Horatio (4 Aug 2022)

Brendan Burgess said:


> Index the acquisition costs for inflation so you tax the real gains.


This is a foundational proposal at the very least. It used to be index linked to inflation but it was removed, I'd love to view the cited rationale behind that chestnut.


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## T McGibney (4 Aug 2022)

Horatio said:


> This is a foundational proposal at the very least. It used to be index linked to inflation but it was removed, I'd love to view the cited rationale behind that chestnut.


The rationale was quite logical and simple - CGT was then historically low at 20% and inflation had for years been non-existent. Needless to say, that didn't last.

Remember,



T McGibney said:


> In Ireland, there is never such thing as a tax-neutral tax change.


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## Horatio (4 Aug 2022)

Simple minded perhaps. Logical? I don't think so.

It was around 2003 it was removed I think.
Wouldn't it have been reasonable to rule that it would remain indexlinked at all time into the future even if inflation was zero or near zero & regardless of the CGT rate?


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## nest egg (4 Aug 2022)

Tax on income and wealth accumulation should be minimal, or outright abolished. You should be incentivized to earn and allowed to keep as much as you can while you're alive. Instead, let's have a high rate of Inheritance Tax on people's estates.  I've never seen a hearse with a tow-hitch.


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## T McGibney (4 Aug 2022)

nest egg said:


> Tax on income and wealth accumulation should be minimal, or outright abolished. You should be incentivized to earn and allowed to keep as much as you can while you're alive. Instead, let's have a high rate of Inheritance Tax on people's estates.  I've never seen a hearse with a tow-hitch.


OK, in 2021 Income Tax took in €29,389,379,000. Capital Acquisitions Tax (on inheritances and gifts) took in €519,701,000, less than 1.8% of the Income Tax figure. Source Revenue Annual Report page 85

By precisely how much do you propose raising CAT in order to cut or abolish Income Tax?


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## nest egg (4 Aug 2022)

T McGibney said:


> OK, in 2021 Income Tax took in €29,389,379,000. Capital Acquisitions Tax (on inheritances and gifts) took in €519,701,000, less than 1.8% of the Income Tax figure. Source Revenue Annual Report page 85
> 
> By precisely how much do you propose raising CAT in order to cut or abolish Income Tax?


As much as is necessary. Think about how much fairer society would be if there was little or no inherited wealth for a moment. Redistribute that wealth instead to those who need it, make the shift away from taxing income/earnings.


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## Protocol (4 Aug 2022)

If CAT is very high, that reduces the incentive to save, and encourages the spending of any accumulated wealth before death, maybe in high-living, buying sports cars, etc.


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## Protocol (4 Aug 2022)

Most people I know are against higher CAT.

They argue that if the savings have been accumulated out of already taxed income, then the same savings should not be taxed again on transfer within the family.


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## Protocol (4 Aug 2022)

Milton Friedman

on inheritance taxes and redistributing wealth.


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## T McGibney (4 Aug 2022)

T McGibney said:


> OK, in 2021 Income Tax took in €29,389,379,000. Capital Acquisitions Tax (on inheritances and gifts) took in €519,701,000, less than 1.8% of the Income Tax figure. Source Revenue Annual Report page 85
> 
> By precisely how much do you propose raising CAT in order to cut or abolish Income Tax?





nest egg said:


> As much as is necessary.


How much?
Bear in mind that if you double it, ie by raising CAT to 66%, you can then afford to reduce the Income Tax take by 1.8%. If you triple it, ie by raising CAT to 99% , you can then afford to reduce the Income Tax take by 3.5%.

I await your answer.


nest egg said:


> Think about how much fairer society would be if there was little or no inherited wealth for a moment. Redistribute that wealth instead to those who need it, make the shift away from taxing income/earnings.


Societies that in the past have confiscated all inherited wealth have turned out to be anything but fair. It's usually a precursor to societal collapse, if not genocide.


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## nest egg (4 Aug 2022)

T McGibney said:


> How much?
> Bear in mind that if you double it, ie by raising CAT to 66%, you can then afford to reduce the Income Tax take by 1.8%. If you triple it, ie by raising CAT to 99% , you can then afford to reduce the Income Tax take by 3.5%.
> 
> I await your answer.
> ...


To really look at figures, as CAT only applies after thresholds have been reached, how much wealth is actually inherited annually?

But my question is an ideological one, and I realise this is a minority view, but wouldn't a society which didn't have inherited wealth be fairer?


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## nest egg (4 Aug 2022)

Protocol said:


> Milton Friedman
> 
> on inheritance taxes and redistributing wealth.


What about people who don't/can't have children, are they really less motivated, less productive?


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## T McGibney (4 Aug 2022)

nest egg said:


> To really look at figures, as CAT only applies after thresholds have been reached, how much wealth is actually inherited annually?


If you want to know that, surely you can look it up as easily as I can.


nest egg said:


> But my question is an ideological one, and I realise this is a minority view, but wouldn't a society which didn't have inherited wealth be fairer?


Ok, you're in your first year in college, living away from home. You have two younger siblings, one with special needs. Your parents are killed in a car accident. Their savings and assets including your home are confiscated by the State as 100% inheritance tax.

You suddenly have nowhere to live and nobody to pay your college and accommodation costs. Your siblings go into HSE care because none of your relatives feels capable of minding a teenager with special needs. You drop out of college, penniless, unqualified and unemployed.  There's a housing crisis so you end up on the streets.

Where's the fairness in that?


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## Bow tie (4 Aug 2022)

nest egg said:


> To really look at figures, as CAT only applies after thresholds have been reached, how much wealth is actually inherited annually?
> 
> But my question is an ideological one, and I realise this is a minority view, but wouldn't a society which didn't have inherited wealth be fairer?


Fairer to who though? It wouldn't fairer to the vast majority who hope to hand on some of their life's work in value rather than have it revert to the state. I'd prefer my family to have the ability to benefit from what is left than general society which has already benefited from me as a tax paying useful citizen.


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## The Horseman (4 Aug 2022)

Brendan 
How many times do you actually want to tax the same euro. One of the biggest issues I actually see in Ireland is the more you try to look after your future to not rely on the State the more the State wants to take. 

Middle income Ireland is getting crucified. We contribute a higher % of our income than any other group yet we get very little benefits for doing so.

The fair deal scheme is a prime example of this. Two people will receive exactly the same care and it will cost one significantly more than another simply because one was prudent. 

Our tax system is fundamentally flawed, if we look at the property tax as another example. We have a tax base calculated on the value of your property. So you could have two properties (certainly in Dublin) both identical in size located within the same distance of identical amenities paying different property tax.

Surely the idea behind any tax is to encourage people (within reason) to be as self sufficient from a financial perspective as possible without continually relying on the State.

At what point should individuals be held responsible for their own (in)actions regarding their financial position. 

I appreciate we need some safeguards but if we don't encourage responsibility the situation will never improve.


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## Sophrosyne (4 Aug 2022)

No tax system is perfect. It cannot be assumed that all inequalities can be solved by taxation.

The main problem is that there are not enough taxpayers.

Of the existing taxpayers, the vast majority of income tax (75%) is paid by those with incomes of €60,000 or more.

Middle income earners (according to the CSO are those with incomes of €43,915) would fall into the €40,000 to €50,000 income decile and accounted for 7.8% of income tax and 8.8% of taxpayers.

The highest percentage (15.82%) is paid by those with incomes of €275,00 or more though they represent only 0.54% of taxpayers.

_2019 figures from Revenue_.

We all know that we over-rely on MNCs. In 2020, they accounted for 49% of all employment taxes and 82% of corporation taxes.

Comparatively, the indigenous economy generates a much higher percentage of low paid employment that contributes nothing to the exchequer and necessitates welfare assistance.

If any adjustments to taxation are needed in these challenging times they must be directed to economic growth, high value job creation, innovation and diversification.

The more taxpayers there are the less everyone pays.


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## Purple (5 Aug 2022)

Sophrosyne said:


> No tax system is perfect. It cannot be assumed that all inequalities can be solved by taxation.
> 
> The main problem is that there are not enough taxpayers.
> 
> ...


Excellent post. 
The reality is that middle income earners pay too little income tax but their marginal rate is too high. 
We need to broaden the tax base by bringing more people back into the tax net. At the very least the Universal Social Charge should be universal. People on €200k a year should be paying a marginal rate of 50% but people earning up to €100k shouldn't.

Multinationals employ around 12% of the workforce so that 12% pays four times as much income tax as their counterparts in the indigenous economy. That's a very risky funding strategy.


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## Brendan Burgess (5 Aug 2022)

nest egg said:


> I've never seen a hearse with a tow-hitch.



That is a great line.


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## The Horseman (5 Aug 2022)

Sophrosyne said:


> No tax system is perfect. It cannot be assumed that all inequalities can be solved by taxation.
> 
> The main problem is that there are not enough taxpayers.
> 
> ...


I agree no tax system will fix all inequalities but our system in my view falls disproportionately on the squeezed middle (ironically a fact the govt are finally acknowledging with the third income tax rate of 30%). 

Example a person on a €250k mortgage will see interest rates increase by €47 per month following recent interest changes. Compare this to somebody for example on HAP living next door who won't see their rent raise by a similar amount. 

Before any poster say's but the mortgage owner will own the house the title of this thread suggests that this person should be levied with a higher tax for being prudent. 

I fully agree we don't learn when it comes to a narrow tax base. The property bust is a prime example of this, we are (as you rightly point out) heavily reliant on corporation tax and its associated taxes for a significant portion of our tax revenue. 

More people paying tax to spread the risk of a shock to a particular tax head is appropriate but politically is unpalatable.


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## Sophrosyne (5 Aug 2022)

Just to clarify, I am not suggesting that the tax base should be widened to encapsulate people who are tax exempt because they are poorly paid. We can’t get blood from a stone no matter what way we tinker around the edges of taxation. We need more better paid employees.

MNC employees pay almost half of employment taxes and most of our CT because they are highly paid and their businesses are highly profitable.

The only way to end reliance on MNCs is to have profitable domestic businesses who pay better wages and salaries so that their businesses and employees can contribute more to taxation.

Anything the Government can do to encourage this, whether through the tax regime or by other means is needed urgently.


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## Bow tie (5 Aug 2022)

Pandemic deficit erased as exchequer returns show €5 billion surplus
					

The public finances have improved by €10.7 billion since the end of July last year.




					www.thejournal.ie
				




5Billion surplus, surely we could save and invest a bit for the rainy days


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## Brendan Burgess (5 Aug 2022)

The Horseman said:


> Example a person on a €250k mortgage will see interest rates increase by €47 per month following recent interest changes. Compare this to somebody for example on HAP living next door who won't see their rent raise by a similar amount.



Hi Horseman

We are going a bit off topic, but...

I have been campaigning for years to reduce mortgage rates in this country.

Having said that, anyone with a mortgage is paying far less interest than anyone who is renting an equivalent house. 

Take a €250k house - the rent would probably be around €1,500 a month?   
With a 90% mortgage at 3.5%, the interest charge would be around €650 per month.  Even if rates rise to 5.5%, the home owner will be paying €1,000 a month in interest. 



Brendan


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## NoRegretsCoyote (5 Aug 2022)

T McGibney said:


> already inadequate CAT thresholds,


The €335k tax-free threshold is about a decade's labour at the average wage.

I'm not sure what "adequate" would look like


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## T McGibney (5 Aug 2022)

NoRegretsCoyote said:


> The €335k tax-free threshold is about a decade's labour at the average wage.
> 
> I'm not sure what "adequate" would look like


A million euro combined for inheritances and gifts from all sources, would be my best guess of that.

The Group A threshold was circa €500k 15 years ago.

Only the rich should be paying CAT. As things stand the Group B threshold would barely cover the inheritance of a new car, the Group C limit a second-hand car. That's a joke.

Remember in the UK, there's no tax whatsoever on gifts.


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## The Horseman (5 Aug 2022)

Brendan Burgess said:


> Hi Horseman
> 
> We are going a bit off topic, but...
> 
> ...


Hi Brendan
I am not trying to take this off topic. But the specific example quoted above relates to HAP. So the rent is by an large paid for by the State and not the tenant. The tenant pays the councils differential rate which is mostly single mothers with one or two children and I am personally aware of two such cases where both are contributing €75 a week in rent. Between their HAP contribution and the top up to meet the monthly rent.  

I am trying to show how what you are proposing possibly could be a disincentive for people to be prudent in planning for their future. My initial post is posing the question why plan for your future and rather rely on the State to look after you. 

Which ironically is why we have a pensions timebomb because they are paid out of current income.


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## Brendan Burgess (10 Aug 2022)

Interesting comments from the ESRI on the topic. 



			https://www.esri.ie/system/files/publications/BP202201.pdf#page=42
		


Page 24 (PDF 35) 

_It would also allow for *the equal treatment of capital gains and cash income, which
currently have separate allowances and rates for reasons that are hard to justify.* The effect of this is to leave better-off taxpayers whose income comes exclusively from employment or rental income subject to a higher effective tax rate than those with the same income but from both employment and capital gains. Conversely, the differential treatment encourages those with lower levels of income to take that in the form of earnings rather than capital gains.

This treatment inhibits the ability of government to raise income tax revenues from higher earners, given the ability of company owner-managers to convert income into capital gains. For these reasons, Adam and Miller (2021) and the Office for Tax Simplification (2020), among others, have proposed aligning the rates of tax on capital gains with those on employment income in the UK.19  Harmonising the treatment of these different income sources would provide more scope for a future tax-raising government to increase not only rates of CGT, but rates of
income tax and USC too._


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## Brendan Burgess (10 Aug 2022)

Interesting table from the Tax Strategy Group. Many countries tax Capital Gains at the normal PIT (Personal Income Tax) rate. 



			https://assets.gov.ie/231227/3d600187-2802-4121-b96d-d996ec961d77.pdf


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## Bow tie (10 Aug 2022)

So do Belgium & Netherlands levy no tax on personal gains?


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## Bluefin (10 Aug 2022)

Correct for Netherlands... 

If an Irish person had a substantial cgt due on the disposal of shares why wouldn't they move there for tax avoidance purposes?


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## Bluefin (10 Aug 2022)

Extract from report that Brendan referenced above... 

This is a tentative exercise based on matching two different systems (income tax and capital 
gains tax) and does not include any behavioural change. This is an important point as it is 
likely that an additional charge could influence behavior to try to minimise tax liabilities in terms 
of how and when gains are realized.
Increases in rates may have a significant behavioural impact. CGT is dependent on individual 
behaviour and a change in rate may not produce a corresponding increase or decrease in tax 
yield. In current economic conditions, any estimate of additional yield must be treated with 
caution. The realisation of any estimated yield from an increase in taxation on assets relating 
to property is subject to movements in the value of such assets, which are currently occurring 
in the economy. In addition, increasing the rate could, in theory, lead to a reduction in yield 
from the tax...


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## Purple (10 Aug 2022)

Sophrosyne said:


> MNC employees pay almost half of employment taxes and most of our CT because they are highly paid and their businesses are highly profitable.


And MNC's have invested vast sums of capital in order to create highly efficient and therefore highly profitable businesses. That point is often ignored.


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## Sophrosyne (10 Aug 2022)

Purple said:


> And MNC's have invested vast sums of capital in order to create highly efficient and therefore highly profitable businesses. That point is often ignored.


Absolutely!
That is to their credit. It is the best way to grow their businesses.


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## ryaner (10 Aug 2022)

Bluefin said:


> Correct for Netherlands...
> 
> If an Irish person had a substantial cgt due on the disposal of shares why wouldn't they move there for tax avoidance purposes?


You remain tax resident in Ireland for up to two years after you leave so it'd require a fair bit of foresight.


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## joe sod (11 Aug 2022)

Brendan Burgess said:


> Interesting table from the Tax Strategy Group. Many countries tax Capital Gains at the normal PIT (Personal Income Tax) rate.
> 
> 
> 
> ...


Yes but what about the details in the taxation in each country most especially index linking gains to inflation and reducing nominal gains to account for inflation. Therefore for Ireland this year the gain associated with year 2022 should be reduced by 10%.
It's easy to put up a table that compare Ireland with other countries based on one parameter but then not give the background to this taxation.  How many of those countries allow for inflation indexation,  that would reduce quite considerably the total CGT gain.
Another factor where Ireland is a complete outlier is regarding deemed disposal and 41% tax on sale of investment funds and ETFS,  with no loss relief and again no indexation for inflation.


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