Can we have no more threads about public sector pay

You say that Brendan's post is standard accountant's advice, that's a big leap. I have never had an interest only mortgage on an investment property and nor do many others so I don't see where you get the confirmation that all accountant's advise this. Personally I think that not paying back capital is mad as you risk negative equity should property fall and rents decrease (like we have now) and it gives the business no room for manoeuvre.

How exactly do you think that landlords don't pay their fair share of tax as compared to any other business? I think you should back that up rather than throwing it out there as a statement of fact. CGT is a hefty tax if your property had tripled in value, also if property triples in value your stamp duty costs go up likewise.

CGT did not fuel the property bubble, it was people outbidding each other in the race to pay as much as possible for property without any thought as to affordability, price and interest rates rises and what would happen if they overpaid and lost some of their earning power.
 
Complainer said:
Landlords are a long way from paying their fair share
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Well if you want to up capital gains on property to 40%, most people wouldn't have a problem with that. That would be the fairest way of targetting those who have gained. Trying to get at capital gains through changes to taxation of revenues is simply too crude and will not target those who have gained the most without catching those who have not gained at all.

Similarly for pensions, if you want to make sure the rich don't gain inordinately then cap the annual contibution at €10k i.e. max tax relief of €4k.

I neither own an investment property nor contribute a significant amount to a pension. I believe appropriate pensions contributions limits and higher capital gains tax on residential property would hit those who genuinely can afford it.

Scrapping tax reliefs on pension contributions and interest offset on investment properties will hit many on moderate incomes who have contributed handsomely to the exchequer but have now been hit by falling pension values and property prices
 
DerKaiser said:
Well if you want to up capital gains on property to 40%, most people wouldn't have a problem with that.
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This didn't work in the past because when you make people contribute 40% most people will do everything to 'avoid' the tax. When they reduced it to a more manageble 20/25% more people complied.

It was the same when income tax was 70%, everybody was doing everything for cash where possible.

If people perceive tax to be grossly unfair they will do everything to avoid it.

Anyway 40% on capital gains :(, what capital gains in the current market?
 
Bronte said:
This didn't work in the past because when you make people contribute 40% most people will do everything to 'avoid' the tax. When they reduced it to a more manageble 20/25% more people complied.

It was the same when income tax was 70%, everybody was doing everything for cash where possible.

If people perceive tax to be grossly unfair they will do everything to avoid it.

Anyway 40% on capital gains :(, what capital gains in the current market?
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That's the catch. If you set the tax too high it will only encourage people to avoid it and you might actually reduce the capital gains tax take.
 
Bronte said:
This didn't work in the past because when you make people contribute 40% most people will do everything to 'avoid' the tax. When they reduced it to a more manageble 20/25% more people complied.
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This is an over-simplification - it is true to say that the overall CGT take rose around the time that the rate was cut, but this does not mean that cutting the rate caused the rise. There were lots of other things happening at that time, including the dot-com boom and the early days of the Celtic tiger/property boom.

In fairness, it is a fairly hard tax to avoid - you can't really hide a house.
 
Complainer said:
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In fairness, it is a fairly hard tax to avoid - you can't really hide a house.
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I've been around a while and you'd be amazed at what people will do to avoid crippling taxes (even during the boom when by any stretch of the imagination taxes weren't onerous).

DerKaiser and Complainer it is a fact that CGT compliance rose when it came down to 20%

Complainer you still have not stated how landlords as versus any other business do not pay their fair share of tax.
 
Complainer said:
Source, please.

Oh yes I have (for the panto season) - see above re abuse of mortgage interest relief by maximising borrowings.
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Ask revenue to prove the CGT compliance if you don't believe me.

And no you have not proved that landlords pay any less tax than other businesses. All you have stated and continue to state is that they abuse mortgage interest relief and you also said they don't pay their fair share of tax. And I've asked you how they do not pay their fair share of tax in comparsion with any other business.
 
In fact it is far harder for landlords to hide earning than in many other businesses.
 
Bronte said:
Ask revenue to prove the CGT compliance if you don't believe me.
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Given that you underlined the 'fact' in "it is a fact that CGT compliance rose when it came down to 20%", I thought that you had some hard evidence, such as a Revenue report or a C&AG report to back this up. Perhaps not. Silly me.

Bronte said:
And no you have not proved that landlords pay any less tax than other businesses. All you have stated and continue to state is that they abuse mortgage interest relief and you also said they don't pay their fair share of tax. And I've asked you how they do not pay their fair share of tax in comparsion with any other business.
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Sorry if this is not patently obvious, but the two things are connected. They don't pay their fair share of tax BECAUSE they abuse mortgage interest relief. And that is without even looking at the ongoing 'black economy' landlords, as evidenced by the fairly regular threads on AAM showing landlords still refusing to give the PPS number.

Towger said:
In fact it is far harder for landlords to hide earning than in many other businesses.
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True, but that's not to say that tax evasion by landlords doesn't happen.
 
Complainer said:
They don't pay their fair share of tax BECAUSE they abuse mortgage interest relief.
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By abusing mortgage interest relief do you mean they are claiming something which they are not presently entitled to claim under existing legislation? If that is the case and you have appropriate factual evidence to back this up then a complaint to Revenue might be the way to go. However if you mean they don't pay their fair share just because they choose to maximise reliefs legally available to them then would that argument not also apply to, for example those maximising pension contributions to reduce tax. Are they abusing pensions relief?
 
Graham_07 said:
By abusing mortgage interest relief do you mean they are claiming something which they are not presently entitled to claim under existing legislation? If that is the case and you have appropriate factual evidence to back this up then a complaint to Revenue might be the way to go. However if you mean they don't pay their fair share just because they choose to maximise reliefs legally available to them then would that argument not also apply to, for example those maximising pension contributions to reduce tax. Are they abusing pensions relief?
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I've explained what I mean clearly above. Is there some part of this that you don't understand?
 
Complainer said:
Oh yes I have (for the panto season) - see above re abuse of mortgage interest relief by maximising borrowings.
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All businesses have loans. The trick is to try generate enough revenue to cover borrowing costs (interest) and hopefully make a profit, which can then be taxed.

You cannot simply look at taxing revenues with no reference to costs for businesses.

It is a well known fact in business that you can leverage your gains through borrowing if you can generate a return higher than the cost of debt. This is a pretty basic economic idea that has been in vogue for decades, it's not a device or a trick. It's cetainly not abuse, Graham is rightfully confused as to how you see this basic fact of business as abuse.
 
DerKaiser said:
All businesses have loans. The trick is to try generate enough revenue to cover borrowing costs (interest) and hopefully make a profit, which can then be taxed.

You cannot simply look at taxing revenues with no reference to costs for businesses.

It is a well known fact in business that you can leverage your gains through borrowing if you can generate a return higher than the cost of debt. This is a pretty basic economic idea that has been in vogue for decades, it's not a device or a trick. It's cetainly not abuse, Graham is rightfully confused as to how you see this basic fact of business as abuse.
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This is abused because (as recommended by Brendan B), landlords can and will keep their borrowings artificially high to maximise their tax relief.

THis scam was quite obvious to everyone, including the Govt that pulled this relief some time back, following the Bacon report. Pity they didn't have the guts to stand up to the lobbyists and hold their line - we mightened be in the mess we are in now in the property market.
 
Complainer said:
This is abused because (as recommended by Brendan B), landlords can and will keep their borrowings artificially high to maximise their tax relief.

THis scam was quite obvious to everyone, including the Govt that pulled this relief some time back, following the Bacon report. Pity they didn't have the guts to stand up to the lobbyists and hold their line - we mightened be in the mess we are in now in the property market.
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Didn't that lead to a shortage of rental properties and an increase in rents. Those lobbyists included many charities that were helping poorer people. I think even Bacon changed his tune in later times. I will try and find a link.
 
Sunny said:
Didn't that lead to a shortage of rental properties and an increase in rents. Those lobbyists included many charities that were helping poorer people. I think even Bacon changed his tune in later times. I will try and find a link.
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Yes, and complainer knows this. What with the number of posts he's been involved in on this issue, he should the the most educated man in Ireland with regard to all these points.
 
Complainer said:
This is abused because (as recommended by Brendan B), landlords can and will keep their borrowings artificially high to maximise their tax relief.

THis scam was quite obvious to everyone, including the Govt that pulled this relief some time back, following the Bacon report. Pity they didn't have the guts to stand up to the lobbyists and hold their line - we mightened be in the mess we are in now in the property market.
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There is nothing artificial about the borrowings. The definition of the interest you can offset is:

Mortgage Interest paid “on monies borrowed for the purchase, improvement or repair” of the property.

There is no obligation to pay down the capital. If you do choose to pay it down then you will benefit from reduced interest costs. Not the full value of interest because of the tax relief, but you will still reduce your total interest bill after allowing for tax relief.

Your point of view is that there is effectively a moral obligation on the purchaser of a residential property to subsidise the undertaking out of wealth gained independently of the property itself. It is a view that is completely at odds with the accepted wisdom of investing any form of enterprise.
 
DerKaiser said:
There is nothing artificial about the borrowings. The definition of the interest you can offset is:

Mortgage Interest paid “on monies borrowed for the purchase, improvement or repair” of the property.

There is no obligation to pay down the capital. If you do choose to pay it down then you will benefit from reduced interest costs. Not the full value of interest because of the tax relief, but you will still reduce your total interest bill after allowing for tax relief.

Your point of view is that there is effectively a moral obligation on the purchaser of a residential property to subsidise the undertaking out of wealth gained independently of the property itself.
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That is absolutely NOT what I've said - please don't put words into my mouth.

The current situation is that the tax relief makes it in the landlord's best financial interest NOT to repay the capital, even where the investment is making good money. The landlord will make more money by putting his profits on deposit then by using it to repay capital, thanks to the state subsidy.

Sunny said:
Didn't that lead to a shortage of rental properties and an increase in rents. Those lobbyists included many charities that were helping poorer people. I think even Bacon changed his tune in later times. I will try and find a link.
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Certainly rents did increase around that time. But very interestingly, house price growth dropped from a bubbling 20% in 2000 to a level-headed 3% in 2001.

However, we are in very different circumstances now. For a start, we have a huge oversupply of rental properties at the moment. Also, given our current economic woes, the rental market will simply not bear substantial increases. The money just isn't there. This is a unique one-off opportunity to address this problem without hitting renters.

At a bare minimum, interest should only be allowed in line with the repayment schedule for a traditional repayment mortgage over a reasonable period, say 10-15 years.
 
Complainer said:
The current situation is that the tax relief makes it in the landlord's best financial interest NOT to repay the capital, even where the investment is making good money.
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If the investment is making good money then the investor will pay tax on that at their marginal rate and if they choose not to use this taxed money to repay their capital I certainly wouldn't label that as abuse of the system
 
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