Alan Shatter's campaign to abolish Inheritance Tax

[Zion2022]

I’m not so sure about the difficulty of moving away. We’re talking about people with money here, let’s call a spade a spade. Lots of people with money retire abroad, or at least have a place abroad. Lots of kids study or work abroad in places where gifts aren’t heavily taxed, or aren’t taxed at all. It’s just a case of aligning the two. Not entirely straightforward, but not rocket science either.

Based on my understanding of CAT, it’s the recipient of the money who would need to redomicile, not just the individual passing on the inheritance. So we’re not necessarily talking about people with lots of money, we’re talking about relatives of people with lots of money.

Add in that in Ireland there’s a lot of very wealthy people who don’t really see themselves as such because it’s all tied up in a PPR.

People typically receive inheritance at roughly age 50-60. Often peak career stage, maybe kids finishing out school/college. So these people would need to take a good guess at when their parents are going to die, move themselves & family to a different country and wait for that dreaded/glorious day to come….all to save 33% on money over a very generous threshold. These people must also be happy paying 52% on earned income to be here in the first place.

Throw in that you retain ‘ordinary residence’ for 3 years after leaving so you need to be gone out of Ireland for at least 3 years before the big day…easier to structure if it’s a gift before death but still a sizeable commitment and requires the parent to be willing to part ways with a substantial part of their wealth before death.

I think you’re talking mega levels of wealth to make all of that worthwhile…and even at that, would you really uproot your family to get €100m instead of €67m?

And in any case. Very wealthy people are masters at avoiding tax anyway. Doesn’t mean the taxes shouldn’t exist. Extreme cases make for bad policy.

 

[Bronte]

So if a business person or farmer dies, their successor gets lumbered with a huge tax deferral that will sometime have to be paid?

How would that work? Who in their right mind is ever going to advance business capital investment or working capital finance to a such a successor whose entire collateral is effectively mortgaged to the State?

Is the failure rate in second- and third- generation firms in this country not bad enough as it is?

Many in this country and many on this site are almost obsessed with finding new and ingenious ways to tax others (and it's always others) as long and as hard as possible, while remaining blind to the general inefficacy of public expenditure generally and public expenditure waste in particular.

Bike shed anyone?

 

[Bronte]

During the meeting he (Alan Shatter) described the tax as a “resentment tax” favoured by people who were “jealous” of those who had “lawfully accumulated assets”.
He said it “was an “invention of the 1970s ... a sort of socialist dogma that there was something wrong that families should ... provide some financial assistance to other members of their family”.

Can't fault him there as agree wholeheartedly.

Very rich man, with influence wants to put pressure on lawmakers so his accumulated assets can be passed on tax free.

BTW I hope he succeeds. Can’t stand the idea of more taxes on what we’ve paid income tax on already.

 

[Gordon Gekko]

Based on my understanding of CAT, it’s the recipient of the money who would need to redomicile, not just the individual passing on the inheritance. So we’re not necessarily talking about people with lots of money, we’re talking about relatives of people with lots of money.

Add in that in Ireland there’s a lot of very wealthy people who don’t really see themselves as such because it’s all tied up in a PPR.

People typically receive inheritance at roughly age 50-60. Often peak career stage, maybe kids finishing out school/college. So these people would need to take a good guess at when their parents are going to die, move themselves & family to a different country and wait for that dreaded/glorious day to come….all to save 33% on money over a very generous threshold. These people must also be happy paying 52% on earned income to be here in the first place.

Throw in that you retain ‘ordinary residence’ for 3 years after leaving so you need to be gone out of Ireland for at least 3 years before the big day…easier to structure if it’s a gift before death but still a sizeable commitment and requires the parent to be willing to part ways with a substantial part of their wealth before death.

I think you’re talking mega levels of wealth to make all of that worthwhile…and even at that, would you really uproot your family to get €100m instead of €67m?

And in any case. Very wealthy people are masters at avoiding tax anyway. Doesn’t mean the taxes shouldn’t exist. Extreme cases make for bad policy.

It’s like you didn’t even read my post. I literally spoke about parents retiring abroad and kids studying or working abroad at the same time.

Also, one could argue that, say, a €1m saving on €3m is more attractive than your extreme example of a €33m saving on €100m.

 

[Brendan Burgess]

Why is there no international movement to change the tax laws so that Irish citizens get taxed whether they live here or not?

Isn't that what the USA does?

And let the Double Taxation treaties ensure that people aren't taxed twice.

And bring in an estate tax for Irish citizens who die while resident abroad.

But it would be a bit hypocritical when we are a tax haven for overseas corporates.

Brendan

 

[Zion2022]

It’s like you didn’t even read my post. I literally spoke about parents retiring abroad and kids studying or working abroad at the same time.

Also, one could argue that, say, a €1m saving on €3m is more attractive than your extreme example of a €33m saving on €100m.

I just don’t see it as likely to be a widespread phenomenon that people with kids of studying age (I.e. parents 50-55, kids 20-25) both up sticks & pick universities based on locations with favourable inheritance laws in order to save CAT on a €3m inheritance.

Sure it might happen in a few fringe cases but it would be vanishingly small. Most 50 years olds with €3m to give to their kids are likely to be flat out, head down in the middle of an exec career or running an SME. Not pondering inheritance tax their kids might have to pay in 40 years time. It’s definitely not a risk that you would be terribly concerned by when setting tax policy.
Sure we nail people for 52% marginal income over 70k it’s not like everybody has left yet!

From my experience it’s only those with really extreme levels of wealth who typically engage in such drastic tax avoidance strategies.

 

[Brendan Burgess]

Sure it might happen in a few fringe cases but it would be vanishingly small. Most 50 years olds with €3m to give to their kids are likely to be flat out, head down in the middle of an exec career or running an SME. Not pondering inheritance tax their kids might have to pay in 40 years time. It’s definitely not a risk that you would be terribly concerned by when setting tax policy.

Agree fully.

We design a lot of policy to discourage something which rarely happens, and thousands of people pay less tax as a result.

Brendan

 

[Gordon Gekko]

I just don’t see it as likely to be a widespread phenomenon that people with kids of studying age (I.e. parents 50-55, kids 20-25) both up sticks & pick universities based on locations with favourable inheritance laws in order to save CAT on a €3m inheritance.

Sure it might happen in a few fringe cases but it would be vanishingly small. Most 50 years olds with €3m to give to their kids are likely to be flat out, head down in the middle of an exec career or running an SME. Not pondering inheritance tax their kids might have to pay in 40 years time. It’s definitely not a risk that you would be terribly concerned by when setting tax policy.
Sure we nail people for 52% marginal income over 70k it’s not like everybody has left yet!

From my experience it’s only those with really extreme levels of wealth who typically engage in such drastic tax avoidance strategies.

Again you’ve chosen to ignore what I wrote and you’ve gone down a rabbithole in relation to specific ages that I never referenced. I said ‘study or work’.

You’ve also referenced ‘drastic tax avoidance strategies’, something I never referred to. I spoke about retired people having a place overseas and kids studying or working abroad.

 

[Zion2022]

Again you’ve chosen to ignore what I wrote and you’ve gone down a rabbithole in relation to specific ages that I never referenced. I said ‘study or work’.

You’ve also referenced ‘drastic tax avoidance strategies’, something I never referred to. I spoke about retired people having a place overseas and kids studying or working abroad.

Ok sorry I didn’t follow. You’re talking about a set of people where parents have gotten rid of their Irish ordinary resident status (through their retirement planning) and their children have also, coincidentally got a job or are studying in another country for 3+ years where there is no/low CAT. They then as a family see this as an opportune time to pass on wealth free of Irish CAT?.

1. I’m confident this would be a tiny tiny percentage of people
2. If this set up was not made purely for the purposes of avoiding CAT, it was merely just their life plans anyway, then their capital would have left Ireland anyway and therefore shouldn’t be considered a downside to Irelands CAT.

 

[Gordon Gekko]

Ok sorry I didn’t follow. You’re talking about a set of people where parents have gotten rid of their Irish ordinary resident status (through their retirement planning) and their children have also, coincidentally got a job or are studying in another country for 3+ years where there is no/low CAT. They then as a family see this as an opportune time to pass on wealth free of Irish CAT?.

1. I’m confident this would be a tiny tiny percentage of people
2. If this set up was not made purely for the purposes of avoiding CAT, it was merely just their life plans anyway, then their capital would have left Ireland anyway and therefore shouldn’t be considered a downside to Irelands CAT.

It doesn’t matter what percentage of ‘people’ it is.

What’s more relevant is the percentage of people with meaningful amounts more than €335,000 per child to give away.

 

[clinteastwood]

Fourth tax is the income tax that the publican pays.
Fifth is the VAT he pays when he spends your hard earned on expanding his collection of fake moustaches.
This game can go on forever.
It's almost like the State needs a continuous flow of tax money, from a variety of sources...

Yes it does, it will need millions to take care of you when you, your spouse and your sisters /brothers get sick, old and need 24h nursing.

 

[Purple]

Yes it does, it will need millions to take care of you when you, your spouse and your sisters /brothers get sick, old and need 24h nursing.

Maybe the State should tax the estate of wealthy older people when they die in order to recoup some of the money it lavished on them in their last few years through the medical care system.

Some sort of inheritance tax perhaps?

 

[yellowmoose]

Maybe the State should tax the estate of wealthy older people when they die in order to recoup some of the money it lavished on them in their last few years through the medical care system.

Some sort of inheritance tax perhaps?

or maybe just have them pay for the services they use as they use them so no need for inheritance tax

 

[Purple]

or maybe just have them pay for the services they use as they use them so no need for inheritance tax

In the vast majority of cases they couldn’t afford to pay for them as they use them. The average healthcare cost in the final year of life for a patient in the healthcare system is around €70,000 so in many cases it’s vastly more than that. 20% of patients consume 90% of our healthcare budget.
(I hate calling it healthcare when it’s actually sick care. Less than 5% of our health budget is spent on preventative medicine, i.e. healthcare.)

 

[yellowmoose]

In the vast majority of cases they couldn’t afford to pay for them as they use them. The average healthcare cost in the final year of life for a patient in the healthcare system is around €70,000 so in many cases it’s vastly more than that. 20% of patients consume 90% of our healthcare budget.
(I hate calling it healthcare when it’s actually sick care. Less than 5% of our health budget is spent on preventative medicine, i.e. healthcare.)

70k could be less than their inheritance tax so give them the option?

 

[Purple]

70k could be less than their inheritance tax so give them the option?

Really?

 

[The Horseman]

Maybe the State should tax the estate of wealthy older people when they die in order to recoup some of the money it lavished on them in their last few years through the medical care system.

Some sort of inheritance tax perhaps?

Or maybe acknowledge the prudence they showed to achieve their wealth in comparison to those who did not and still receive the same care?

 

[T McGibney]

Or maybe acknowledge the prudence they showed to achieve their wealth in comparison to those who did not and still receive the same care?

It is a good and noble thing to work hard and make sacrifices in order to avoid as much as one can ever do, becoming a burden on one's family, siblings or the State in advanced old age.

Inheritance taxes disincentivise such work and such sacrifices and, irony of ironies, actually encourage the wasteful dissolution of inherited wealth rather than its preservation and productive use.

 

[Ceist Beag]

A number of the posts on this thread are at the extreme end of things, e.g. €3m inheritance to children, businesses being inherited, etc. However the vast majority of cases will be much much less than that. As others have said, why should my hard work and savings (which have already been taxed to the hilt) be further diluted by the government dipping their hand in once again when they are passed on to my children. I may have accumulated those savings by being prudent/frugal and avoiding lavish spending. Why should I (or my children) be punished for that. Would it have been better to spend it all while I'm alive, possibly even spend it on my children so that they get the benefit while I'm alive? That appears to be what is being encouraged by such proposals. But wouldn't that leave me in a more vulnerable financial state as I get older?

 

[Purple]

It is a good and noble thing to work hard and make sacrifices in order to avoid as much as one can ever do, becoming a burden on one's family, siblings or the State in advanced old age.

Inheritance taxes disincentivise such work and such sacrifices and, irony of ironies, actually encourage the wasteful dissolution of inherited wealth rather than its preservation and productive use.

Are you suggesting that people will spend their wealth rather than give it to their children because their children will have to pay tax on it?

Dad; "I'm going to sell the house and spend the money on hookers and fine wines in Vegas then land back here with my liver and Kidneys buggered to die at the States expense."
Daughter; "Good on you Dad, otherwise I'd have to pay 30% on what you left to me when you did eventually die."