Can we have no more threads about public sector pay

DerKaiser said:
If the investment is making good money then the investor will pay tax on that at their marginal rate
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Nope - you're still not getting it. The investor will artificially ensure that the investment doesn't make good money - he will maximise his interest and take the state subsidy tax relief.

So where he is making a good profit, he avoids tax by making it look on paper like he is not making a profit, by diverting his capital elsewhere. He is better off keeping it on deposit then repaying his loan, thanks to the tax relief.
 
Complainer said:
Nope - you're still not getting it. The investor will artificially ensure that the investment doesn't make good money - he will maximise his interest and take the state subsidy tax relief.

So where he is making a good profit, he avoids tax by making it look on paper like he is not making a profit, by diverting his capital elsewhere. He is better off keeping it on deposit then repaying his loan, thanks to the tax relief.
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Complainer, really, I want to agree with you. I thought as you once. Then I talked to people who knew what they were talking about. I've had second thoughts and want to be convinced but I have to agree with the landlords.

From what I can see you either accept mortgage interest as a legitimate expense or you don't.

If it isn't then how so?

If it is, but you want to disallow it or a percentage of it, for tax purposes then why? Are there other examples of apparently legitimate expenses that
are disallowed for tax purposes that you are aware of?

I do want to be convinced on this but ultimately your tax system has to be fair and transparent.

What you've described is a person who's made an investment that doesn't make him any money on a day to day basis, who never pays for the property that forms the investment, who has paid up front a huge tax bill in stamp duty.

I'm sorry but that's not someone to envy. This person has no income. Their business model is predicated on a false assumption that there is no risk, that property prices only go one way, that they'll always have tenants, that the maintenance costs / management fees don't exist. This isn't 2006. The investor you describe has artificially bankrupted himself.

This is the argument of the newly converted. Those who didn't see the property bubble for what it was, when it was, and now zealously want their pound of flesh for falling for all the bull.
 
Howitzer said:
This is the argument of the newly converted. Those who didn't see the property bubble for what it was, when it was, and now zealously want their pound of flesh for falling for all the bull.
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This is offensive. I've been beating this particular drum for many years now, before and after the bubble.

Howitzer said:
From what I can see you either accept mortgage interest as a legitimate expense or you don't.

If it isn't then how so?

If it is, but you want to disallow it or a percentage of it, for tax purposes then why? Are there other examples of apparently legitimate expenses that
are disallowed for tax purposes that you are aware of?

I do want to be convinced on this but ultimately your tax system has to be fair and transparent.

What you've described is a person who's made an investment that doesn't make him any money on a day to day basis, who never pays for the property that forms the investment, who has paid up front a huge tax bill in stamp duty.
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The problem is that in many cases, particularly with interest-only mortgages, the mortgage interest is artificial and unnecessary. The investor may well have the funds from his profitable investment to repay the capital, but he chooses not to do so for tax reasons (as per Brendan's advice. It is that simple.

It is not unusual for tax law to be specific about write-off/depreciation periods for particular assets. Why should it not be specific about interest periods allowed for this kind of asset?
 
I'm no fan of landlords.

I think commercial rents are way, way too high in Ireland. Many need to fall by up to 50%.

They are one of the main causes of our high price level.

But, all businesses are and should be allowed to deduct interest as an expense. Landlords should be treated equally.

I think that TRS on mortgage interest should be abolished.
 
Howitzer said:
If it is, but you want to disallow it or a percentage of it, for tax purposes then why? Are there other examples of apparently legitimate expenses that
are disallowed for tax purposes that you are aware of?
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Complainer said:
It is not unusual for tax law to be specific about write-off/depreciation periods for particular assets. Why should it not be specific about interest periods allowed for this kind of asset?
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While I do not object to any landlord making use of existing tax deductions/reliefs ( as is their right under law ), there are examples of business expenses being restricted. Motoring expenses and the CO2 emissions would be an example where Revenue restrict the expense depending on value and emission. It is up to the self-employed individual to use that which maximises his relief within the legislation. If they want a gas guzzler, then be prepared for less tax deductions.
 
Complainer said:
It is not unusual for tax law to be specific about write-off/depreciation periods for particular assets. Why should it not be specific about interest periods allowed for this kind of asset?
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That sort of idea definately works for me. Mortgage interest only being tax deductable once the principle is paid within, say, 20 years. You'd need some fairly watertight legislation. What happens if the owner sells within that period - a clawback similar to the S23 presumably? Only specific investor motgages allowed - no balloom payments.

Under those circumstances you'd also probably have to raise the relief back up to 100%. I think it would be a very progressive move from the point of view of our rental housing market but I don't think it would raise much capital - certainly in the short term. And I reckon it would take quite a bit og time to implement, ideally done in a more holistic fashion.
 
Complainer said:
Nope - you're still not getting it. The investor will artificially ensure that the investment doesn't make good money - he will maximise his interest and take the state subsidy tax relief.

So where he is making a good profit, he avoids tax by making it look on paper like he is not making a profit, by diverting his capital elsewhere. He is better off keeping it on deposit then repaying his loan, thanks to the tax relief.
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Please read this very carefully and tell me where I am not getting it.

The bottom line is that the only borrowings you can take into account are those used in the purchase or improvement of the property.

It is real money has been used for no purpose other than to acquire the property in the first place. There is no other way of looking at it.

So whether you pay off the loan or not, any interest incurred is an actual cost of owning that property. What you do with any excess of rent over loan repayments and other expenses (after it has been taxed at your marginal rate) is entirely up to you.
 
Complainer said:
It is not unusual for tax law to be specific about write-off/depreciation periods for particular assets. Why should it not be specific about interest periods allowed for this kind of asset?
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What period would you allow?

I basically think that a lot of PAYE workers have bought investment properties as a provision retirement. And I believe most of them would pay down the capital before they retire so that they are left with a rental income stream with no significant costs in retirement.

I think taxing the rent at the full marginal rate of taxation whilst these people are paying off their mortgages is very unfair.

So yes, maybe it would be fair to finally settle on a tax treatment whereby the interest offset is reduced in a straight line from 100% to 0% over 20 years. This will not save a fraction of the €500m in the short term, however.

The main thing for me is that you stick to a single basis to give people certainty i.e. if my marginal tax rate is 50% moving from a 100% interest offset to a 0% offset halves the value of the property to me. We can't just mess around with this every few years.

If we decided to abolish the interest offset now and reintroduce it at a later point (It's not inconceiveable that we'd need to encourage property investment again at some point in the medium to long term) we would reintroduce the same cycle of fluctuating property prices.
 
Complainer said:
he avoids tax by making it look on paper like he is not making a profit, by diverting his capital elsewhere. He is better off keeping it on deposit then repaying his loan, thanks to the tax relief.
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Could anyone in any business not do this? Say for example I own a flower shop and it's making 100k profit per year on 300k turnover. Included in the expenses are interest payments of 50k a year on a big extension built recently. If I can put my profit into a dep account paying more interest than the interest I'm charged then I would opt to keep my loan as big as possible..
 
Complainer said:
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.



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.


True, but that's not to say that tax evasion by landlords doesn't happen.
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How many landlords as a percentage of landlords 'abuse' mortgage interest relief? Zero is the answer because even if some do not pay back the capital it is not abuse, it is not illegal and it is not tax evasion. In fact the landlord is taking a huge risk which you don't seem to appreciate. You also have no statistics to prove that the vast majority of landlords in fact do not pay back capital which you are constantly alleging on AAM. These type of loans are in any case only a relatively new phenomenon (celtic tiger ) and landlords prior to and currently purchasing would not have access to interest only loans (banks want capital repayments) so it cannot apply to very many landlords or only those who purchased at the heights of the market and they can't be making any profit between reduced rents and property that has halved in value.

In fact it is difficult to even maximise the 75% interest relief because banks are giving out only 50% loans on investment purchases.

Of course this has no effect I suppose on the property market currently whereby the dreaded investors have disappeared. You cannot blame us for the upswing if you dont agree that they are out of the market now and causing the downswing. Not ordinary purchasers borrowing too much and now not being able to do so I suppose.

I don't think some landlords on AAM refusing to give their PPS number is statistically important, they will in any case be caught by the Revenue checks on the PRTB listing or the HSE payments of rents and the Revenue has time on it's side in this regard. It is very difficult for a landlord to hide income as versus other cash business. I imagine that it is one of the more tax complaint sectors.

You should do the figures on a fictious landlord to see how a strategy of not paying back the capital can have serious repercussions for a landlord. The reason there is no time limit on the interest (which incidentally I would have no issue with) is because property owners borrow extra money to do up property as over time renovations have to be done. You seem to think that landlords are raking in thousands in profit and putting it into what exactly to make vast sums of money on it? Deposit accounts/equities/shares other property?

In relation to CGT the reason this has never gone back up to 40% is because the low rate ensured complaince in the vast majority of cases, I don't need statistics for this. I think proof of a reasonableness variety on AAM suffices.
 
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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eh?

http://www.askaboutmoney.com/showthread.php?t=128337


Today, 10:03 AM
Complainer
Frequent Poster Location: South Dublin
Posts: 2,330

Re: Fulltime public service employees :Keep Saving or put lump sum towards Mortgage
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For tax reasons, you should concentrate your repayments on your home mortgage, and not the rental property. You may well be financially better off going 'interest only' on the rental property, and letting the state subsidise you with uncapped mortgage interest tax relief.
Given your future life changes (kids etc), I would be inclined to keep the cash on hand for the time being.
 
Complainer said:
Like I say to my 5-year-old when she grunts or groans at me, if you have a question, please talk to me and explain it to me. I don't respond to grunts.
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If you can't spot the irony in my post maybe you should ask your 5 year old.
 
Giving solid tax advice to somebody doesn't necessarily mean that you actually agree with the fairness of the legislation
 
Complainer said:
I'll take it then that you're not interested in any serious discussion on this issue so.
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In previous posts you argue that the interest on investment properties is not a "legitimate business expense" and coupled with tax deductions from pension contributions have resulted in cutbacks to the blind persons allowance. You then provide this advice to a PS collegue in a different thread.
 
So you're providing solid tax advice by recommending a relief you deem is not a legitimate business expense. This has to be the best ad to see a professional tax accountant for tax advice I've ever seen.
 
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