€140m is not the figure they’re concerned about, it’s the lost income tax and CGT if funds start popping up again that roll-up dividends and disposals within the fund allowing potentially indefinite deferral of all taxation - ie. the reason DD was introduced in the first place.
It doesn't have to be indefinite deferral.
It is fair to say that indefinite deferral was the policy risk targeted by Ireland’s original DD8 rules, notably for accumulating funds that allow gains to compound over time without taxation, which could otherwise persist indefinitely in the absence of intervention. However, Ireland’s DD8 regime is not the only way to restrict tax deferral on investment funds.
For example, a UK-style ISA (Individual Savings Account) or EU SIA (Savings and Investment Account) type scheme could cap the tax advantage either by limiting overall investment size, annual contributions, or permitted gains. Such schemes exist in the UK and other jurisdictions, and they balance investor flexibility with targeted tax collection. We could even create separate first-time buyer accounts which encourage diversified investments for those looking to build a deposit, rather than encouraging flutters in more volatile asset types like individual stock picks, crypto, commodities.
In Ireland, even without DD8, tax deferral is not truly indefinite because death also constitutes a disposal event on which CGT (or exit tax) is charged, ensuring that tax is eventually paid when ownership changes or assets are finally realized. While our system could be improved by being structured with capped exemptions or annual limits (as with an ISA/SIA), it is accurate that, under Irish law, death does lead to final CGT liability for unrealized gains, thereby precluding true indefinite tax deferral.
My biggest issue with DD8 is the insane complexity of it. My second largest issue is the tax drag, which, as we have seen, limits compound growth by requiring taxation (at roughly an annualised equivalent of DIRT) at intervals rather than at final realisation... Let's not forget that we are a significant outlier here versus the rest of the western world.
Other countries have dealt with this issue effectively, as I said in an earlier post, they could maintain "deemed disposal " for such funds. However this was used as an excuse because most ETFS pay out dividends they do not roll them up yet they were still included in the deemed disposal regime, so investors were already paying tax every year on their dividends and still required to do a deemed disposal every 8 years. This is preposterous and hugely unfair. That's why donohue needs to be vigorously challenged in the dail on this grossly unfair and out dated tax.
Exactly! Well said.
taxation-customs.ec.europa.eu
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