Is inheritance Tax Fair?

[Sherpa]

government will raise the tax in other ways ....

Niall Brady had an article in yesterday's Tribune on inheritance tax (wonder where he got the idea ). I can't remember his exact figures, but he was saying that the amount of revenue raised from inheritance tax was quite trivial in the overall context.

 

[Booh]

I was trying very hard not to let this debate drift off into a debate on the taxing of asstes in general, although I wouldn't mind a separate thread on the issue...in particular on property tax.

We don't have it here YET but it is being discussed behind closed doors. Now that can be particularly unfair...(when i say unfair I mean Unequal, i.e it assumes those with the most expensive properties have the most income). This does lead on nicely from our inheritance discussion though. A child inherits an expensive house and is faced with a large property tax bill every year based on the property value and not his/her financial means. We end up back at the same point, the child having to sell the family home to pay the tax.

 

[Kiddo]

I was trying very hard not to let this debate drift off into a debate on the taxing of asstes in general, although I wouldn't mind a separate thread on the issue...in particular on property tax.

We don't have it here YET but it is being discussed behind closed doors. Now that can be particularly unfair...(when i say unfair I mean Unequal, i.e it assumes those with the most expensive properties have the most income). This does lead on nicely from our inheritance discussion though. A child inherits an expensive house and is faced with a large property tax bill every year based on the property value and not his/her financial means. We end up back at the same point, the child having to sell the family home to pay the tax.

There was property tax about 10 years ago. As far as I can remember it was in place for a couple of years and then was abolished.


[broken link removed]

 

[dam099]

I was trying very hard not to let this debate drift off into a debate on the taxing of asstes in general, although I wouldn't mind a separate thread on the issue...in particular on property tax.

We don't have it here YET but it is being discussed behind closed doors.

I am note sure it is even behind closed doors, haven't Labour openly stated they would like to see a property tax?

I think with the present government the PD's would never go for it on ideological grounds and FF would not do something this unpopular for the more pragmatic reasons and especially not prior to the next election.

 

[bearishbull]

a lot of countries have property taxes, can help stop housing bubbles like we are having here,but i think if there was one it shouldnt be on PPR

 

[shnaek]

Property tax would be political suicide. If they need revenue they will find stealthier ways of gaining it.

Regarding inheritance tax - it is lucky we are not in the UK where inheritance is taxed at 40%! Yipes! They, like us, didn't increase the allowance level to take into account the massive rise in house prices. The wealthier British are domiciling themselves abroad for this reason - like the Irish in Portugal I guess. No inheritance tax, and no CGT.

Interesting to see also that the republicans in the US want to repeal inheritance tax, considering the US was built on the notion that you can make your own wealth, unlike 'Old Europe' where wealth was traditionally inherited.

 

[hotlips]

Re: Is inheritance Tax Fair? - be thankful you're not French!

I think Inheritance tax is grossly unfair but I calm down when I see the situation in France - only 76k allowance between spouses!

Between spouses there is a tax free allowance of €76,000. Amounts in excess of this are taxed according to the following table:
Taxable part (i.e. after allowances) Tax rate
Up to €7,600 5%
€7,601 to €15,000 10%
€15,001 to €30,000 15%
€30,001 to €520,000 20%
€520,001 to €850,000 30%
€850,001 to €1,700,000 35%
over €1,700,000 40%

For parents or children, there is a tax free allowance of €46,000. Amounts in excess of this are taxed according to the following table:
Taxable part (i.e. after allowances) Tax rate
Up to €7,600 5%
€7,601 to €11,400 10%
€11,401 to €15,000 15%
€15,001 to €520,000 20%
€520,001 to €850,000 30%
€850,001 to €1,700,000 35%
over €1,700,000 40%

For more distant relations, the tax allowances are smaller and the tax rates are higher. Between brothers and sisters that tax rate is 35% on the first €23,000 (after allowances) and 45% on the remainder. For other relatives (up to the fourth degree) the tax rate is 55% (after allowances). For other cases the rate is 60% (after allowances). Note that in the event of unmarried partners (unless there is a PACS) and in the event of step-children, this rate of 60% is applied.

 

[sonar]

Property tax would be political suicide. If they need revenue they will find stealthier ways of gaining it.

I think a property tax on 2nd, 3rd etc. properties would be acceptable if it's done in conjunction with relaxing stamp duty for first time buyers.

But to be honest I don't think anything will be done by the government or the central bank to interfere with the housing market.

We have become so dependant on construction - over 20% of non-farm jobs - that when the correction comes it is going to be very hard on us.

Nobody wants the finger pointed at them and told they crashed the market. That's why I think this market will be allowed to continue its inevitable journey without domestic interference.

 

[gearoidmm]

How can you tax inheritance between spouses? Is it not all jointly owned anyway?

I'm not an opponent of inheritance tax in principle but those rates seem punitive

 

[A.Partridge]

I think that inheritance tax has got to be viewed as in the interests of the 'social good'. That is to say that the portion of inherited income that is taken in tax goes towards the redistribution of wealth and services to benefit ALL citizens.

I sympathise with people who feel they have little option but to sell the property or asset they have inherited but it's a sad fact that if no inheritance tax were in place we would have enormous disparity between the 'haves' and the 'have-nots' such as exists in countries like Brazil where over 80% of the land is owned by less than 5% of the people (or some similar figures).

Goodness knows the disparity is bad enough as it is.

 

[mollser]

Booh,

When you inherit a property, say for €1m, you do so at that Market Value, of €1m. So for any future sale, the cost base of that property is now €1m.

Without inheritance tax, the government will then never get their slice of the appreciation (fair or not, they want a bit of it!). So you pay your 20%, over your threshold, so say, €100,000 to inherit a property worth €1m. No bank will ever refuse such a loan backed against this property, especially as there will most likely be no debt against this house, as on death it may well be paid off, if not by the deceased, but by their insurance policy. Yes, you still do have to repay that loan though. (rent may quite comfortably cover this)

Take it the other way, if no CAT existed, then most likely the Revenue would not allow the asset to transfer at Market Value, so you inherit a cost base of say €100,000. You go to sell at MV of €1m, you pay CGT at 20%, there's just shy of €180k gone in tax, €80k more than if you paid the CAT.

CAT is a method whereby the Revenue get their share up front, rather than later on when the asset is disposed (if ever!). Without CAT, you can end up with serious uncrystallised gains brewing up!

 

[ISTHISALOOPE]

NO its not a fair tax. I read in one of last sundays papers that it may be abolished.

 

[ACCK01]

Could you tell me what paper you read that in ISTHISALOOPE? Thanks.

 

[Booh]

Booh,

When you inherit a property, say for €1m, you do so at that Market Value, of €1m. So for any future sale, the cost base of that property is now €1m.

Without inheritance tax, the government will then never get their slice of the appreciation (fair or not, they want a bit of it!).!

Hi Mollser, I'm sorry but I don't really agree with your logic. Regardless of whether or not i paid inheritance tax on the property of €1m, when the property is ultimately sold, the government apply stamp duty to the new purchaser which is a % of the MV. So if the property is sold now, they make 9% of the MV of €1m = €90,000. If i wait 7 years and sell at €1.5m they make 9% of €1.5m = €135,000. The way i see it, they make their cut when the property is TRADED. I don't see why they should get a cut when the property is bequeathed on death. It is not being sold in this scenario (inheritance) and so I don't believe that it should be taxed. It only acquires an MV in this scenario so that Revenue can assess it for inheritance tax in the first instance.

WARNING WARNING : RANT Follows:
As for the very sensible and altruistic comments from the proponents of social justice and wealth redistribution I am going to be honest and unpopular and say the following.

I'm not big into wealth redistribution. If you earn it, it's yours. You should decide how to distribute it. If you have a social concisions, you are free to support local charity, donate to worthy causes etc. My social concisions is underdeveloped i fear. I fail to see why the assets that resulted out of my wealth creation should be taxed for the benefit of others who have created less wealth. My income is taxed is it not. Perhaps they created less wealth because they were not given the start in life that i got, perhaps they are lazy, unlucky, or thick...I really don't care. I don't feel responsible for others in that way. I am happy to pay income tax anp PRSI and all the stealth taxes so that our government has enough money to build a strong infrastructure, to care for the less well off, elderly, sick and indigent. To provide a comperhensive health care system etc. I do support the concept of community and everyone contributing their share to pay for things. My point is that I already do that. Just don't tax my assets when I die and tell me that you are redistributing my money. That's not okay as far as i am concerned.

I don't believe for a moment that the tax revenues from Inheritance tax are in any way used to redistribute wealth. This is such a small revenue stream that I can't accept that it is used directly to pay for any social insurance programmes. It may, and I stress MAY save the tax payer having to borrow a couple of 10's of millions on the national debt in order to pay a few expensive consultants to prepare a report on moving a prison or to write a report into paying off the NRA or moving the health employers onto a payroll system that doesn't work for the sake of it etc etc etc. This economy is so awash with cash that it appears to me that our government have, figuratively speaking, stopped shopping in Tesco and Dunnes and now only shop M&S food hall and BTs!!!. Value for money doesn't appear to be high on the agenda. I do not like the thought of my assets being stripped of some of their value when I die, depriving my family of their true value only to provide a 'consultant report/cock up slush fund' for the government.

 

[Loki]

Did I miss something here?

I thought the primary resident of the dead person was exempt from inheritance tax. If that is true there is no reason to sell the family home to pay a tax bill. The only tax bill will come from other inheritance which they can sell rather than the family home.

Either way all income is taxable you get exemptions and allowances so don't look at it from inheritence tax being fair or not just should exemptions and allowance be increased for inheritance

 

[CCOVICH]

Did I miss something here?

I thought the primary resident of the dead person was exempt from inheritance tax. If that is true there is no reason to sell the family home to pay a tax bill.

I think you did. Whether the property in question is the deceased's primary residence or not is irrelevant, it is the relationship of the beneficiary to the deceased that determines the capital acquisitions tax implications.

 

[gearoidmm]

Given that this is a website devoted to financial issues and hence that the majority of people visiting it are probably in the ABC group of the population, it's interesting how many people defend inheritance tax and taxes in general as a means of passing around wealth.

This argument has been lost in the US where the republican idea of more wealth for the wealthy is generally accepted. It would be interesting to see this argument on a site on the other side of the atlantic. I suspect that it would have a different slant. Still, gives me hope for the future.

Sorry Booh, your argument is well thought out and reasoned but I still can't agree that people should be allowed inherit money for nothing. My conscience won't allow it. You mention that people are free to give money to worthy causes and charities if they want and again this is very much in line with the fiscal conservative line of the Republican party in the US. Problem is that they won't.

 

[Loki]

I think you did. Whether the property in question is the deceased's primary residence or not is irrelevant, it is the relationship of the beneficiary to the deceased that determines the capital acquisitions tax implications.

looks like you missed something

Family Home

Under certain circumstances, there is no Capital Acquisitions Tax on a gift or inheritance of a family home. This is the case

• the recipient lived in the house for the three years prior to the transfer and
• the recipient does not have an interest in any other residential property and
• the recipient owns and lives in the house for 6 years after the transfer. However, this last condition does not apply to recipients who are aged over 55. There are provisions made for those recipients who are unable to comply with this condition because of work commitments or illness.

Not quite clear for everybody but you can avoid it if it is going to be where you live and you don't have property assets. So sell your house when your parents are sick and then live there for 6 years you pay no inheritance on it. You don't even need to live there say if you work in another county or country.

 

[CCOVICH]

Ok, but that's a fairly restrictive requirement (I felt there was some relief available along those lines, but it isn't really likely to be applicable to many), hence why I didn't mention it.

I thought the primary resident of the dead person was exempt from inheritance tax.

If you had said that CAT was not payable in certain circumstances, fair enough.

 

[Loki]

Ok, but that's a fairly restrictive requirement (I felt there was some relief available along those lines, but it isn't really likely to be applicable to many), hence why I didn't mention it.

I did say it in a questioning manner and as people were refering to having to sell a family home I think it is extremely relevant. The restrictions mean people can get it tax free if they live there which really is what most people found most objectional.

If you had said that CAT was not payable in certain circumstances, fair enough.

I could say the same about your response saying it was not so