# The €3,000 annual small gift exemption should be abolished



## Brendan Burgess (14 Jan 2022)

I am writing my submission  to the Commission on Tax and Social Welfare

I had initially suggested making the €3,000 Small Gifts Exemption from CAT cumulative but now I think it should be completely reformed in light of subsequent comments.

The rationale for exempting occasional small gifts from the administrative burden of CAT is a good one.

However, it has become an integral part of tax planning with wealthy couples  giving their children €6,000 a year over a period of 30 years. Thus a person gets €180k of gift tax exemptions on top of the already generous €335k threshold.

Option 1  - Abolish it completely
I can receive gifts up to €16,250 cumulatively anyway.  So if I get a gift of €3,000 from a friend, it's exempt from CAT anyway.

If I get €3,000 a year from a parent for 30 years,  then my €335k threshold should be reduced by this amount.

*The more I think of it, this really is the best option. *

An occasional small gift is exempt anyway so the exemption is not needed.


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## Zenith63 (14 Jan 2022)

Brendan Burgess said:


> The €3,000 small gift exemption for CAT. Make it €3,000 cumulative.


This one sounds tricky. Am I building up an exemption from the age of 18? At age 50 I can get a gift of €100k from anybody in the state tax free?

I think it would be fair for this to apply between parents and children though, because wealthier people will already be using it throughout their lives to pass inheritance to their children tax free while those less well off in earlier years do not have this opportunity.

Certainly agree on pensions. It’s absolutely bizarre that for my age/past service using an executive pension a company can contribute €750k once-off, but somebody who just started earning enough to begin a pension as an employee can only contribute €23k.


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## Brendan Burgess (14 Jan 2022)

Zenith63 said:


> At age 50 I can get a gift of €100k from anybody in the state tax free?



OK, make it €1k a year. 

The €3k was probably aimed at very occasional gifts and not to be part of systematic tax planning.

Brendan


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## noproblem (14 Jan 2022)

Brendan Burgess said:


> OK, make it €1k a year.
> 
> The €3k was probably aimed at very occasional gifts and not to be part of systematic tax planning.
> 
> Brendan


It would be very interesting to know the total amount that's given as "€3000k gifts" in the state every year. Something tells me it's a, very, very, large amount. My wife tells me i'm wrong.


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## Protocol (14 Jan 2022)

Surely most people aren't even aware of the 3k CAT exemptions.

Many parents give gifts to children, i.e. house deposit, wedding, and CAT is not considered.


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## noproblem (14 Jan 2022)

noproblem said:


> It would be very interesting to know the total amount that's given as "€3000k gifts" in the state every year. Something tells me it's a, very, very, large amount. My wife tells me i'm wrong.


I hadn't read your No 2 post on this, was just going to add the €1270 CGT too. The other half was reading it and pointed it out to me.

The thing about the €3000 gift is it will help the wealthier people. A couple with 3 children, who also have 3 children each. The older couple could  give €3k to their children, and also to each grandchild, and also the spouses of their children. That's a total amount of €30,000.00 to each family tax free every year as it stands now. A lot of money so no real need to make it cumulative.


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## Brendan Burgess (14 Jan 2022)

Maybe then 3 x €3,000 gifts in total . 

Brendan


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## noproblem (14 Jan 2022)

Brendan Burgess said:


> Maybe then 3 x €3,000 gifts in total .
> 
> Brendan


Not against that, but of no benefit to the exchequer. Why not put some tax on the 3 x €30k instead?


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## Pinoy adventure (15 Jan 2022)

Brendan - what’s the €16,250 you mentioned in option 1 ?


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## Clamball (15 Jan 2022)

Protocol said:


> Many parents give gifts to children, i.e. house deposit, wedding, and CAT is not considered.


Is this true, that CAT is not required for a gift of a house deposit or to pay for a wedding?  How does the revenue deal with these?

I thought that say if I gave my child €21K in 7 years time to use as a house deposit, that she would have to pay tax, but if I gave her €3K per year for the next seven years she would not need to pay tax?  My only problem was fretting she would waste it partying, and holidaying in the next few years.  She has just finished university where I paid €3K per year in “fees”, so it seemed a good idea to me to keep doing this.

It is true that not a lot of people know about the €3K gift exemption.  My mother wanted to give 2 specific grandchildren cash gifts but did not want to exclude any other grandchild.  She was also talking about paying specific costs on their behalf, which varied in value so she was fretting about fairness.  so I explained to her about the small gift tax exemption.  She was delighted that it was all above board and had a specific limit and organised it for them all.  All the grand kids late teens, early 20’s were chuffed.


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## Brendan Burgess (15 Jan 2022)

Pinoy adventure said:


> Brendan - what’s the €16,250 you mentioned in option 1 ?



It's the Group C threshold for CAT. 

In other words, you can receive up to €16,250 in gifts during your lifetime from unconnected persons before you have to pay any gift tax.

Brendan


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## Nordkapp (15 Jan 2022)

People do rely on that €3000 gift exemption, whether it is for college fees etc.

In my case, I get disbelieving looks from my daughter, who went to Uni, when I explain that we can her and her husband €12,000 per year towards their deposit without tax liability. The financial education in schools in this country is abysmal.

BTW, tax has been paid on that gift already, I think it should be at least €7,500 as it has been €3,000 for more years than I care to remember


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## PMU (15 Jan 2022)

A decision to tax or not to tax capital gains (or indeed anything else) should first pass a test of wheather or not the tax or tax exemption will lead to distortions in capital markets.  In this case we are not talking of taxing or not taxing capital gains; we are just changing ownership of savings or earnings.  So does it really matter if I retain savings in my account or give it to someone else to retain in their account?   Or if I give a proportion of my earnings, on which I have already paid income tax, to another person?  I don't see any distortions here.

If I spend my savings I pay taxation on the products or services I buy; and the beneficiary of my gift, if he/she decides to spend the money will pay similar taxes depending on their spending decisions.  Likewise,  if I retain the savings in my account I pay DIRT, as will the beneficiary if he/she retains it. Again no distortions here. 

And this applies regardless of the wealth or income of the donor.  Also assuming that recipients are generally less well off than donors, overall such gifts will lead to a redistribution of savings from the better off the the relatively less well off in society.

So why tax savings based on a change of ownership?   It's not an exemption; the money will be spent at some stage and then the relavant taxes will be collected.


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## Brian McD (15 Jan 2022)

Parents already spend €6k - €7k per year for children for private schools plus a lot if extras on top, so can’t really see why anybody should get too worked up over this €3k annual exemption


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## Brian McD (15 Jan 2022)

It’s not like one is passing on wealth, it’s just money that one has already paid 51% tax on as income and giving this to their family , to tax this further seems very very unfair


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## Thirsty (15 Jan 2022)

I'm a PAYE employee, I pay tax on all my income.

If I choose to give some of my earned income to my children it is inequitable for an additional tax to be charged on that money *solely* because I give it to them.


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## cremeegg (15 Jan 2022)

Zenith63 said:


> This one sounds tricky. Am I building up an exemption from the age of 18? At age 50 I can get a gift of €100k from anybody in the state tax free?


No. You can't.


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## PebbleBeach2020 (15 Jan 2022)

I agree, this is earned income. Tax paid at 51%. If I want to gift a child three grand a year then I should be allowed. Why does Brendan feel the need to propose it be eliminated? We all want to minimise tax,and having paid half of income in tax, to try and tax the other half when giving an annual gift is ridiculous.


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## Brendan Burgess (15 Jan 2022)

But is it not equally ridiculous that you have to pay Excise Duty and VAT on the half you do spend?


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## 2bmortgagefree (15 Jan 2022)

Whilst the thinking on this is well meant people would find ways round it.  What's to stop the parent giving the cash in hand in small amounts over the course of the year. Or what is stopping the parent paying for maintenance to the house or car for the child. Respectively I suggest that people would find ways around this very easily.


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## ClubMan (15 Jan 2022)

Thirsty said:


> I'm a PAYE employee, I pay tax on all my income.


That's incorrect.
Tax bands, credits and exemptions mean that you don't pay tax on *all* of your income.


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## ClubMan (15 Jan 2022)

PebbleBeach2020 said:


> I agree, this is earned income. Tax paid at 51%.


This is also incorrect.
Look at your end of year balancing statement and express the tax/USC/PRSI actually paid as a percentage of your gross income.
It'll be far less than 51%.


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## Gordon Gekko (15 Jan 2022)

The €3,000 exemption is there to stop ludicrous things being caught in the tax net.

e.g. I lend you my car for the summer, I invite someone for a meal at the chef’s table in Chapter One, I bring my nephew on holidays, etc.

There should be a de minimis amount and €3,000 is about right.

Let’s not forget that gifts are effectively tax-free in the UK.


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## Steven Barrett (15 Jan 2022)

Clamball said:


> Is this true, that CAT is not required for a gift of a house deposit or to pay for a wedding?  How does the revenue deal with these?
> 
> I thought that say if I gave my child €21K in 7 years time to use as a house deposit, that she would have to pay tax, but if I gave her €3K per year for the next seven years she would not need to pay tax? * My only problem was fretting she would waste it partying, and holidaying in the next few years.  *She has just finished university where I paid €3K per year in “fees”, so it seemed a good idea to me to keep doing this.
> 
> It is true that not a lot of people know about the €3K gift exemption.  My mother wanted to give 2 specific grandchildren cash gifts but did not want to exclude any other grandchild.  She was also talking about paying specific costs on their behalf, which varied in value so she was fretting about fairness.  so I explained to her about the small gift tax exemption.  She was delighted that it was all above board and had a specific limit and organised it for them all.  All the grand kids late teens, early 20’s were chuffed.


I have done this for a number of clients who have kids over 18 and there hasn't been a problem. You put it in a 28 day notice account or another hard to get at account such as the post office or and investment account. If you put it in their current account it will be spent and you'll only have yourself to blame. Leave it out of reach, and it will be fine. 


On the exemption as a whole, it is adhered to by parents using long term transfer of wealth. There are lots of parents who give their children money all the time to buy cars, house deposits, weddings etc and do not report it to the revenue despite it costing them tens of thousands of euro. Spend €30k on a wedding, that's 10 year's worth of gifts. The revenue won't be coming after these people.


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## Brendan Burgess (15 Jan 2022)

2bmortgagefree said:


> people would find ways round it.



But on that basis, we should abolish Income Tax.  People find away around it. 

Brendan


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## Brendan Burgess (15 Jan 2022)

Gordon Gekko said:


> Let’s not forget that gifts are effectively tax-free in the UK.



Yes. And that makes no sense. 
There is a tax on a person's estate but not on the beneficiary. 

Brendan


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## Gordon Gekko (15 Jan 2022)

Brendan Burgess said:


> Yes. And that makes no sense.
> There is a tax on a person's estate but not on the beneficiary.
> 
> Brendan


They adopt the logic that when a person dies, the State takes some of their assets.

Whereas a person should be free to do whatever they like in terms of gifting their own cash.

e.g. if I earn an extra £10k, net £5k and want to give that £5k to Brendan Burgess, it’s nobody’s business unless I die within seven years.


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## The Horseman (15 Jan 2022)

ClubMan said:


> That's incorrect.
> Tax bands, credits and exemptions mean that you don't pay tax on *all* of your income.


Technically you are correct however if you look closer the €3k is taxed at the 51% as most people spend up to 42k (assuming a married couple and tax band etc) on day to day expenses, mortgage payments, etc.


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## Brendan Burgess (15 Jan 2022)

Gordon Gekko said:


> Whereas a person should be free to do whatever they like in terms of gifting their own cash.



That is an argument against CAT full stop.  

As I have pointed out elsewhere, the children of wealthy parents have a huge advantage anyway over the children of poor parents. 

This is levelling the playing field a bit.

Brendan


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## Brendan Burgess (15 Jan 2022)

Brian McD said:


> Parents already spend €6k - €7k per year for children for private schools plus a lot if extras on top, so can’t really see why anybody should get too worked up over this €3k annual exemption



So the kid is getting €7k a year in private school fees.
Then €3k a year for 30 years to avail of the Small Gifts Exemption.
Then maybe Business Relief on a business worth €2m. 
And with a Threshold of €335k ...

They pay no tax at all on their gifts or inheritance. 

Opinions differ, but that does not seem fair to me. 

Brendan


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## The Horseman (15 Jan 2022)

Brendan Burgess said:


> I am writing my submission  to the Commission on Tax and Social Welfare
> 
> I had initially suggested making the €3,000 Small Gifts Exemption from CAT cumulative but now I think it should be completely reformed in light of subsequent comments.
> 
> ...


I am at a loss why you are even considering this. 

By effectively removing this exemption you want to give more tax to Revenue. Removal of these type of incentives act to discourage people trying to better themselves. 

Why better yourself to work hard, do without to help your family etc. Remember this exemption when used is used by the ordinary person.


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## The Horseman (15 Jan 2022)

Brendan Burgess said:


> So the kid is getting €7k a year in private school fees.
> Then €3k a year for 30 years to avail of the Small Gifts Exemption.
> Then maybe Business Relief on a business worth €2m.
> And with a Threshold of €335k ...
> ...


The child is not getting 7k a year rather they are going to a school which should ensure they achieve an education that should secure them well paid employment. This well paid employment will result in income tax revenue and ensure they will be net contributors to Revenue in the future.


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## Brendan Burgess (15 Jan 2022)

We have huge inequality in society. 

And a lot of that inequality is inherited. 

I would prefer to see people rewarded for their work than for their accidents of birth. 

Brendan


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## The Horseman (15 Jan 2022)

Brendan Burgess said:


> We have huge inequality in society.
> 
> And a lot of that inequality is inherited.
> 
> ...


Education has never been more accessible. When I left school in the late 80's only those with money could go to college. Since then I have secured a degree, masters and a professional qualification accountant (all part time). 

Not all "Inequality" is inherited, some of it is as a result of sacrifices made by previous generations to give their families a better life than the one they had.


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## Zenith63 (15 Jan 2022)

Is the €335k Group A allowance from both parents combined, or can you receive €335k from each parent if they have the money to do it?

Thought it might be interesting to do the numbers on how things play out for average people vs. those who have the money to give to their children during their lifetime -

1. Wealthy parents able to give money during a single child's lifetime:

€3k from each parent from age 1 until parents deaths 60 years later€360,000€3k from each parent to child's spouse from age 25 until parents death 35 years later€210,000€3k from each parent to child's two children, born when child was 30 until parent death 30 years later€360,000First parent dies and leaves €335k to child, €16250 to child's spouse and €32500 to each grandchild€416,250Second parent dies and leaves remainder to child, €335k of which will be tax free, €16250 to spouse and €32500 to each grandchild€416,250Total tax free transfer€1,762,500


2. Average people who build up a decent pension but cannot afford to transfer money to their child during their lifetime, no significant savings outside pension so first parent to die leaves everything to the second (as is common).

Second parent dies and leaves remainder to child, €335k of which will be tax free, €16250 to spouse and €32500 to each grandchild€416,250Total tax free transfer€416,250



I wouldn't be in favour of chasing every penny transferred from a parent to a child, particularly things like paying for education and even weddings, or creating a huge admin overhead for small transfers.  But to me the example above is very unfair to the second family who will end up paying inheritance tax on anything over €416k, just because they weren't wealthy enough in their lifetimes to hand it over sooner.

The small gift exemption should count towards your CAT lifetime group thresholds in my opinion, even if those thresholds were increased so this all worked out revenue neutral to the exchequer.


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## Horatio (15 Jan 2022)

The Horseman said:


> By effectively removing this exemption you want to give more tax to Revenue. Removal of these type of incentives act to discourage people trying to better themselves.
> 
> Why better yourself to work hard, do without to help your family etc.



Hear, hear!

Income tax'd.
Give away some of your remainder & have the recipient pay CAT for the pleasure of receiving it.
The recipient pays VAT when they spend it.
Urrgh!


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## Horatio (15 Jan 2022)

Brendan Burgess said:


> We have huge inequality in society.
> 
> And a lot of that inequality is inherited.
> 
> ...


A counter point to that could be that you *are *rewarded for your work when you work. You trade your time & expertise for wages & you're tax'd on those wages.
If your Parents (for example) worked in their generation, were rewarded for it, lived well within their means & have a surplus to provide for their progeny, why should the Tax coffers be the beneficiary of this?

Yes, inequality is inherited, it is also not anything near insurmountable in the Republic of Ireland today. People pull themselves up the socio economic ladder every single day.
Your proposed changes to the CAT will not change the inequality in my mind. They'll just slosh more funds into the exchequer.


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## Brendan Burgess (15 Jan 2022)

Zenith63 said:


> But to me the example above is very unfair to the second family who will end up paying inheritance tax on anything over €416k just because they weren't wealthy enough in their lifetimes to hand it over sooner.



Hi Zenith

And it's potentially much worse.

A farm or business worth €3m can be left without any CAT, though it will use up €300k of the CAT threshold.

Brendan


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## PMU (15 Jan 2022)

The Horseman said:


> Why better yourself to work hard, do without to help your family etc. Remember this exemption when used is used by the ordinary person.


This is an important point.  I think most people make a distinction between inequality that derives from work/enterprise; inequality that derives from inheritance; and inequality that derives from non-economic factors like poor decision making.


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## Billo (15 Jan 2022)

Zenith63 said:


> Is the €335k Group A allowance from both parents combined, or can you receive €335k from each parent if they have the money to do it?
> 
> Thought it might be interesting to do the numbers on how things play out for average people vs. those who have the money to give to their children during their lifetime -
> 
> ...


_In my humble opinion  the $335k is a combined figure for both parents. I am open to correction._


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## Brendan Burgess (15 Jan 2022)

The CAT thresholds are determined by the recipient and their relationship to the donor.

So a person can get a total of €335k from both their parents.

They can get €32,500 in total from their uncles and aunts and others in Group B

Brendan


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## Zenith63 (16 Jan 2022)

The Horseman said:


> I am at a loss why you are even considering this.
> 
> By effectively removing this exemption you want to give more tax to Revenue. Removal of these type of incentives act to discourage people trying to better themselves.
> 
> Why better yourself to work hard, do without to help your family etc. Remember this exemption when used is used by the ordinary person.


I don’t think any of Brendan’s suggestions are intended to raise extra tax.

On this one you could get rid of the €3k exemption, but increase the Group A threshold to whatever level means the change is tax revenue neutral.  That way everybody gets an equal opportunity to benefit from this exemption, rather than just the wealthy.


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## Brendan Burgess (16 Jan 2022)

Zenith63 said:


> I don’t think any of Brendan’s suggestions are intended to raise extra tax.



That is my general principle. 

However, some of the CAT ones are so wrong that I think I would say that more tax should be raised from CAT. 

I agree with the idea of a small gift exemption - but unfortunately it is being used to effectively increase tax-free thresholds by €180k which was not the intention.

Brendan


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## Aurora (16 Jan 2022)

Sorry Brendan. Are you saying that a person can get 335 from both parent's. 
That is news to me.


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## Gordon Gekko (16 Jan 2022)

Aurora said:


> Sorry Brendan. Are you saying that a person can get 335 from both parent's.
> That is news to me.


No, one parent


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## The Horseman (16 Jan 2022)

Zenith63 said:


> I don’t think any of Brendan’s suggestions are intended to raise extra tax.
> 
> On this one you could get rid of the €3k exemption, but increase the Group A threshold to whatever level means the change is tax revenue neutral.  That way everybody gets an equal opportunity to benefit from this exemption, rather than just the wealthy.


But that's exactly what will happen. In the majority of cases it is normally parent to child who receive inheritances. 

If you remove the €3k and increase the group A threshold what figure to you increase it too? If its less than €75k (birth of a child until 25 yrs old when they have finished college and started working) then yes you are increasing the tax take by Revenue. With prices raising in "real terms" the €3k is not worth what it was in the past as it is.

With smaller average family sizes, it is not unusual to see people in their mid 50's with assets exceeding 600k (by the time they reach retirement) be it the family,  life assurance policies, savings and investments. 

The threshold limits (certainly the A threshold) were reduced significantly and have not taken any account of raising property prices.


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## Zenith63 (16 Jan 2022)

The Horseman said:


> But that's exactly what will happen. In the majority of cases it is normally parent to child who receive inheritances.
> 
> If you remove the €3k and increase the group A threshold what figure to you increase it too? If its less than €75k (birth of a child until 25 yrs old when they have finished college and started working) then yes you are increasing the tax take by Revenue. With prices raising in "real terms" the €3k is not worth what it was in the past as it is.
> 
> ...


Not sure I understand your objection sorry. If Revenue are instructed to increase the Group A threshold by whatever amount they believe would lead to a tax revenue neutral position after the €3k exemption is cancelled, they are by definition not collecting extra tax. No?

I’m not sure what the new threshold would be, but I imagine the boffins in Revenue have a good sense of how widely used the €3k exemption is and could figure it out. It may well be an extra €25-50k per person.

The Group A threshold having not increased as property prices have is something that should be addressed, but is irrelevant to a discussion about wealthy individuals using the €3k exemption to increase their tax free inheritance allowances.


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## The Horseman (16 Jan 2022)

Zenith63 said:


> Not sure I understand your objection sorry. If Revenue are instructed to increase the Group A threshold by whatever amount they believe would lead to a tax revenue neutral position after the €3k exemption is cancelled, they are by definition not collecting extra tax. No?
> 
> I’m not sure what the new threshold would be, but I imagine the boffins in Revenue have a good sense of how widely used the €3k exemption is and could figure it out. It may well be an extra €25-50k per person.
> 
> The Group A threshold having not increased as property prices have is something that should be addressed, but is irrelevant to a discussion about wealthy individuals using the €3k exemption to increase their tax free inheritance allowances.


What about those people who use the 3k exemption who have no children? Or those who want to help family members over and above the Group b threshold for example. What about child to parent to help cover there day to day expenses? Revenue will collect extra tax in these situations. 

With such low thresholds the 3k allows people reduce their tax liability. With the increased use of electronic payment methods even down to weekly shopping it has never been easier to see exactly who is paying for items. In the recent past physical cash was easy to give to others with no trace of its origin. 

This thread is not about wealthy individuals using the small gift exemption. Wealthy individuals will use tax experts to reduce their tax liability.


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## Zenith63 (16 Jan 2022)

The Horseman said:


> What about those people who use the 3k exemption who have no children? Or those who want to help family members over and above the Group b threshold for example. What about child to parent to help cover there day to day expenses? Revenue will collect extra tax in these situations.
> 
> With such low thresholds the 3k allows people reduce their tax liability. With the increased use of electronic payment methods even down to weekly shopping it has never been easier to see exactly who is paying for items. In the recent past physical cash was easy to give to others with no trace of its origin.
> 
> This thread is not about wealthy individuals using the small gift exemption. Wealthy individuals will use tax experts to reduce their tax liability.


With respect, the thread is about that, have a look at the first post again.

To your other points, I have no problem with the Group B/C thresholds being increased as well, again throw it into the calculations with the requirement that the whole thing works out tax revenue neutral.

The purpose is not for Revenue to collect more tax or to collect more tax from the less wealthy, so the thresholds would be restructured to ensure this. Again I’m not sure I understand your objection, unless you’re one of the wealthy individuals using the €3k exemption for the purposes outlined above, you’ll be getting a greater ability to pass on wealth tax free because your allowance is no longer use-it-or-lose-it at a time when most average people don’t have it to give.

This is not a money grab from the rich, it’s correcting something that means the more money you have the less tax you pay.


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## The Horseman (16 Jan 2022)

Zenith63 said:


> With respect, the thread is about that, have a look at the first post again.
> 
> To your other points, I have no problem with the Group B/C thresholds being increased as well, again throw it into the calculations with the requirement that the whole thing works out tax revenue neutral.
> 
> ...


It is a money grab by Revenue and it is not tax neutral on the individuals it impacts on. 

If you want a fairer system then my suggestion is to give individuals a lifetime threshold to do with as they please and remove the groupings altogether. If you are a couple/married then you get a combined lifetime threshold similar to joint assessment for income tax purposes each year. 

Also link the thresholds to at a min inflation rather than some arbitrary figs.


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## Clamball (16 Jan 2022)

If the small gift exemption is abolished then all gifts from a parent to an adult child, or from a grandparent to a child or from an adult child to a parent should be accounted for and collated until the CAT limit is reached and tax paid on every gift after that.  

This would be an inordinate administrative burden on everyone so it is not surprising that the revenue have set a reasonable annual limit.  With adult children it is pretty easy to spend €3K on gifts to them if you have the disposable income to spend.  A parent might decide to pay for health insurance €1K, car insurance €1K, a family holiday €1K, Christmas, birthday, a concert, a few meals out, a piece of jewellery, etc., etc.  it adds up really fast.

I still don’t understand posters who say revenue are not interested in substantial gifts to pay for weddings, house deposits, cars, paying for that masters etc.  if you have received a gift above the limit the onus is on you to report this to revenue and pay the tax.  

Surely parents giving young adults €3K per year to allow savings for big life events, say in the first 7-10 years of their working life where cash can be very tight is not morally wrong.  And as the parents age I would expect the gift to flow the other way from the child to the parent.


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## Gordon Gekko (16 Jan 2022)

If you start taxing things below €3k, there’ll just be widespread evasion.


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## noproblem (16 Jan 2022)

The Horseman said:


> What about those people who use the 3k exemption who have no children? Or those who want to help family members over and above the Group b threshold for example. What about child to parent to help cover there day to day expenses? Revenue will collect extra tax in these situations.
> 
> With such low thresholds the 3k allows people reduce their tax liability. With the increased use of electronic payment methods even down to weekly shopping it has never been easier to see exactly who is paying for items. In the recent past physical cash was easy to give to others with no trace of its origin.
> 
> This thread is not about wealthy individuals using the small gift exemption. Wealthy individuals will use tax experts to reduce their tax liability.


What do you define as "wealthy individuals"?


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## Zenith63 (16 Jan 2022)

A good citizen already has to track what they give annually to make sure they don’t go over the €3k, and they have to track over the long term instances where they do go over it for the lifetime limits. Are we sure in the Information Age the extra administrative burden is quite the Hurculean being suggested?


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## ClubMan (16 Jan 2022)

noproblem said:


> What do you define as "wealthy individuals"?


Most people define them as "the guys who have more than me".


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## The Horseman (16 Jan 2022)

noproblem said:


> What do you define as "wealthy individuals"?


Any person or couple with assets over 500k and to clarify the 500k is the value the person/couple own and don't owe money on. Eg outstanding mortgage etc.


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## Zenith63 (16 Jan 2022)

The Horseman said:


> Any person or couple with assets over 500k and to clarify the 500k is the value the person/couple own and don't owe money on. Eg outstanding mortgage etc.


Most people with net wealth in the €500k-€1m range would benefit from this change. At that kind of wealth you’re unlikely to be able to give €6k to each child since birth, or their spouse and grandkids in later life. You’ll need to hold on to it in your pension to be sure you have money to live on in old age, and you’ll leave it to your child/children but will now have maybe a €400k GroupA allowance instead of €335k.


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## The Horseman (16 Jan 2022)

Zenith63 said:


> Most people with net wealth in the €500k-€1m range would benefit from this change. At that kind of wealth you’re unlikely to be able to give €6k to each child since birth, or their spouse and grandkids in later life. You’ll need to hold on to it in your pension to be sure you have money to live on in old age, and you’ll leave it to your child/children but will now have maybe a €400k GroupA allowance instead of €335k.


Not necessarily, what about adult child to elderly parent? What about rent free accommodation to relatives either saving for deposits, relationship breakdown? What about childless people?

I am regularly asked about this topic. I am a qualified finance professional but am not in practice and have a basic understanding of taxation. 

Friends in the squeezed middle regularly reference their frustration to me at the tax system and see this as going some way at mitigating the situation.


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## Cavanbhoy (16 Jan 2022)

How many people apart from the wealthy passing on their wealth use the small gift exemption. I have 2 children aged 20 and 21. What constitutes a gift paying for college accommodation, living expenses, driving lessons, car insurance etc. Would easily cost me over 3k each per yr but dont record any of it as a gift.


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## Billo (16 Jan 2022)

Aurora said:


> Sorry Brendan. Are you saying that a person can get 335 from both parent's.
> That is news to me.


Group thresholds​Each group has a tax-free threshold amount that apply from 7 December 2011.

The threshold is cumulative and applies to the total taxable benefits you have received in that group. (You must include the taxable value of any previous gifts and inheritances received since 5 December 1991 in the same group.)

You only pay tax on the value of a gift or inheritance above the tax-free group threshold amount.

Tax-free thresholds

 Group AGroup BGroup COn or after 9 October 2019€335,000€32,500€16,25010 October 2018 - 08 October 2019€320,000€32,500€16,25012 October 2016 - 09 October 2018€310,000€32,500€16,25014 October 2015 - 11 October 2016€280,000€30,150€15,07506 December 2012 - 13 October 2015€225,000€30,150€15,07507 December 2011 - 05 December 2012€250,000€33,500€16,750


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## Gordon Gekko (16 Jan 2022)

Cavanbhoy said:


> How many people apart from the wealthy passing on their wealth use the small gift exemption. I have 2 children aged 20 and 21. What constitutes a gift paying for college accommodation, living expenses, driving lessons, car insurance etc. Would easily cost me over 3k each per yr but dont record any of it as a gift.


It’s not a gift. Parental support of school/college going kids is carved out in Section 82 of the legislation.

So are things like paying for your child’s wedding.


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## noproblem (16 Jan 2022)

Goverment are no fools either. Today's Indo.​Donohoe avoided minefield of taxing bank of mum and dad​Finance Minister Paschal Donohoe quickly backed away from an ill-thought out plan to target people borrowing from the so-called bank of mum and dad last November. At a time when many young people are struggling to get on the increasingly expensive property ladder, politicians are wise to be wary of any measures which could be seen as worsening their plight.


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## tallpaul (17 Jan 2022)

Brendan, this thinking all seems very North Korea/China/socialist utopia of choice. Every country in the world has social inequality and always will. Such is life. A great many socialists have tried and failed to change this. 

If I have worked hard, saved hard, not frittered away my money, paid my taxes, I should ABSOLUTELY be entitled to give it to my children without the Taxman getting his grubby little mitts on more of it.


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## PebbleBeach2020 (17 Jan 2022)

here here. Everything in Ireland these days seems to be about redistributing wealth. What about the generation who got off their backside, worked hard, saved, sacrificed holidays, spending etc, to save, be frugal and save for the rainy day, the future, their pension. It seems to be take take take and give more and more to the have nots in society. And there's a huge difference between the have nots and the lazy asses who will never work a day in their lives, get the dole straight from school and a free house in central dublin city. The people in this country who deserve help as the people who are working but struggling to buy a house or raise a family. They are the ones deserving of our help. Every budget adding a fiver or whatever to the dole, is wrong in my book.

The dole should be 300-400 a week if you lose you job and then cut for each 6 months thereafter until you get a job. the basic dole should be 100 euro a week maximum. At the height of the Celtic Tiger, I think I read there was 150,000 people on the dole. These people will never in the lives get a job. Never. Ever. Not Ever!!!! Is that right that we should support them finanically for 60-70 years?

And Brendan suggesting hair-brain ideas like that this, there's bigger fish to fry when it comes to tax changes in my mind.


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## PGF2016 (17 Jan 2022)

@Brendan Burgess  - Is it possible to do a poll for your suggestion? Seems as though the overwhelming majority are against the proposal. Might need a re-think.


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## Purple (17 Jan 2022)

tallpaul said:


> Brendan, this thinking all seems very North Korea/China/socialist utopia of choice. Every country in the world has social inequality and always will. Such is life. A great many socialists have tried and failed to change this.
> 
> If I have worked hard, saved hard, not frittered away my money, paid my taxes, I should ABSOLUTELY be entitled to give it to my children without the Taxman getting his grubby little mitts on more of it.





PebbleBeach2020 said:


> here here. Everything in Ireland these days seems to be about redistributing wealth. What about the generation who got off their backside, worked hard, saved, sacrificed holidays, spending etc, to save, be frugal and save for the rainy day, the future, their pension. It seems to be take take take and give more and more to the have nots in society. And there's a huge difference between the have nots and the lazy asses who will never work a day in their lives, get the dole straight from school and a free house in central dublin city. The people in this country who deserve help as the people who are working but struggling to buy a house or raise a family. They are the ones deserving of our help. Every budget adding a fiver or whatever to the dole, is wrong in my book.
> 
> The dole should be 300-400 a week if you lose you job and then cut for each 6 months thereafter until you get a job. the basic dole should be 100 euro a week maximum. At the height of the Celtic Tiger, I think I read there was 150,000 people on the dole. These people will never in the lives get a job. Never. Ever. Not Ever!!!! Is that right that we should support them finanically for 60-70 years?
> 
> And Brendan suggesting hair-brain ideas like that this, there's bigger fish to fry when it comes to tax changes in my mind.


The "I worked hard all my life" again. Give me a break. People have been going on with that nonsense since forever.
Most people who are now retired would have next to nothing because of the financial crash if t wasn't for the political decision to print a load of money and borrow a load of money and re-inflate stock markets and capital markets. That's the reason private pensions are worth anything and the it's the reason the State has the money to pay public pensions and it's the reason houses are really expensive. 

You don't have money to pass on to your kids because you worked hard all you life. You have it because when it was gone a political decision was made to replace it. The bill for that falls on the generations to come. Think of inheritance tax as giving them the money to pay the debts we ran up.


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## Zenith63 (17 Jan 2022)

The Horseman said:


> Not necessarily, what about adult child to elderly parent? What about rent free accommodation to relatives either saving for deposits, relationship breakdown? What about childless people?


There are already a bunch of carveouts as @Gordon Gekko pointed out, your suggestions could be added easily.

My only point here is that in the example I gave above, wealthy parents could give €1.8m tax-free to a child utilising the SGE while less wealthy parents would be limited to €400k.  I'm quite open to the GroupA threshold being increased to €1.8m when the SGE is abolished - I just want the inequity removed.

Others might be interested in this Revenue [broken link removed].  Covers the mechanics of lots of this stuff, carve-outs etc.


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## tallpaul (17 Jan 2022)

@Purple Now this is rubbish! Whether I personally have money is NOTHING to do with what decisions the ECB made to print money or not. My savings is AFTER TAX income that I worked for and saved. I didn't buy an apartment in Cape Verde, go on extravagant holidays, try to keep up with the Joneses or live beyond my means.

Give it over with this socialist redistribution of wealth nonsense. If you want to do a Bill Gates on it and leave nothing to your kids, then knock yourself out. Personally, I am more than happy for my children to benefit from my financial prudence and will do so under the rules of the State.


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## Purple (17 Jan 2022)

tallpaul said:


> @Purple Now this is rubbish! Whether I personally have money is NOTHING to do with what decisions the ECB made to print money or not. My savings is AFTER TAX income that I worked for and saved. I didn't buy an apartment in Cape Verde, go on extravagant holidays, try to keep up with the Joneses or live beyond my means.


The actions of the ECB have everything to do with the value of your pension and the value of your property. If all you have is savings which accumulated from your salary post Crash then yes, your wealth has nothing to do with the actions of the ECB. If there are pension and property assets then at least 50% of their value is due to those political decisions. What your individual culpability is in the overall financial crash is irrelevant.


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## tallpaul (17 Jan 2022)

By your logic, then everyone benefitted from the actions of the ECB, so why should those that you are seeking to enrich benefit AGAIN to the detriment of the financially prudent?


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## Purple (17 Jan 2022)

tallpaul said:


> By your logic, then everyone benefitted from the actions of the ECB, so why should those that you are seeking to enrich benefit AGAIN to the detriment of the financially prudent?


How did people who were in school at the time, those who have no pension and no property and who have seen a halving of the real value of their labour relative to capital, benefitted? If we'd let the whole thing go crashing down houses would be worth less than half of what they are worth now. Anyone who worked would be far better off in real terms. They could acquire more than twice as many assets for the same income.


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## tallpaul (17 Jan 2022)

They have benefitted by the whole economy not ending up in the toilet. Using the red herring of ECB financial policies of a decade ago which, in your own words saved the Irish economy in any event, should not distract from the reality of trying to move the goalposts of punishing people who are financially prudent/lucky through birth/lottery winners from doing with THEIR OWN MONEY what they want to do with it compared to those that frittered away their cash/were born at the wrong time/wouldn't work if their lives depended on it. 

I'm (not) sorry if that makes me out to be a raving capitalist (I would not by any means be described as such!) but this populist, Sinn Fein distribution of wealth to the 'less well-off' nonsense needs to be cut down and out like weeds in a flowerbed.

Such is life and circumstance and it was ever thus.


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## Purple (17 Jan 2022)

tallpaul said:


> They have benefitted by the whole economy not ending up in the toilet. Using the red herring of ECB financial policies of a decade ago which, in your own words saved the Irish economy in any event, should not distract from the reality of trying to move the goalposts of punishing people who are financially prudent/lucky through birth/lottery winners from doing with THEIR OWN MONEY what they want to do with it compared to those that frittered away their cash/were born at the wrong time/wouldn't work if their lives depended on it.


That's quite a few groups you are lumping in together there. As a believer that those who work should have more than those who live off welfare seeing people with such a disincentive to work pains me. If we want a society that rewards hard work and skill then we need to see a shift in wealth from capital to labour. Otherwise we are more likely to see the Child Killers in power and their version of a Socialist Utopia imposed on us.


tallpaul said:


> I'm (not) sorry if that makes me out to be a raving capitalist (I would not by any means be described as such!) but this populist, Sinn Fein distribution of wealth to the 'less well-off' nonsense needs to be cut down and out like weeds in a flowerbed.


The Shinners are against a wealth tax. They want a "The Rich" tax. A wealth tax would tax wealth and that would include homes and pensions.
The Shinners have singled out "The Rich" as the problem in society, the group who are unfairly benefitting from the sweat of the "workers", much like the Nazi Party singled out the Jews, the KKK also singled out Jews, and their instruments the Blacks and Catholics, and the Hutus singled out the Tutsi. It's an age old trick by populists and it's as dangerous now as its ever been.


tallpaul said:


> Such is life and circumstance and it was ever thus.


Yep, and due to the Social Contract and some wealth redistribution, along with Capitalism, we don't have to build walls around our villages and bring in our animals at night to protect them from raiders. It used to always be like that but it's better now.


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## _OkGo_ (17 Jan 2022)

Zenith63 said:


> My only point here is that in the example I gave above, wealthy parents could give €1.8m tax-free to a child utilising the SGE while less wealthy parents would be limited to €400k


I don't think that is correct way to view it. Your example includes 4 recipients (child, spouse and 2 grandchildren). It is fair enough to include the spouse but anything transferred to the grandchildren is not a direct benefit to the child. It's not actually given to the child. So excluding the grandchildren and the double counting of the CAT group, your total is closer to €920k.

Increasing the threshold to include the SGE does not reduce inequality. If anything it will further widen it. Those wealthy enough to transfer that kind of money would much prefer to gift €900k now instead of €330k with the hassle of using the small gift exemption every year in the future.

On the whole though, I think a better approach to removing the inequality is to put the onus of tax free gifting back on the donor. For example, if a wealthy parent can only gift €330k, a wealthy couple can gift €660k and it doesn't matter who they choose to give that money to. Their children can only receive €660k from their parents and that's it.

Another point on this which doesn't seem to have been discussed. It is assumed that the SGE is part of some very clever tax planning to transfer wealth. In reality, has anyone ever in any way been chased or investigated by revenue over using it or exceeding it?

My own anecdotal experience from when I was a student/graduate ~15yrs ago was that there were plenty of students or interns driving around in brand new cars, wearing expensive clothing, living in expensive apartments (renting). The gifts these people were receiving were far in excess of any SGE and I highly doubt that any of their parents were worried in any way shape or form about this


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## Zenith63 (17 Jan 2022)

Makes sense @_OkGo_.  As above I'm happy for the boffins at Revenue to figure out the details, I'm by no means an expert on it.  I just want equal access to this estate planning tax exemption for all.




_OkGo_ said:


> My own anecdotal experience from when I was a student/graduate ~15yrs ago was that there were plenty of students or interns driving around in brand new cars, wearing expensive clothing, living in expensive apartments (renting). The gifts these people were receiving were far in excess of any SGE and I highly doubt that any of their parents were worried in any way shape or form about this


To be fair those examples would appear to be mostly excluded -



> 2.3 Revenue’s view is that “normal” in this context refers to the nature of the expenditure rather than the amount and that it means expenditure that might typically be incurred by a person in the circumstances of the disponer. For example, payment of fees and accommodation costs for a dependent child attending college would be normal and would be exempt from gift tax – albeit not all parents would incur such costs. On the other hand, the purchase of a house for a child would not be considered part of the “normal” expenditure of a disponer, regardless of the financial means of the disponer and would not be exempt from gift tax.
> 
> 2.4 “Reasonable” has to be judged by reference to the financial circumstances of the disponer. This requirement prevents a disponer from, for example, making payments that are disproportionate when viewed in the light of the disponer’s means. However, it does not, of itself, set a g
> 
> 2.5 Revenue’s long held interpretation of the exemption provided by Section 82(2) CATCA 2003 is that it does not cover all payments by a parent to a child notwithstanding that such payments may meet the tests of “normal” and “reasonable” outlined in the foregoing paragraphs. The exemption only applies to the provision of support, maintenance or education. This implies at least some level of financial dependence on the part of the child. Revenue does not accept that gifts to a child who is financially independent can come within the terms of the exemption. Neither does it accept that gifts of a capital nature to a child are exempt from gift tax under this section.


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## The Horseman (17 Jan 2022)

Zenith63 said:


> There are already a bunch of carveouts as @Gordon Gekko pointed out, your suggestions could be added easily.
> 
> My only point here is that in the example I gave above, wealthy parents could give €1.8m tax-free to a child utilising the SGE while less wealthy parents would be limited to €400k.  I'm quite open to the GroupA threshold being increased to €1.8m when the SGE is abolished - I just want the inequity removed.
> 
> Others might be interested in this Revenue [broken link removed].  Covers the mechanics of lots of this stuff, carve-outs etc.


As the system currently exists the banding is discriminatory. Remove the banding structure and give each person a lifetime limit of gift/inheritance. I still don't agree with the logic of introducing higher wealth tax. People in the main have wealth as a result of past earnings, good decision making, good fortune and in some instances all of the above of previous generations of their families.


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## Baby boomer (17 Jan 2022)

Purple said:


> How did people who were in school at the time, those who have no pension and no property and who have seen a halving of the real value of their labour relative to capital, benefitted?


If they were in school, then the "bailout" paid.for their education!  



Purple said:


> If we'd let the whole thing go crashing down houses would be worth less than half of what they are worth now. Anyone who worked would be far better off in real terms. They could acquire more than twice as many assets for the same income.


If we'd let the whole thing go crashing down, then we'd be Greece or even worse.  Assets might well be cheap, but there'd be no jobs to buy them with!  Health, education, social welfare would be slashed, really slashed, not a mere trim around the edges.


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## joe sod (17 Jan 2022)

Do you not think this commission will only take on suggestions about new taxes and reducing tax breaks while ignoring any suggestions of taxation reductions or abolition.
This is probably just a smoke screen to allow them to do it by saying it was a submission received by the public.


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## Purple (17 Jan 2022)

Baby boomer said:


> If they were in school, then the "bailout" paid.for their education!


So they got €6k-€8k a year spent on their education but the real value of their future earnings was halved. That's not a good trade.


Baby boomer said:


> If we'd let the whole thing go crashing down, then we'd be Greece or even worse.  Assets might well be cheap, but there'd be no jobs to buy them with!  Health, education, social welfare would be slashed, really slashed, not a mere trim around the edges.


Absolutely, we all benefitted but those who had houses and a pension (people like me) benefitted most. For us there was no down side. That's the point.


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## Purple (17 Jan 2022)

joe sod said:


> Do you not think this commission will only take on suggestions about new taxes and reducing tax breaks while ignoring any suggestions of taxation reductions or abolition.


No. There is a orthodoxy that the State and State spending is universally good. The only debate is how the money should be raised, not whether it should be raised. The same orthodoxy says that the solution to shortcomings in State services is more money, not the better use of the money that's already there.  


joe sod said:


> This is probably just a smoke screen to allow them to do it by saying it was a submission received by the public.


That's exactly what it is.


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## Bluefin (17 Jan 2022)

This is the reality.. Government's are really only interested in raising taxes and collecting more revenue. If I thought there was merit in the suggestions off removing those tax breaks and reducing taxes on income fair enough but I'd say pig's will be flying to the moon before governments would reduce income taxes in any meaningful way. 

In relation to the central banks printing money that's outside our control.. That decision was to support the whole of the EU....EU decisions may not always benefit ireland.. An example of this was the prevailing interest rates in the early 2000's didn't suit our booming construction sector..


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## Baby boomer (17 Jan 2022)

Purple said:


> So they got €6k-€8k a year spent on their education but the real value of their future earnings was halved. That's not a good trade.
> 
> Absolutely, we all benefitted but those who had houses and a pension (people like me) benefitted most. For us there was no down side. That's the point.


I suppose that if the whole thing went belly-up, those who had most would have lost most.  But even still, some people who were cash rich would have piled in and bought up assets very cheaply. That happened here to a lesser extent in the 2009, 2010 era when quite nice Dublin apartments were sold in bulk for less than 100k each.


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## ClubMan (17 Jan 2022)

PebbleBeach2020 said:


> The dole should be 300-400 a week


The dole (Jobseekers Benefit) is a maximum of €208 for a single adult right now.





						Jobseeker's Benefit
					

This is a weekly payment to people who have lost their job and are covered by social insurance.




					www.citizensinformation.ie


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## Purple (17 Jan 2022)

Baby boomer said:


> I suppose that if the whole thing went belly-up, those who had most would have lost most.  But even still, some people who were cash rich would have piled in and bought up assets very cheaply. That happened here to a lesser extent in the 2009, 2010 era when quite nice Dublin apartments were sold in bulk for less than 100k each.


True, but it's still happened up 'till now. It will be interesting to see what happens now that QE has stopped and Bond rates have started to increased.


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## _OkGo_ (17 Jan 2022)

Zenith63 said:


> Makes sense @_OkGo_.  As above I'm happy for the boffins at Revenue to figure out the details, I'm by no means an expert on it.  I just want equal access to this estate planning tax exemption for all.
> 
> To be fair those examples would appear to be mostly excluded -



As a dependent student, yes they are mostly excluded but as a graduate, you are now supposed to be a functioning adult, i.e. no longer a dependent and these living expenses are deemed as gifts

Living a lifestyle of of 40k plus while earning graduate salaries of 20-25k doesn't quiet add up and is heavily reliant on gifts from parents which which seems to be at odds with item 2.5 above from the revenues guide and also this section



> However, a gift such as a car, a house or a paid holiday is still a gift for gift tax purposes,
> notwithstanding the fact that it may be associated with a family occasion such as a wedding. To
> the extent that any such gifts do not exceed the €3,000 small gift exemption in any year, they are
> not subject to CAT.



I think the thread is hung up on the SGE when the reality is that those able to pass on wealth at that level are going to do it anyway. Before changing the thresholds or changing the rules, it would be better to understand whether anyone has ever been cautioned over abuse of the exemption. Otherwise, all the suggestions above are moot.

If equality or fairness in the application of CAT is the main goal of Brendan's OP, then properly enforcing the current rules would be a far better policy change than revising threshold limits.


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