Ireland an unfavourable regime for the stock investor

[He-Man]

This may not be the best place for this thread; if not, please move it, Brendan.

It occurs to me - perhaps wrongly - that Ireland is a terrible place to be a stock market investor. Rather than encourage people to make sensible long-term investments aimed at financial independence, the system seems to penalizes stock market investors with punitive capital gains tax.

If I'm correct that state pensions may be unaffordable a few decades hence, then surely it makes sense to incentivise long-term, prudent investing.

Instead, people are encouraged to pour their money into property and, perhaps as a result, very few Irish people seem to know anything about the stock market. Something like 40% of ETFs offered in Europe are domiciled in Ireland; yet we have advisers in this very forum advising Irish investors to avoid such ETFs like the plague.

At a policy-making level, who is making these decisions, and why?

 

[Fella]

Totally agree this country is a joke , I've about 250k spare cash and it seems where ever I leave it the government want to take there cut from it , there is no incentive to save with tiny interest rates and then dirt tax on top. After much reading I invested in Etf's and am going to keep putting money into them every few months tbh the government make it so complicated to figure what you have to pay what chance have I got not been from a finance background if the knowledgable posters here are confused , my idea is to not ever contact revenue and let them come looking for me and tell me what I owe unless they make it clearer exactly what tax there is on ETFs

 

[Boyd]

Do regular contributions not hit you with lots of transaction fees? Are you trading with Saxo or TD Waterhouse online etc?

I agree regarding the lack of clarity on the tax on ETF, there are so many differing opinions it's impossible to know what to believe.

 

[dub_nerd]

Also agree about the complexity, however the strategy of "letting Revenue come looking for you" is a very, very bad idea. Ignorance of the rules is not a defence and at a minimum you will be charged 10% interest per year on any outstanding tax due, with the strong additional possibility of penalties and interest on the penalties too. There's not much point investing in ETFs if you're going to willfully incur penalties that could be greater than the returns.

 

[Sunny]

You get favourable tax treatment for investing in a pension. What do you want? A free ride just because you are a long term investor? Is Ireland really such a outlier with regard to how it treats people who invest in equities? Capital gains is not unique to Ireland.

 

[He-Man]

You get favourable tax treatment for investing in a pension. What do you want? A free ride just because you are a long term investor? Is Ireland really such a outlier with regard to how it treats people who invest in equities? Capital gains is not unique to Ireland.

Well, I suppose I have two perspectives on this.

In the first case, if I earn a salary, that salary is taxed. Fair enough. But I do believe that I should be able to do whatever I want with the remainder -- whether that is allow it to accrue interest in a savings account or grow from being invested.

In the second case, what if someone is a long-term investor precisely because the long-term investment is their pension (or at least part of it)? We are increasingly hearing that the welfare state may be untenable in 30 or 40 years due to population aging. Why not encourage people to hold an investment (like a mutual fund or index) for long periods through taxation (seen as how my first perspective above is unlikely to be shared by government)?

• So I I invest and sell after 1 year, charge me, say, 60% CGT.
• If I invest and sell after 5 years, charge me 50%.
• If I invest and hold for 20 years, charge me 15%.
• And if I invest and hold for 30 years, let me keep it all.

Something like that linked to age would be useful for individuals and society.

In addition, why don't we have an Irish (or Europe-wide) public version of Vanguard?

 

[Fella]

Also agree about the complexity, however the strategy of "letting Revenue come looking for you" is a very, very bad idea. Ignorance of the rules is not a defence and at a minimum you will be charged 10% interest per year on any outstanding tax due, with the strong additional possibility of penalties and interest on the penalties too. There's not much point investing in ETFs if you're going to willfully incur penalties that could be greater than the returns.

Thanks I'll bare this in mind was under the impression that they would only ever charge you what you actually owed. A friend of mine was audited and turned out be wasn't paying enough tax he played ignorant and just had to cough up the difference ( anyway that's another story ) most likely I'll just wait 7 years then take a serious look at this , I wonder do you get 8 years worth of tax free allowance on the 8th year ? So your allows earn 1270 or something each year tax free , my etf's are all accumulating I won't get a dividend , they make this stuff so complicated for average joe like me .ill mail revenue when I have over 100k in stocks that's my plan about 2 years away now .

 

[dub_nerd]

In the first case, if I earn a salary, that salary is taxed. Fair enough. But I do believe that I should be able to do whatever I want with the remainder -- whether that is allow it to accrue interest in a savings account or grow from being invested.

You are allowed to do whatever you want with it.But if you use it to generate more income, there's no reason that income should not be taxed also.

 

[Jim2007]

You are allowed to do whatever you want with it.But if you use it to generate more income, there's no reason that income should not be taxed also.

I think the OP has a valid argument, although he is probably not make a great case for it!

Here is how I would put it. We need to encourage people to save and invest for their future, so when it comes to deciding how we save, we should have at least a level playing field, which we have not. The choice is clearly skewed in favor of property.

Clearly the cheapest way of investing in equities is via an ETF, but for tax purposes there is an implied sale after a certain number of holding years and the investor is required to pay CGT. This is not the case with property, imagine if it was!

And so on.