Why so much TAX?

I’ve read so much in relation to investing in the past year.

With an eye to the future I’ve a private pension into which 15% of my salary goes monthly.

Pensions are tax efficient but as we all know it’s never a good idea to plough all your resources into one basket. Who knows what could happen that pension pot in the coming decades as a result of myriad uncontrollable variables.

Therefore I’ve been researching where to invest surplus earnings. Obviously (in most cases) clearing down mortgage is one place spare cash will be going.

What disheartens me is the lack of other avenues to receive a satisfying return in this country. Funds, ETFs, Shares, Bonds, Bank Deposits, Property etc……if you do manage to decide on one which will give you very modest returns, after the host of charges and fees, you are then always hit in this country with IMO large tax implications.

I understand the necessity to pay tax on income from other revenues but why so much!?

Surely more money in my pocket is better for the country as I’ll ultimately spend it on goods and services creating jobs? Instead the government take it and add it to the ‘generic tax pot’ and spend it in a manner which does not have the same positive measurable impact. i.e. I’d spend €100 on a meal out, whereas the government would spend that €100 on a report which was reporting on a previous report which reported on a very important report which no one has ever seen!

Direct income taxes are lower than in many other countries.

In particular, ee and er PRSI is very low.

However, high marginal income tax rates kick in very early.

My parents on 48k pay under 10% direct taxes - very low, given that they get travel passes, med cards and subsidised elec.


But yes, DIRT at 41%, and 41% on investment funds after 8 years is too high.

Yes, direct/indirect/stealth taxes in Ireland are punitive. And the public services do not match up to the money paid. It's a European wide trend, we're making ourselves
extremely uncompetitive.

KlausFlouride.

Nope ; direct/indirect/stealth taxes are not per se {punitive} ,they may well be badly apportioned.

{public services do not match} ,not sure about that . methinks overall we are better than we think .

I do not think we are making ourselves {extremely uncompetitive} A. Unemployment now below EU average. B. We get a largish share of FDI (foreign direct investment.

Protocol.

Your parents do pay lowish taxes, these are the same parents that in 1970,s paid 67% income tax!

Money mags .
You want (satisfying ) returns. There are (risky) returns out there but I see little hardship in getting a good tax hit on any type of unearned income !

I must be turning pinkish !!!

I've lived in several countries, European and further afield. Believe me I don't want to come across as rubbising my country. I love this country hence I've decided to settle and raise my family here. Every country has many faults and they're ain't not such thing as a perfect one! I also think the income Tax ain't so bad here and never actually complained about that in my OP.

I was merely trying to point out that Tax on income from investing/savings was punitive. Majority of us ain't wanting to get rich, we want to save in order to provide education for kids, comfort in retirement, monies for unexpected future issues etc.

Gerry Canning you honestly think that 41% DIRT on deposit savings is cool? Really? You see no hardship in 'getting a good tax hit'. I feel I took a fair tax hit on the money before it went into my account, the additional 41% hit on the tiny interest is a bit too much. If it was a boxing match the ref would be stepping in....takin one too many shots kid

I appreciate Tax must be paid on unearned income but sorry, the amount at the moment is too high. I might just bet it all on black like Mr.Snipes. 50/50 chance and tax free!

Money Mags said:

I feel I took a fair tax hit on the money before it went into my account, the additional 41% hit on the tiny interest is a bit too much.

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Unfortunately, the thinking behind this rise was to encourage spending rather than saving during the recession recently. The problem now is will the guv see that it should be lowered again to encourage saving - I'll let you field that one.

Money mags.

I would not say ,nor would I say Dirt tax @ 41% is {cool}.
In (getting a good tax hit) I would think that this is (better) than having say 67% on your employment income as happened in the 70,s .
That had the effect of having very little left to save for old age/kids education.
I would be more a fan of lesser income tax and let people try to maximise returns on savings from having paid less direct income type tax.
If that means unearned income takes a hit , then so be it.

I do not wish to sound prescriptive , just some views !

o

Gerry Canning said:

KlausFlouride.

Nope ; direct/indirect/stealth taxes are not per se {punitive} ,they may well be badly apportioned.

{public services do not match} ,not sure about that . methinks overall we are better than we think .

I do not think we are making ourselves {extremely uncompetitive} A. Unemployment now below EU average. B. We get a largish share of FDI (foreign direct investment.

Protocol.

Your parents do pay lowish taxes, these are the same parents that in 1970,s paid 67% income tax!

I must be turning pinkish !!!

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In a previous life, employees were sent to Denmark, part of the tax workings was to establish which country had the higher effective rate. Guess which was higher? [hint: not Denmark]

In Ireland the CGT exemption is a joke in comparison with other countries, VAT & excise on petrol is a scandal, I could go on.
With regard to public services, I mean health/pensions etc where you pay towards them and then need to supplement them with private backup

My point is by taxing the lard out of people, you force wages higher, but people's net pay stays the same or reduces.

Unemployment is lower than EU because of emigration, and FDI is for quite specific reasons. The international rules around CT and location are being reviewed and will be changed in the next decade, and that is unlikely to benefit Ireland.

Klaus,

With you on {taxing the lard out of people}
Methinks its taxing the {lard} out of normal incomes.
I have the notion that the well off benefit inordinately from our taxation regime and that Mr Rich keeps adding to his wealth without the attendant effort !
Mr Normal gets caught for flat rate/punitive taxes.
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Just a thought ;
Housing is the one requirement we all have , yet again we seem to be rushing to raise rather than lower house prices.
Surely if prices are kept lower it means more crumbs for everyone? and Mr Normal has funds free after rent/mortgage, even for punitive taxes? or are punitive taxes a symptom of wrong side up tax system.?
( I ain,t tax knowledgeable so please treat my views solely as comments)

Gerry Canning said:

yet again we seem to be rushing to raise rather than lower house prices.
Surely if prices are kept lower it means more crumbs for everyone?

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The problem now is that house prices are cheaper than the materials and labour needed to build them (including a 40%-odd premium to cover the govt's tax take on a new build) and thus we have a massive housing crisis.

Gerry Canning said:

Klaus,

I have the notion that the well off benefit inordinately from our taxation regime and that Mr Rich keeps adding to his wealth without the attendant effort !

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Just a thought ;
Housing is the one requirement we all have , yet again we seem to be rushing to raise rather than lower house prices.
Surely if prices are kept lower it means more crumbs for everyone? and Mr Normal has funds free after rent/mortgage, even for punitive taxes? or are punitive taxes a symptom of wrong side up tax system.?
( I ain,t tax knowledgeable so please treat my views solely as comments)

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I think these hordes of Rich people that are coining it simply don't exist. Would be interesting to know the number of households nationwide earning 150k+ (A family below that will not have massive excess income), I believe taxing this cohort extra wouldn't make much difference to tax takings.

"The problem now is that house prices are cheaper than the materials and labour needed to build them (including a 40%-odd premium to cover the govt's tax take on a new build) and thus we have a massive housing crisis."

I'd be fascinated to see the numbers on that, with ordinary 3 beds selling for 300k plus in Leixlip/Celbridge, would be genuinely curious to understand the economics of it.
If we can't build houses at a profit at those prices, something has gone very wrong.

High taxes are always going to be a problem in a country with a population the size of Manchester, where there is the necessity of supporting a functioning nation. That's why we need to be cleverer than larger economies who have more room to cock up, we don't have the wriggle room.

T mc Gibney.
House prices may well not cover cost of building , and you say Governments take is 40%, I would think if that 40% was tweeked we might solve things. . since we all need a roof over us ,it is vital that house supply @ an affordable cost is prioritised.
Without that we will have a decade of social grief that need not happen.

Klaus.
I don,t say there are hordes of rich people .
What I suggest and facts seem to bear this out ,is that a cohort of (rich) have in the teeth of a recession become a lot richer ?
I am not into the simplistic tax like hell, but the system that in a recession favours the (rich) to get richer is badly flawed.

I agree 300k for a 3 bed and can,t make profit, seems odd?
Worse again ,how can people afford this ?

Gerry Canning said:

I don,t say there are hordes of rich people .
I am not into the simplistic tax like hell, but the system that in a recession favours the (rich) to get richer is badly flawed.

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Some people will do well no matter what the prevailing conditions are; I just don't believe there exists a large enough group of 'wealthy' people in Ireland that
we can tax to make everything ok, it's the kind of magical thinking that prevents people reflecting seriously about how Ireland should work, what do we want as a nation, and how to get there.

The notion that high earners are axiomatically "rich" is a bit off too. There is a certain cohort of people who earn 6-figure sums from high pressure jobs, including surgeons, consultants and company executives, not to mention professional sports stars.

The problem many of these people face is that they can only command such earnings for a relatively short number of years and a combination of their own physical limitations and the pressures of the job mean that they need to command a decent level of earnings to finance themselves for the years when they either won't be working at all or need to have alternative, lower-paid work lined up.

None of these people are on the breadline but not all are in tycoon territory either.

The taxation of "rich people" seems to be the main Economic mantra proposed by SF and many of the Left Wing politicians. This is based on the supposition of a significant group of "rich people" who are still coining it and that the imposition of a wealth tax/super tax on earnings over a certain figure would solve all of our problems and provide sufficient additional tax income to finance a host of cut-backs on tax payable by the "suffering masses".
A broad definition of a "rich person" is anyone earning over €100k as per SF discussions. "Obviously a married person with 4 kids a large mortgage and a stay at home partner is significantly richer than a couple with both earning 60k no mortgage and no kids"!!! I.e. taking one single factor to define a category of a population is both unrealistic and unfair!
Our tax system is not perfect but to a large extent is reasonably fair in that while it is progressive this is not to the extent that it encourages certain high earners to either evade tax or move out of the country.
Yes there are some "rich" people in our economy who benefit through legal tax avoidance schemes in lowering their tax burdens. However these people are likely to be in the minority and any additional tax imposed on them would be insignificant to the total tax return figure.

The "Tax the rich" mantra works on the basis of promoting a "let the other fella pay. he can well afford it" type of culture that is fine for opposition parties but totally unreal for those in Government! It's always the Government out of power that has the best policies

Note that SF, if in power, plan to increase income tax for many workers earning over 35k approx.

The 100k mentioned above refers to a third income tax rate.

But they would reduce tax relief on pension conts to 20%, so anybody earning above 35k and paying pension conts would pay more tax.

PS would be hit hard, as all PS pay up to 17% pension conts.

I don,t think I said there is a cohort of rich people waiting to be taxed!

What I do say ,is that wealth in this recession has increased for a cohort of (rich) people/entities more by them holding assets rather than by work..
Surely a system allowing this is not fair?

I also accept there is a % who will always do well from their efforts and good luck to them.
I just don,t see why those who inordinately benefit from non-effort, eg windfall things such as increases in house prices ,should not be hit harder than those who earn their k100 from effort.

I do not think we are far apart on our views and it irritates me that this ends up in a (tax the wealthy) rather than reform taxes to benefit those who make income from work rather than those who benefit from things like random house price increases?

Gerry Canning said:

What I do say ,is that wealth in this recession has increased for a cohort of (rich) people/entities more by them holding assets rather than by work..
Surely a system allowing this is not fair?

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So Gerry are you suggesting that a "windfall" tax should be applied to all real estate based on an inherent general rise in the market value of these assets. CGT is applicable to that rise in value when the asset is sold/passed on. perhaps I am misunderstanding you but that appears to be your suggestion. I.e. Imposition of a requirement that all real assets owned are valued annually and that an actual tax payment is imposed on any rise in value from previous year. In many instances this would force the owner of an asset to sell it in order to pay the "implied" rather than realized increase in value!

I think the old CGT system is a far better and fairer system.

Gerry Canning said:

I do not think we are far apart on our views and it irritates me that this ends up in a (tax the wealthy) rather than reform taxes to benefit those who make income from work rather than those who benefit from things like random house price increases?

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Lost me there chief, how would this work? We have CGT, CAT and (God help us) a property tax. People may be rich on paper as a result of house prices, but that doesn't translate into any actual income unless you sell the house.

Chief here !
Klaus,
What I mean is this,
Those who more by dint of luck get (free) funds eg by sale of property ,not by effort ,should they not be taxed harder than Joe Soap who shows a good income of K100 by dint of effort , the same Joe that has mortgage etc etc.
I am in no way advocating that because house prices go up ,anyone by that circumstance should be hammered.

I have the perception (could be wrong) that a lot of acquired wealth is not achieved by work ,my inclination is to tweek the system to keep working taxes down.