Are CAT rates too high.

Joe_90

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http://m.independent.ie/opinion/col...es-hard-and-needs-a-big-shakeup-31266775.html

I think that this is a very poor article.

Take someone who inherits a property from an aunt, where a €30,150 threshold applies. The property is valued at €200,000. This will trigger a tax bill of around €56,000.

There is a relief from CAT in certain circumstances where the donee has resided in the property for 3 years and retains it for 6 and does not own another property the gift is exempt.

I actually think there needs to be reform of the Capital Taxes but where workers are paying 51% income tax over €33,800, why should others receive gifts tax free.

Before anyone starts "but it's been taxed already" that is not always the case.
 
Agree with you there Joe - CAT is a tax on wealth and the passing of it, usually between generations. The thresholds are reasonably generous, along with other reliefs and exemptions.

My attitude would be if someone gifts me a property worth 200k I'd be delighted, I can sell it and have 140k left after paying the CAT, or I can mortgage the property, hire a letting agent to let it, and enjoy a small additional income.

Either way my wealth has increased substantially through no particular action of my own, so why shouldn't the rest of society get a share of my good fortune... (and I wouldn't consider myself very left-leaning!)
 
The biggest fault in the CAT system is the Dwelling House exemption. It's ridiculous that a person can gift a home worth €1m to a tenant and that tenant will pay no CAT. It should be limited to the first €200k.

In fact, any such inheritance should use up the threshold. I should not be able to get a gift of a house for €200k and €225k in other gifts tax-free.


I can't see any reason at all why someone who is earning around €35k - pays 51% tax on every additional euro earned, whereas someone who inherits €200k pays no tax if they get it from a parent.

Inheritances and gifts should be treated like income and taxed at the marginal rates. This would bring down the top rates of income tax.
 
Before anyone starts "but it's been taxed already" that is not always the case.

But it is the case for the majority.

I have found that with the low thresholds and higher level of tax, people are more pro active when it comes to inheritance planning, the easiest being setting up accounts and putting in €6,000 (€3,000 from each parent) a year. Or gifts for grand children's educations under a bare trust structure.

Steven
www.bluewaterfp.ie
 
Say someone makes €100 and ends up with €45 after tax.

He then gifts that €45 to his son.

The son ends up with €30.

The family have been taxed at 70%.

That is ridiculously penal.
 
Say someone makes €100 and ends up with €45 after tax.

He then gifts that €45 to his son.

The son ends up with €30.

The family have been taxed at 70%.

That is ridiculously penal.

The family didn't earn the €100 though, the father did.

The only way the 70% burden of taxation per your example kicks in, is if the father has already gifted his son more than €3k that year and the son has already received more than €225k from his parents since 1991. And don't forget the various reliefs, exemptions and planning opportunities available to minimise exposure.

So, my heart doesn't bleed for someone in the fortunate position of receiving wealth that they didnt generate having to suffer tax on it, although 33% is a bit scaldy alright...

CAT accounts for less than 1% of exchequer tax receipts anyway, and the majority of people for whom it's never likely to be a concern, would be unlikely to agree in an informed debate to making it even easier for the wealthy to avoid taxation of their retention of wealth across generations...
 
Take the average couple. Thats us. I earn just above the average industrial wage and my wife earns just below the average industrial wage. Our savings come from PAYE income subject to the highest rate of tax. We lead a happy but simple life. Take the odd holiday etc but dont go mad. We overpaid our mortage for years in order to clear it early. We worked abroad for five years in order to be able to place a sizeable down payment on our home. By our mid thirties we had our house paid for.
We have one child. I am of the opinion that in the future I should be allowed to do what I like when I like with my hard earned, tax deducted money.
Be it to gift it to my child, the cats and dogs home or give it to Paddy Power. No end up having it double taxed at a rate of approx. 70% as Gordon
states.
 
Take the average couple. Thats us. I earn just above the average industrial wage and my wife earns just below the average industrial wage. Our savings come from PAYE income subject to the highest rate of tax. We lead a happy but simple life. Take the odd holiday etc but dont go mad. We overpaid our mortage for years in order to clear it early. We worked abroad for five years in order to be able to place a sizeable down payment on our home. By our mid thirties we had our house paid for.
We have one child. I am of the opinion that in the future I should be allowed to do what I like when I like with my hard earned, tax deducted money.
Be it to gift it to my child, the cats and dogs home or give it to Paddy Power. No end up having it double taxed at a rate of approx. 70% as Gordon
states.

Well the first 225k worth of it won't be taxed at all. The first 3k in any year will be completely ignored. If you have enough wealth that CAT is going to amount to a worthwhile sum, then you can afford to figure out how to, or pay for the expertise to tell you how to, minimise it.

The level of hyperbole around CAT is a genuine mystery to me.

How can it be double taxation anyway, since the second tax liability isn't yours, it's whoever takes a gift from you.
 
Double taxation is common.

If I earn €50k I get €25k net.

If I spend that on tobacco and alcohol, there is probably around €15k in taxes and excise duty.

So am I paying 80% tax?

If I invest the €25k and put it on deposit, I will pay 41% ? DIRT on the deposit interest.

Brendan
 
Double taxation is common.

If I earn €50k I get €25k net.

If I spend that on tobacco and alcohol, there is probably around €15k in taxes and excise duty.

So am I paying 80% tax?

If I invest the €25k and put it on deposit, I will pay 41% ? DIRT on the deposit interest.

Brendan

To be fair, the DIRT isn't double taxation as it arises in respect of the deposit interest rather than the principal.
 
Well the first 225k worth of it won't be taxed at all. The first 3k in any year will be completely ignored. If you have enough wealth that CAT is going to amount to a worthwhile sum, then you can afford to figure out how to, or pay for the expertise to tell you how to, minimise it.

The level of hyperbole around CAT is a genuine mystery to me.

How can it be double taxation anyway, since the second tax liability isn't yours, it's whoever takes a gift from you.

Jon,
Well aware of limits etc regarding passing on assets to my son. I consider my child to be part of the family flesh/blood and all that. I am simply of the opinion that what my family have worked hard for over many years ( payed all taxes etc) should be allowed to share fruits of labor any way they want especially within the family. I dont live in a fancy house although its worth way in excess of the 225k limit and my son is his own man working away and hoping to buy a starter home for himself in a year or two. If you or any person chooses to holiday all the time or choose to change their car every year the best of luck to you. If you or anybody else finds themselves in a position where they have little or nothing to pass on to whom they choose that is a pity.
The limits that are currently in place are the highest on the planet. As a ordinary PAYE worker I am not in a position to use tools employed by the very rich in order to minimise their CAT bill. I dont begrudge the wealth these people have built up probably over many years. The best of luck to them.
Some people might begrudge others that have the ability to pass on significant assets to their family. That is really sad.
 
You can pass the house to your son tax free.

You can start giving him €6k a year when you've the spare cash.

Your ARF(s) can pass to him separately at a rate of 30% (rather than 33%) without impacting on his €225k threshold.

And rumour has it that the threshold will increase to €300k later this year.
 
You can pass the house to your son tax free.

You can start giving him €6k a year when you've the spare cash.

Your ARF(s) can pass to him separately at a rate of 30% (rather than 33%) without impacting on his €225k threshold.

And rumour has it that the threshold will increase to €300k later this year.

Gordon,
Thanks. If I was to pass on house now under the3-6 year rule. Is there any implications if he was to purchase his own property say in two years time? Or does he need to stay away from a purchase for 6 year period.?

Cheers
 
Gordon,
Thanks. If I was to pass on house now under the3-6 year rule. Is there any implications if he was to purchase his own property say in two years time? Or does he need to stay away from a purchase for 6 year period.?

Cheers

He can't own an interest in another residential property at the date of gift or inheritance.

Any other time is fine.

e.g. the following is fine:

Wednesday - Own property
Thursday - Gift property to wife
Friday - Receive tax free gift of property from parents
 
He can't own an interest in another residential property at the date of gift or inheritance.

Any other time is fine.

e.g. the following is fine:

Wednesday - Own property
Thursday - Gift property to wife
Friday - Receive tax free gift of property from parents

Cheers,
nighty night
 
Jon,
Well aware of limits etc regarding passing on assets to my son. I consider my child to be part of the family flesh/blood and all that. I am simply of the opinion that what my family have worked hard for over many years ( payed all taxes etc) should be allowed to share fruits of labor any way they want especially within the family. I dont live in a fancy house although its worth way in excess of the 225k limit and my son is his own man working away and hoping to buy a starter home for himself in a year or two. If you or any person chooses to holiday all the time or choose to change their car every year the best of luck to you. If you or anybody else finds themselves in a position where they have little or nothing to pass on to whom they choose that is a pity.
The limits that are currently in place are the highest on the planet. As a ordinary PAYE worker I am not in a position to use tools employed by the very rich in order to minimise their CAT bill. I dont begrudge the wealth these people have built up probably over many years. The best of luck to them.
Some people might begrudge others that have the ability to pass on significant assets to their family. That is really sad.

It's not about begrudging anyone anything, it's a simple matter of opinion and, to an extent, ideology.

If you are so far right that you view all tax as theft then you're never going to want to accept CAT or any other form of tax on wealth.

If you're way left then taxes like CAT aren't high enough, and you'd be advocating for annual wealth taxes on assets, so as to redistribute wealth.

Being somewhere in the middle I view taxes as necessary for a civil society to function; and in my opinion CAT as a form of proxy for an actual wealth tax is not a bad thing. It's not as penal as an annual wealth tax, it doesn't impede the wealth generator/stockpiler (although we have CGT for that!), and has a moderate redistributive effect.

I have to chuckle at you saying you don't have the facility to mitigate your liability the way the very wealthy do, but yet you've just been told how to effectively negate any charge on passing wealth to your son...! ;)
 
Are you seriously suggesting that media should not report on tax changes arising from legislation or Revenue practice?
Nope, not at all, but I distinctly remember hearing discussion on several radio programmes during my commute, where the actual impact of the proposals was being completely hyped up by vested interests.

You asked me what I meant by hyperbole, that's what I remember, it stuck in my mind as totally over egging the impact. That to me is the epitome of hyperbole.
 
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