# Sunday Independent writing rubbish about CAT



## Mrs Vimes (21 Jun 2020)

How does such rubbish get published?



> Houses worth less than €335,000 are currently exempt from capital gains tax also know as inheritance tax



So, I can inherit a house from a random stranger and not pay Capital Gains Tax - correct, but I don't think that's what he's saying. 

I don't disagree with the idea that the Group A be linked somewhat to average property prices, but surely that would imply an average child should inherit an average house? How many one child families are there in Ireland?

I really should have more sense than to go to that tabloid


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## NoRegretsCoyote (21 Jun 2020)

The average dwelling in Ireland is about €220k.

Average family size in receipt of a bequest is three.

A €75k allowance would leave the "average" home inheritance free of tax.

I have never seen these pretty basic stats laid out in the Irish media.


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## Brendan Burgess (21 Jun 2020)

I think that the guy is a political writer rather than a financial writer. 

So he has only a half idea of what he is talking about.

Brendan


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## moneymakeover (22 Jun 2020)

I see another article today









						Explainer: Why Leo Varadkar is pushing to abolish inheritance tax
					

OUTGOING Taoiseach Leo Varadkar put the cat among pigeons when he said that inheritance tax should be abolished for anyone inheriting an average-priced home.




					www.independent.ie
				





What is the objection to reduction in inheritance tax?


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## fidelcastro (22 Jun 2020)

Money!!


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## Protocol (22 Jun 2020)

I suspect many parties would object to any cut to CAT: PBP, SF, Labour, Greens, etc.


SF suggest that CAT be increased from 33% to 36%.


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## dereko1969 (22 Jun 2020)

moneymakeover said:


> I see another article today
> 
> 
> 
> ...


It is unearned income and contributes to the continuation of inequality in society.


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## Protocol (22 Jun 2020)

It's not income.

Income is *regular*.

If it was income, income tax would apply.

It's a capital transfer.


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## Gordon Gekko (22 Jun 2020)

dereko1969 said:


> It is unearned income and contributes to the continuation of inequality in society.



I get a bonus.

The State gets 52% of it.

I’m left with 48% of it.

I give the 48% to my son.

The State takes 1/3 of that, so another 16% is snaffled.

He then takes the 32% and buys something, 23% of which is VAT, so the State gets another 6%.

I made the 100%, but the State got 74% and the Gekko family got 26%.

The State then takes the 74% and wastes a hell of a lot of it.

How is the above ‘fair’?

Yet the Left spend their time moaning about people like me not paying their fair share! “Congrats Gordon...here’s your bonus!” In reality, it’s Pascal Donohue who’s getting the lion’s share.


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## dereko1969 (22 Jun 2020)

"Gordon" I'm sure you'd find a cleverer way of having the money benefit your son! Plus we're talking about Inheritance Tax not gift Tax, there's a difference.


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## Duke of Marmalade (22 Jun 2020)

Gordon Gekko said:


> I get a bonus.
> 
> The State gets 52% of it.
> 
> ...


_Gordon_, given my guesstimate of your bonus I would reckon that Gordon Jr.  would be buying a high end car.  36% VRT.  Government get 87% of your bonus - proper order!


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## Zenith63 (22 Jun 2020)

moneymakeover said:


> What is the objection to reduction in inheritance tax?


The purpose of an inheritance tax is to reduce the effects of generational wealth, which I'd guess most would agree is pretty unhealthy for society.  So the objection is that by reducing it, you're allowing the wealthy keep more money in their families and all the risks that entails.  Personally though I don't think it serves this purpose well; even unsophisticated business people know to start companies in their childrens' names so there is no liability to inheritance tax when they pass away, we can only imagine how a sophisticated team working for a very wealthy person might find ways to work around it.

So personally I'd like to see the rate of inheritance tax increased but also the threshold increased significantly (maybe €1m?).  That way the average punter isn't paying a tax aimed at the very weathly, while the very wealthy are mostly avoiding it.


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## NoRegretsCoyote (22 Jun 2020)

@Zenith63 

But the average punter isn't paying any inheritance tax at all from an estate that contains their parents' house.

A good tax is one with a wide base and low rate. I would have a threshold of maybe €30k per child and then 25% tax after that.


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## Zenith63 (22 Jun 2020)

NoRegretsCoyote said:


> But the average punter isn't paying any inheritance tax at all from an estate that contains their parents' house.


Good point, that was a poor choice or term. I meant people that are not the super wealthy.




NoRegretsCoyote said:


> A good tax is one with a wide base and low rate.


That is undoubtedly true of a tax designed to generate revenue, but it does not seem particularly relevant where a tax is being implemented to encourage or discourage certain behaviours in a small number of individuals.


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## Thirsty (22 Jun 2020)

So do you believe we should also remove the inheritance of a social housing tenancy?


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## Gordon Gekko (22 Jun 2020)

Some very valid points made there. We do need to move away from the idea that someone with €1m worth of assets is ‘wealthy’. That’s the Sinn Fein/IRA or PPP narrative. They’re not. A nurse or a teacher with a €25k defined benefit pension is just as ‘wealthy’.

The problem with a lot of this is that it’s the middle class people in Dublin and other cities that wear most of this stuff. People are able to trot out stats about the average house price in Ireland being €200k when it’s €400k in Dublin and €600k for anything half decent in a half decent area.


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## NoRegretsCoyote (22 Jun 2020)

Gordon Gekko said:


> The problem with a lot of this is that it’s the middle class people in Dublin and other cities that wear most of this stuff. People are able to trot out stats about the average house price in Ireland being €200k when it’s €400k in Dublin and €600k for anything half decent in a half decent area.



95% of dwellings sold for less than €600k in 2019.

If being inside the top 5% of home-owners does not make you wealthy then who is wealthy?


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## Zenith63 (22 Jun 2020)

NoRegretsCoyote said:


> If being inside the top 5% of home-owners does not make you wealthy then who is wealthy?


For the purposes of a tax designed specifically to tackle generational wealth, you’re talking the top 0.1% at most. The idea is not to prevent people being wealthy, just prevent it getting to the excesses that threaten society/democracy.


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## Gordon Gekko (22 Jun 2020)

NoRegretsCoyote said:


> 95% of dwellings sold for less than €600k in 2019.
> 
> If being inside the top 5% of home-owners does not make you wealthy then who is wealthy?



So you think that a couple on €137k combined are ‘wealthy’?

€137k x 3.5 plus 20% deposit gets you to €600k.


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## NoRegretsCoyote (22 Jun 2020)

Are we talking income or wealth? They are not the same.

Anyway the median net income for a two-adult household under 65 is €50k according to CSO. For dual-earning couples €137k gross is about 90th percentile for all dual-income couples as per Revenue statistics.

What you choose to describe as 'wealthy' is a value judgement. Most people mix with people very like them and this skews their perception of what average is. 

I am just bringing some actual statistics on averages and distributions to the discussion.


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## Gordon Gekko (22 Jun 2020)

NoRegretsCoyote said:


> Are we talking income or wealth? They are not the same.
> 
> Anyway the median net income for a two-adult household under 65 is €50k according to CSO. For dual-earning couples €137k gross is about 90th percentile for all dual-income couples as per Revenue statistics.
> 
> ...



Can you please post a link to that stat?

i.e. that the median income for two people is €50k

When you say net, do you mean net of tax?

It seems too low. If they’re accurate, there is something odd in those stats that’s driving them. Do people on social welfare skew it wildly for example? Pre Covid, there were 300,000 people on social welfare.


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## NoRegretsCoyote (22 Jun 2020)

You can play around [broken link removed]. Go to table SIA16, select households with two adults under 65, and median nominal household disposable income for 2018. The result is €50,255. A similar household with kids gets €56,445.

Net here means all income less taxes plus transfers. 

If it intuitively seems too low it is probably because you mix with people like yourself who have incomes well above average.


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## Gordon Gekko (22 Jun 2020)

NoRegretsCoyote said:


> You can play around [broken link removed]. Go to table SIA16, select households with two adults under 65, and median nominal household disposable income for 2018. The result is €50,255. A similar household with kids gets €56,445.
> 
> Net here means all income less taxes plus transfers.
> 
> If it intuitively seems too low it is probably because you mix with people like yourself who have incomes well above average.



“disposable income”?

Sure then €50k is a lot of money!


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## NoRegretsCoyote (23 Jun 2020)

Don't confuse it with discretionary income.


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## Gordon Gekko (23 Jun 2020)

NoRegretsCoyote said:


> Don't confuse it with discretionary income.



But you wrote “disposable income”?

What’s “discretionary income”?

It’s hard NOT to be confused!


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## Itchy (23 Jun 2020)

Gordon Gekko said:


> “disposable income”?
> 
> Sure then €50k is a lot of money!



To the CSO it’s Disposable income, to the individual it’s net income.

CSO Definition:
*Disposable income*

Tax and social insurance contributions are also summed to household level and subtracted from the gross household income to calculate the _total disposable household income_.  The components of disposable household income are gross household income _less_:

Employer’s social insurance contributions

Regular inter-household cash transfer paid

Tax (including USC) on income and social insurance contributions

Tax deducted at source from individual private pension plan.



Gordon Gekko said:


> Yet the Left spend their time moaning...


Typical tactic of “the right” to make up their own definitions to suit their own narrative


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## Protocol (23 Jun 2020)

Gordon Gekko said:


> It Pre Covid, there were 300,000 people on social welfare.



The number is way, way higher.

Pre COVID, approx 45% of pop were on welfare, recipients or beneficiaries.

I'd guess 2m.


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## Protocol (23 Jun 2020)

Gordon Gekko said:


> Can you please post a link to that stat?
> 
> i.e. that the median income for two people is €50k
> 
> When you say net, do you mean net of tax?







__





						Income - CSO - Central Statistics Office
					






					www.cso.ie
				




The median HH disp income is 42,865.


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## Gordon Gekko (23 Jun 2020)

Protocol said:


> The number is way, way higher.
> 
> Pre COVID, approx 45% of pop were on welfare, recipients or beneficiaries.
> 
> I'd guess 2m.



We’re talking about under 65s, so OAPs aren’t relevant, and we also need to exclude Childrens Allowance. What’s relevant is the number of people under 65 whose only income is social welfare; pre-Covid, 300k seems reasonable. Clearly the number isn’t 2m.


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## Protocol (23 Jun 2020)

Under 65s, ok.

The DSP website has been amended, so give me a chance to get the data.

I will now make a guess of 800k recipients, and over 1m beneficiaries.

Give me 30 mins.


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## cremeegg (23 Jun 2020)

Thirsty said:


> So do you believe we should also remove the inheritance of a social housing tenancy?



I believe this has now happened in many, perhaps all councils


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## dereko1969 (23 Jun 2020)

Thirsty said:


> So do you believe we should also remove the inheritance of a social housing tenancy?


Absolutely and it's really important to punch down not up, isn't it?


Gordon Gekko said:


> We’re talking about under 65s, so OAPs aren’t relevant, and we also need to exclude Childrens Allowance. What’s relevant is the number of people under 65 whose only income is social welfare; pre-Covid, 300k seems reasonable. Clearly the number isn’t 2m.


Good man gordon, when the facts don't suit then change the question.


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## Gordon Gekko (23 Jun 2020)

dereko1969 said:


> Absolutely and it's really important to punch down not up, isn't it?
> 
> Good man gordon, when the facts don't suit then change the question.



What is that supposed to mean?

The point is that people whose only income is social welfare skew the figures.

We get social welfare in the form of Children’s Allowance, for example, but we’re not relevant.


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## Protocol (23 Jun 2020)

End of 2018 data

*Recipients*
Pensions, for information = 629k

Working-age income supports, e.g. JSA, OPFP, SWA = 276k
Working-age employment supports = 43k

CA, DA, IB, IP = 353,000

WFP = 54k, of course all of these people have a job


Total recipients = 1.34m, of which
Social Insurance = 709k
Social Assistance = 631k

Stripping out Pensions, we have *711,000 recipients on welfare.*

This excludes beneficiaries, i.e. their dependent spouses and children.


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## Protocol (23 Jun 2020)

2018 data

*Recipients and beneficiaries data - note this is wider than the previous post*

Pensions, for information = 709k

Working-age income supports, e.g. JSA, JSB OPFP, SWA, MB = 540k
Working-age employment supports = 90k

CA, DA, IB, IP = 539,000


*So far we have 1,169,000, that is recipients and beneficiaries, but excludes pensions, WFP, Child Benefit*


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## Protocol (23 Jun 2020)

NoRegretsCoyote said:


> Anyway the median net income for a two-adult household under 65 is €50k according to CSO. For dual-earning couples €137k gross is about 90th percentile for all dual-income couples as per Revenue statistics.



Here is the 2018 SILC income data:





__





						Income - CSO - Central Statistics Office
					






					www.cso.ie
				




HH mean:             68,485 gross to disposable 51,458
HH median:          49,260 gross to disposable 42,865


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## PMU (23 Jun 2020)

Zenith63 said:


> The purpose of an inheritance tax is to reduce the effects of generational wealth, which I'd guess most would agree is pretty unhealthy for society.  So the objection is that by reducing it, you're allowing the wealthy keep more money in their families and all the risks that entails.  Personally though I don't think it serves this purpose well; even unsophisticated business people know to start companies in their childrens' names so there is no liability to inheritance tax when they pass away, we can only imagine how a sophisticated team working for a very wealthy person might find ways to work around it.
> 
> So personally I'd like to see the rate of inheritance tax increased but also the threshold increased significantly (maybe €1m?).  That way the average punter isn't paying a tax aimed at the very weathly, while the very wealthy are mostly avoiding it.



It's not that type of a tax.  It's got nothing to do with screwing the wealthy.   As a matter of public policy all states tax money when it is transferred, as it is difficult to avoid. The amount of inheritance tax paid depends on the amount of money begin transferred, the value of which which is set by the market place.  As a fixed amount tax it does not effect consumer behaviour or economic activity, unlike income tax that impacts on work / leisure decisions or VAT that impacts on spending decisions.   Politicians will say that the purpose an inheritance tax is to reduce the effects of generational wealth, but this is just guff and pandering to readers of the Irish Times and viewers of RTE.  A 'right-wing' government will tax this way as much as or more than a 'left-wing' one.  Except the right-wing one would probably be more honest and just say it does it as it needs the money to pay for running  the state.  When money moves the state taxes it. It's an efficient tax.  It doesn't need political or sociological justification.


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## Gordon Gekko (23 Jun 2020)

Why do middle class urban dwellers get hammered though?

Farmers and people with their own businesses get a notional 90% reduction in value.

Meanwhile, the rest get hammered.


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## Sarenco (23 Jun 2020)

Personally I think the group thresholds are already pretty generous.

Three kids can inherit a €1m house from a parent, tax-free.  

If there are going to be tax reductions, I would much rather see them being made to income tax.


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## Zenith63 (23 Jun 2020)

Sarenco said:


> Three kids can inherit a €1m house from a parent, tax-free.


In Dublin though a 2 bed apartment would be over the threshold for a lone child, potentially meaning they have to sell it to cover the tax.  Never mind if they inherited such a luxury as a 3-bed semi-d


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## Sarenco (23 Jun 2020)

Zenith63 said:


> In Dublin though a 2 bed apartment would be over the threshold for a lone child, potentially meaning they have to sell it to cover the tax.


I don't think that's unreasonable. 

We also have the dwelling house exemption for adult children that live with their parent.


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## Silvius (23 Jun 2020)

I can't understand why people have such a problem with inheritance and are so keen to punish the transfer of money with inheritance tax. Say I work hard all my life, earn as much money as I can and pay all my taxes. Say my aim is to be financially secure, to enjoy the advantages of my wealth but also, most importantly, to provide for my children so that they will have more advantages, more opportunities and more choices than I did. What is so very wrong with this? Historically this is what everyone has always wanted.


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## NoRegretsCoyote (23 Jun 2020)

Silvius said:


> I can't understand why people have such a problem with inheritance and are so keen to punish the transfer of money with inheritance tax.



It is literally the fairest tax of all. The donor is dead. The recipient is gaining a windfall. You are not being taxed for working or for buying something. There is no disincentive to work.

For the government, more tax on inheritance means less income tax and excise. What's not to like?!

I say this as an only child who will one day probably pay about 10% overall tax on an inheritance. The current regime will be personally hugely beneficial. It's just not fair when lots of people are (at the margin) losing half the income they have sweated hard for to the taxman.


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## Gordon Gekko (23 Jun 2020)

The point is that the money has been heavily taxed already.

If I earn €100, the State takes €52 and I only get €48.

I should be free to do what I want with my €48, including gifting it to my children.

Or at least the level at which inheritance tax kicks in should be higher.


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## Silvius (23 Jun 2020)

There isn't a direct correlation between inheritance tax and income tax and if you're really worried about disincentives to work better have a look at social welfare. As Gordon says, the money has already been taxed, every step of the way. The earner should be free to do what they want with what they have earned and 'sweated hard' for. It's arguably the unfairest tax of all.


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## Sarenco (23 Jun 2020)

Gordon Gekko said:


> The point is that the money has been heavily taxed already.


I would have thought that was an excellent argument for reducing the tax burden on income, rather than reducing taxes on unearned inheritances.

But I know some people don’t see it that way...


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## NoRegretsCoyote (23 Jun 2020)

Gordon Gekko said:


> Or at least the level at which inheritance tax kicks in should be higher.



It takes nearly ten years hard work  at average wages to earn a child's tax-free threshold for inheritance. It's not equitable.

I have a work-shy family member who hasn't worked in years, has no plans to do so and lives a reasonably comfortable life on benefits paid for by you and me.

Last year he inherited €200k. The only opportunity the state ever has to tax him is on on inheritance yet he sailed in well under the threshold!


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## Silvius (23 Jun 2020)

Sarenco said:


> reducing taxes on unearned inheritances


The money was earned - the person who earned it has paid their dues to the state, they don't owe the state anything more.


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## Silvius (23 Jun 2020)

No regrets coyote - I still don't see how those two issues are related. The state missed the opportunity to tax your family member by setting up a system that allowed them to live a reasonably comfortable 'work-shy' life on benefits and avoid work by choice, thus costing the tax payer a lot. The fact that they can now inherit €200k is a completely different issue. In relation to your argument about disincentivising work - there are very few (in this country anyway) who would ever inherit enough to be able to choose not to work at all, and even if they did so they wouldn't be costing the taxpayer anything.


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## torblednam (23 Jun 2020)

Silvius said:


> The money was earned - the person who earned it has paid their dues to the state, they don't owe the state anything more.



But the person who earned it and paid tax on it, isn't the person who is being taxed on it...


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## Itchy (23 Jun 2020)

No mention yet of the significant tax break you get by dying! Significant CGT on assets and income tax on pension assets forgone by the state!


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## Silvius (23 Jun 2020)

torblednam said:


> But the person who earned it and paid tax on it, isn't the person who is being taxed on it...


 emphasis on 'unearned' makes it sound as if nobody ever earned the money....if instead of leaving it to their nearest and dearest the donor left it to the dogs and cats home would there be the same objections to the charity receiving an 'unearned' inheritance tax-free?


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## torblednam (23 Jun 2020)

Itchy said:


> No mention yet of the significant tax break you get by dying! Significant CGT on assets and income tax on pension assets forgone by the state!



CGT can be offset against CAT arising on the same event. So, if you gift an asset to a child (or to me - I'm always available for gifts!) then any CGT you pay is available for offset against any CAT arising to them on the gift.


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## NoRegretsCoyote (23 Jun 2020)

Silvius said:


> emphasis on 'unearned' makes it sound as if nobody ever earned the money



This debate is centered on capital gains over long periods on PPRs.

This is indeed unearned!


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## torblednam (23 Jun 2020)

Silvius said:


> emphasis on 'unearned' makes it sound as if nobody ever earned the money....if instead of leaving it to their nearest and dearest the donor left it to the dogs and cats home would there be the same objections to the charity receiving an 'unearned' inheritance tax-free?



There's specific exemptions in the tax code for charitable and similar organisations, and a clear public policy objective behind that.

Do you oppose that exemption, or perhaps you do not see a distinction between the receipt of money by charities versus the receipt of money by individuals?

I personally think CAT is a great tax. From the State's perspective it is something of a sitting duck to an extent. It is also an entirely progressive tax, since it is a form of wealth tax. If ever there should be a tax that the great unwashed could get behind it should be this - the vast majority of people will never find themselves liable to it, so to the extent that it's a tax on other people, and "the rich" (a group that most people like to define as not including themselves), it should be a slam dunk.

I don't buy the whole, "but it's already been taxed" line at all. Sure all money in the economy has "already been taxed", isnt the whole point of money that it circulates, getting sliced, diced, and taxed, along the way.

The bottom line is, if the State wants to broaden, or maintain the width of, the tax base, then it absolutely shouldn't water down CAT. Particularly since the inevitable result of paying all the wealthy Pauls, will be the further robbing of the put upon Peters in the middle.


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## Gordon Gekko (24 Jun 2020)

The thing with CAT is it isn’t that equitable. The really wealthy hardly pay it at all.


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## Baby boomer (24 Jun 2020)

torblednam said:


> There's specific exemptions in the tax code for charitable and similar organisations, and a clear public policy objective behind that.
> 
> Do you oppose that exemption, or perhaps you do not see a distinction between the receipt of money by charities versus the receipt of money by individuals?
> 
> ...


I wonder how much of otherwise taxable assets is moved offshore and into trusts to (legitimately) avoid CAT?  I suspect that the wealthier you are the more likely you are to do this.  You are also far more likely to benefit from the 90% farm/business relief. Meanwhile, the average Joe who has accumulated a house and a modest lump of cash or investments sees his surviving relatives getting whacked.  (Ok, he doesn't really _*see*_ it but you know what I mean.)

It's particularly harsh on those without spouse or children.

Would it not be fairer and more efficient to reduce the rate to something like 5% which would mean engaging in tax planning and complex avoidance mechanisms simply wasn't worthwhile? You could then justify reducing the threshold by a modest amount.   It would keep money in the economy and the state would get a smaller slice of a bigger pie.


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## Gordon Gekko (24 Jun 2020)

It’s tricky enough to avoid CAT but I guess it’s not that tricky if you put your mind to it. If I had €5m and a child going to college in the UK or living in Australia, I’d give strong consideration to moving to Fermanagh for a few years with a view to gifting them the €5m. It’s essentially a €1.5m saving. And I’m still only 90 minutes from Dublin without the need to take a flight.


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## Zenith63 (24 Jun 2020)

Gordon Gekko said:


> It’s tricky enough to avoid CAT but I guess it’s not that tricky if you put your mind to it. If I had €5m and a child going to college in the UK or living in Australia, I’d give strong consideration to moving to Fermanagh for a few years with a view to gifting them the €5m. It’s essentially a €1.5m saving. And I’m still only 90 minutes from Dublin without the need to take a flight.


Start a business in your child's name and use that capital to help grow the business (investing in the business, buying product, directors loans, sponsoring connections and all the other ways you can support a business when you have money to spare).  If the business goes well you might end up with your €5m back and still have the CAT issue, but either way you would have used your wealth to make significant wealth for your child without any CAT liability.  Even without the €5m you can achieve something similar by starting a business in your child's name and working in it to grow it for them.  I see quite a bit of both.


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## Gordon Gekko (24 Jun 2020)

Zenith63 said:


> Start a business in your child's name and use that capital to help grow the business (investing in the business, buying product, directors loans, sponsoring connections and all the other ways you can support a business when you have money to spare).  If the business goes well you might end up with your €5m back and still have the CAT issue, but either way you would have used your wealth to make significant wealth for your child without any CAT liability.  Even without the €5m you can achieve something similar by starting a business in your child's name and working in it to grow it for them.  I see quite a bit of both.



Most businesses fail and there are carve-outs for ‘makey-up’ property-type businesses. Plus there’s an element of forcing the child down a particular path (not in terms of being involved day-to-day but more generally). I’d question the wisdom of such an approach.


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## NoRegretsCoyote (24 Jun 2020)

Serious question. Supposing I am an Irish-resident multi-millionaire. The bulk of my wealth is in publicly-quoted shares of the company of which I am CEO. I have a few other investments and a very large PPR. I want my children to inherit it all in equal shares.

How do I avoid my children paying CAT when I die? I don't want to move abroad.


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## Zenith63 (24 Jun 2020)

Gordon Gekko said:


> Most businesses fail and there are carve-outs for ‘makey-up’ property-type businesses. Plus there’s an element of forcing the child down a particular path (not in terms of being involved day-to-day but more generally). I’d question the wisdom of such an approach.


Yep I'd agree with you questioning forcing a child down that route, just saying I see it quite a bit by those doing more aggressive estate planning, though by no means talking about very wealthy individuals with their own money managers.

One thing I would say is that most business fail because of lack of start-up capital, I imagine the statistics look very different if you're starting with your €5m example on-tap, you can buy your way into plenty of business areas with that kind of money.  Even if you don't have that kind of money but are well connected and business savvy, bringing your maturity to a young business would change the statistic drastically.  Again talking from experience.


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