# Are CAT rates too high.



## Joe_90 (31 May 2015)

http://m.independent.ie/opinion/col...es-hard-and-needs-a-big-shakeup-31266775.html

I think that this is a very poor article.



> Take someone who inherits a property from an aunt, where a €30,150 threshold applies. The property is valued at €200,000. This will trigger a tax bill of around €56,000.



There is a relief from CAT in certain circumstances where the donee has resided in the property for 3 years and retains it for 6 and does not own another property the gift is exempt.  

I actually think there needs to be reform of the Capital Taxes but where workers are paying 51% income tax over €33,800, why should others receive gifts tax free.

Before anyone starts "but it's been taxed already" that is not always the case.


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## Jon Snow (31 May 2015)

Agree with you there Joe - CAT is a tax on wealth and the passing of it, usually between generations. The thresholds are reasonably generous, along with other reliefs and exemptions.

My attitude would be if someone gifts me a property worth 200k I'd be delighted, I can sell it and have 140k left after paying the CAT, or I can mortgage the property, hire a letting agent to let it, and enjoy a small additional income.

Either way my wealth has increased substantially through no particular action of my own, so why shouldn't the rest of society get a share of my good fortune... (and I wouldn't consider myself very left-leaning!)


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## Brendan Burgess (1 Jun 2015)

The biggest fault in the CAT system is the Dwelling House exemption. It's ridiculous that a person can gift a home worth €1m to a tenant and that tenant will pay no CAT.  It should be limited to the first €200k.  

In fact, any such inheritance should use up the threshold. I should not be able to get a gift of a house for €200k and €225k in other gifts tax-free. 


I can't see any reason at all why someone who is earning around €35k - pays 51% tax on every additional euro earned, whereas someone who inherits €200k pays no tax if they get it from a parent. 

Inheritances and gifts should be treated like income and taxed at the marginal rates.  This would bring down the top rates of income tax.


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## Steven Barrett (1 Jun 2015)

Joe_90 said:


> Before anyone starts "but it's been taxed already" that is not always the case.



But it is the case for the majority. 

I have found that with the low thresholds and higher level of tax, people are more pro active when it comes to inheritance planning, the easiest being setting up accounts and putting in €6,000 (€3,000 from each parent) a year. Or gifts for grand children's educations under a bare trust structure. 

Steven
www.bluewaterfp.ie


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## Gordon Gekko (1 Jun 2015)

Say someone makes €100 and ends up with €45 after tax.

He then gifts that €45 to his son.

The son ends up with €30.

The family have been taxed at 70%.

That is ridiculously penal.


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## Jon Snow (1 Jun 2015)

Gordon Gekko said:


> Say someone makes €100 and ends up with €45 after tax.
> 
> He then gifts that €45 to his son.
> 
> ...



The family didn't earn the €100 though, the father did. 

The only way the 70% burden of taxation per your example kicks in, is if the father has already gifted his son more than €3k that year and the son has already received more than €225k from his parents since 1991. And don't forget the various reliefs, exemptions and planning opportunities available to minimise exposure. 

So, my heart doesn't bleed for someone in the fortunate position of receiving wealth that they didnt generate having to suffer tax on it, although 33% is a bit scaldy alright...

CAT accounts for less than 1% of exchequer tax receipts anyway, and the majority of people for whom it's never likely to be a concern, would be unlikely to agree in an informed debate to making it even easier for the wealthy to avoid taxation of their retention of wealth across generations...


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## KOW (1 Jun 2015)

Take the average couple. Thats us. I earn just above the average industrial wage and my wife earns just below the average industrial wage. Our savings come from PAYE income subject to the highest rate of tax. We lead a happy but simple life. Take the odd holiday etc but dont go mad. We overpaid our mortage for years in order to clear it early. We worked abroad for five years in order to be able to place a sizeable down payment on our home. By our mid thirties we had our house paid for. 
We have one child. I am of the opinion that in the future I should be allowed to do what I like when I like with my hard earned, tax deducted money. 
Be it to gift it to my child, the cats and dogs home or give it to Paddy Power. No end up having it double taxed at a rate of approx. 70% as Gordon
states.


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## Jon Snow (1 Jun 2015)

DCD said:


> Take the average couple. Thats us. I earn just above the average industrial wage and my wife earns just below the average industrial wage. Our savings come from PAYE income subject to the highest rate of tax. We lead a happy but simple life. Take the odd holiday etc but dont go mad. We overpaid our mortage for years in order to clear it early. We worked abroad for five years in order to be able to place a sizeable down payment on our home. By our mid thirties we had our house paid for.
> We have one child. I am of the opinion that in the future I should be allowed to do what I like when I like with my hard earned, tax deducted money.
> Be it to gift it to my child, the cats and dogs home or give it to Paddy Power. No end up having it double taxed at a rate of approx. 70% as Gordon
> states.



Well the first 225k worth of it won't be taxed at all. The first 3k in any year will be completely ignored. If you have enough wealth that CAT is going to amount to a worthwhile sum, then you can afford to figure out how to, or pay for the expertise to tell you how to, minimise it.

The level of hyperbole around CAT is a genuine mystery to me.

How can it be double taxation anyway, since the second tax liability isn't yours, it's whoever takes a gift from you.


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## Brendan Burgess (1 Jun 2015)

Double taxation is common. 

If I earn €50k I get €25k net.

If I spend that on tobacco and alcohol, there is probably around €15k in taxes and excise duty.

So am I paying 80% tax? 

If I invest the €25k and put it on deposit, I will pay 41% ?  DIRT on the deposit interest.  

Brendan


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## Gordon Gekko (1 Jun 2015)

Brendan Burgess said:


> Double taxation is common.
> 
> If I earn €50k I get €25k net.
> 
> ...



To be fair, the DIRT isn't double taxation as it arises in respect of the deposit interest rather than the principal.


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## KOW (1 Jun 2015)

Jon Snow said:


> Well the first 225k worth of it won't be taxed at all. The first 3k in any year will be completely ignored. If you have enough wealth that CAT is going to amount to a worthwhile sum, then you can afford to figure out how to, or pay for the expertise to tell you how to, minimise it.
> 
> The level of hyperbole around CAT is a genuine mystery to me.
> 
> How can it be double taxation anyway, since the second tax liability isn't yours, it's whoever takes a gift from you.



Jon,
    Well aware of limits etc regarding passing on assets to my son. I consider my child to be part of the family flesh/blood and all that. I am simply of the opinion that what my family have worked hard for over many years ( payed all taxes etc)  should be allowed to share fruits of labor any way they want especially within the family. I dont live in a fancy house although its worth way in excess of the 225k limit and my son is his own man working away and hoping to buy a starter home for himself in a year or two. If you or any person chooses to holiday all the time or choose to change their car every year the best of luck to you. If you or anybody else finds themselves in a position where they have little or nothing to pass on to whom they choose that is a pity.
The limits that are currently in place are the highest on the planet. As a ordinary PAYE worker I am not in a position to use tools employed by the very rich in order to minimise their CAT bill. I dont begrudge the wealth these people have built up probably over many years. The best of luck to them.
Some people might begrudge others that have the ability to pass on significant assets to their family. That is really sad.


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## Gordon Gekko (1 Jun 2015)

You can pass the house to your son tax free.

You can start giving him €6k a year when you've the spare cash.

Your ARF(s) can pass to him separately at a rate of 30% (rather than 33%) without impacting on his €225k threshold.

And rumour has it that the threshold will increase to €300k later this year.


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## KOW (1 Jun 2015)

Gordon Gekko said:


> You can pass the house to your son tax free.
> 
> You can start giving him €6k a year when you've the spare cash.
> 
> ...



Gordon,
           Thanks. If I was to pass on house now under the3-6 year rule. Is there any implications if he was to purchase his own property say in two years time? Or does he need to stay away from a purchase for 6 year period.?

Cheers


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## Gordon Gekko (1 Jun 2015)

DCD said:


> Gordon,
> Thanks. If I was to pass on house now under the3-6 year rule. Is there any implications if he was to purchase his own property say in two years time? Or does he need to stay away from a purchase for 6 year period.?
> 
> Cheers



He can't own an interest in another residential property at the date of gift or inheritance.

Any other time is fine.

e.g. the following is fine:

Wednesday - Own property
Thursday - Gift property to wife
Friday - Receive tax free gift of property from parents


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## KOW (1 Jun 2015)

Gordon Gekko said:


> He can't own an interest in another residential property at the date of gift or inheritance.
> 
> Any other time is fine.
> 
> ...



Cheers,
           nighty night


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## Jon Snow (2 Jun 2015)

DCD said:


> Jon,
> Well aware of limits etc regarding passing on assets to my son. I consider my child to be part of the family flesh/blood and all that. I am simply of the opinion that what my family have worked hard for over many years ( payed all taxes etc)  should be allowed to share fruits of labor any way they want especially within the family. I dont live in a fancy house although its worth way in excess of the 225k limit and my son is his own man working away and hoping to buy a starter home for himself in a year or two. If you or any person chooses to holiday all the time or choose to change their car every year the best of luck to you. If you or anybody else finds themselves in a position where they have little or nothing to pass on to whom they choose that is a pity.
> The limits that are currently in place are the highest on the planet. As a ordinary PAYE worker I am not in a position to use tools employed by the very rich in order to minimise their CAT bill. I dont begrudge the wealth these people have built up probably over many years. The best of luck to them.
> Some people might begrudge others that have the ability to pass on significant assets to their family. That is really sad.



It's not about begrudging anyone anything, it's a simple matter of opinion and, to an extent, ideology.

If you are so far right that you view all tax as theft then you're never going to want to accept CAT or any other form of tax on wealth.

If you're way left then taxes like CAT aren't high enough, and you'd be advocating for annual wealth taxes on assets, so as to redistribute wealth.

Being somewhere in the middle I view taxes as necessary for a civil society to function; and in my opinion CAT as a form of proxy for an actual wealth tax is not a bad thing. It's not as penal as an annual wealth tax, it doesn't impede the wealth generator/stockpiler (although we have CGT for that!), and has a moderate redistributive effect. 

I have to chuckle at you saying you don't have the facility to mitigate your liability the way the very wealthy do, but yet you've just been told how to effectively negate any charge on passing wealth to your son...!


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## T McGibney (2 Jun 2015)

Jon Snow said:


> The level of hyperbole around CAT is a genuine mystery to me.



What hyperbole, exactly? Charlie Weston's article is the first I have seen for yonks on the issue of excessive CAT.


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## Jon Snow (2 Jun 2015)

T McGibney said:


> What hyperbole, exactly? Charlie Weston's article is the first I have seen for yonks on the issue of excessive CAT.



Last November I remember being subjected to much wailing and gnashing of teeth - http://www.irishtimes.com/business/...-gifts-by-parents-to-their-children-1.1997156


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## T McGibney (2 Jun 2015)

Jon Snow said:


> Last November I remember being subjected to much wailing and gnashing of teeth - http://www.irishtimes.com/business/...-gifts-by-parents-to-their-children-1.1997156



Are you seriously suggesting that media should not report on tax changes arising from legislation or Revenue practice?


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## Jon Snow (2 Jun 2015)

T McGibney said:


> Are you seriously suggesting that media should not report on tax changes arising from legislation or Revenue practice?


Nope, not at all, but I distinctly remember hearing discussion on several radio programmes during my commute, where the actual impact of the proposals was being completely hyped up by vested interests.

You asked me what I meant by hyperbole, that's what I remember, it stuck in my mind as totally over egging the impact. That to me is the epitome of hyperbole.


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## T McGibney (2 Jun 2015)

Jon Snow said:


> Nope, not at all, but I distinctly remember hearing discussion on several radio programmes during my commute, where the actual impact of the proposals was being completely hyped up by vested interests.
> 
> You asked me what I meant by hyperbole, that's what I remember, it stuck in my mind as totally over egging the impact. That to me is the epitome of hyperbole.



Two isolated stories in 7 months hardly count as hyperbole. And you miss the point too that the Revenue eBrief of 24 December last defused many of the questions raised in relation to CAT following the Finance Act. So Dominic Coyle was entirely correct in raising them.

The fact remains that, unlike say Income Tax, most people are totally unaware of high C.A.T. until it directly affects them, and it says a lot too that high rates and low thresholds actually suppress the exchequer returns from capital taxes, as those holding even modest levels of wealth and assets are incentivised to hoard them until death in order to escape taxes on themselves and their families.


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## Jon Snow (2 Jun 2015)

T McGibney said:


> Two isolated stories in 7 months hardly count as hyperbole. And you miss the point too that the Revenue eBrief of 24 December last defused many of the questions raised in relation to CAT following the Finance Act. So Dominic Coyle was entirely correct in raising them.



The number of stories is irrelevant - it's the way the reporting is done.

Hyperbole (from the Greek word for "exaggeration") is the use of exaggeration as a rhetorical device or figure of speech. (From Wikipedia.)


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## T McGibney (2 Jun 2015)

But where exactly was the exaggeration? The Finance Act left a number of questions hanging, which Revenue then addressed & resolved in an eBrief.  [broken link removed]

Until the eBrief issued people were genuinely unsure of the situation and this uncertainty gave rise to the media coverage.

I can't for the life of me see how this coverage was harmful.


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## Codogly (2 Jun 2015)

Is it not a fairer society if everybody has to stand on there own feet and make their own way in life rather than inheriting their wealth.
That way you live by your own successes and or failures.
To this end i believe parents should give their childern a good education and upbringing and thats it ... after that the kids should have to make their own way.
Why not have a system where parents as they approach retirement start to slowly liquidate their assets with a view to enjoying the retirement.
Under this system the next generation all start on an equal footing ...which is fair.

So for me 100% Inheridance tax is appropriate (Save funeral expenses which should be covered by all responsible people and not passed on).


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## KOW (2 Jun 2015)

Would that be like the thousands of farmers who can have millions in land and machinery assets and still receive grants to put their children through college. Spreading income over five years.
Would that be like the thousands and thousands of farmers who can  pass on assets to the children in a very efficient manner.
Fair society where are you. Cant see the farmer boys going for your 100% inheritance tax Codology.
Cant see any government tackling that one either.


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## T McGibney (2 Jun 2015)

DCD said:


> Would that be like the thousands of farmers who can have millions in land and machinery assets and still receive grants to put their children through college. Spreading income over five years.



Here is the SUSI website: http://www.susi.ie/ 
Show me where in the SUSI income assessment rules it is possible to suppress one's income as you describe. I've worked in accounts and tax since the 1980s and nobody has ever answered this for me yet.


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## KOW (2 Jun 2015)

T.
   You seem to have a lot experience in accounts and tax over a very long period. I do not.
That said I was only listening last week to the average farming income and how I think it said they were up 6% in the past year. For the life of me how do they come up with these average farming incomes and raise families. I simply could not live on these average incomes put forward by the likes of the IFA.
Apart from that T. If there are to be such low thresh holds regarding CAT it should be across the board. As a Paye worker anything above 225k is tax bound. I am not afforded the same opportunities to reduce my CAT bill. Farmers have always been afforded an advantage when passing on land etc to there families. Why? Because if that was to change there would be sheep in the Dail and a lot of very unhappy rural TD,s.


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## T McGibney (3 Jun 2015)

DCD said:


> T.
> You seem to have a lot experience in accounts and tax over a very long period. I do not.
> That said I was only listening last week to the average farming income and how I think it said they were up 6% in the past year. For the life of me how do they come up with these average farming incomes and raise families. I simply could not live on these average incomes put forward by the likes of the IFA.


Because the vast majority of farms these days are part-time enterprises, with the farmer and their spouse typically both holding down full-time jobs, and farming in the evening and weekends. On most farms, there otherwise simply isn't the earnings capacity to support a living.



> Apart from that T. If there are to be such low thresh holds regarding CAT it should be across the board. As a Paye worker anything above 225k is tax bound. I am not afforded the same opportunities to reduce my CAT bill. Farmers have always been afforded an advantage when passing on land etc to there families. Why? Because if that was to change there would be sheep in the Dail and a lot of very unhappy rural TD,s.



What's your beef with farmers? Equivalent CAT relief applies to businesses generally. Perhaps you'd prefer the alternative of every business automatically closing down when the owner dies or is forced to retire?


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## KOW (3 Jun 2015)

T McGibney said:


> Because the vast majority of farms these days are part-time enterprises, with the farmer and their spouse typically both holding down full-time jobs, and farming in the evening and weekends. On most farms, there otherwise simply isn't the earnings capacity to support a living.
> 
> 
> 
> What's your beef with farmers? Equivalent CAT relief applies to businesses generally. Perhaps you'd prefer the alternative of every business automatically closing down when the owner dies or is forced to retire?



T.
 No beef with farmers at all. Out having a beer last friday--six of us. Three farmers. They are doing just fine. If a farm is not viable it should close just like any other business. Thats the law of economics 
Nobody should get special treatment. Are you a farmer? If so your lucky like the 3 lads I was out having a few pints with last friday.If I drop dead in the morning why should my family not be treated in the same fashion as yours?


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## T McGibney (3 Jun 2015)

Am I a farmer? No.

I don't understand your point on special treatment and I suspect you didn't fully read my post which you quoted. The CAT relief we're discussing applies to all businesses and business assets. If you invest in such assets, you & your family will enjoy the same CAT reliefs as your farmer friends enjoy in respect of their business assets.


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## Protocol (3 Jun 2015)

Many, many farms are hobbies, non-viable, but they stay open.

That decision is driven by sentiment, love of land, not economics or accountancy.


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## Joe_90 (10 Jun 2015)

At the risk of reigniting this one Charlie Weston was on Matt Cooper this evening

Around 18 mins [broken link removed]

I don't know what to make of him he talks about the rich not paying any CAT as they can pay for advice and that it's the squeezed Middle class that end up paying it.  The average PAYE worker.

Matt gave him the example of a house worth €525,000 left to three children and asked how much CAT they would pay, answer ZERO!

But it penalises small families because if there was only one child they would have a tax bill of €99,000 and could have to sell the house to pay the tax! Then Matt says what if an adult can't afford their own house and the parent give them a house will they have a tax bill, answer ZERO!


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## orka (10 Jun 2015)

Charlie Weston also has an article in today's Independent about how we have one of the most penal inheritence tax regimes in the world. 

http://www.independent.ie/business/...me-one-of-toughest-in-the-world-31291580.html


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## rob oyle (10 Jun 2015)

Is there an agenda behind this? Not that the system isn't penal, but I'm just not aware of the 'mass outrage' that Charlie Weston talks about.


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## T McGibney (11 Jun 2015)

There is no mass outrage as it's only an issue for people directly affected. This will grow in time as it affects more and more people.


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