Progress Update: Responses to the Public Consultation December 2023
193 submissions - 140 of them from individuals.
193 submissions - 140 of them from individuals.
2. Taxation of investment products
2.1 Overview
The majority of submissions received addressed the questions posed on the taxation of investment products. Of the 140 responses submitted by private individuals, a considerable number of these were concerned exclusively with taxation. More specifically, many submissions by private individuals referred to the taxation regime for Exchange Traded Funds (ETFs). The submissions convey a general perception that the taxation of investment products, and of ETFs in particular, is a major barrier to increasing retail investor participation in Ireland. These views were also reflected in the submissions received from industry participants and the Central Bank which highlighted the apparent disconnect between Ireland’s role as a global hub for the funds industry and the low levels of domestic household investment into investment funds.
2.2 Issues raised in submissions
There was a broad consensus from those that submitted a response to the public consultation that the taxation of investment products was overly-complex and in need of reform. Both industry and individual respondents highlighted the benefits, to investors and to the real economy, of increasing retail participation in capital markets . The following issues were consistently raised as impediments to increasing levels of retail investment:
The complexity of the taxation regime for investment products with different tax treatments applying depending on product, domicile and tax residence
The challenges of administering the deemed disposal regime (for both industry and, in the case of ETFs, the individual retail investor)
The tax treatment for Irish investors investing in Irish ETFs Many respondents also highlighted concerns that investment decisions by Irish investors are largely driven by tax considerations rather than the individualneeds of the investor. Others offered the view that the complexity of the taxation of investment income and gains in Ireland is likely to make compliance a significant challenge for retail investors.
2.3 Proposals raised in submissions
A significant number of changes to the tax regime were suggested by both industry and individual respondents. Many of these focused on the need to simplify and harmonise the taxation of investment funds. However, the scope and ambition of the suggested changes ranged conside rably, from a reimagined system of taxation for investment products to discrete and specific amendments to tax legislation. Among the proposals raised most frequently were:
Reform the Investment Undertakings Tax (IUT) regime
o Abolish the 8-year deemed disposal rule
o Move IUT from deduction at source to a self-assessed basis
o Provide for loss relief under the IUT regime
Introduce a reduced IUT rate for investments in ESG projects
Reform the taxation of ETFs
Align the tax rates applying to savings and investment products
Develop a tax-free/tax-advantaged retail savings and investment product
The Funds Review Team will consider further progress updates, consultations and industry events as we continue to progress in our work to report to the Minister for Finance by summer 2024. The submissions received will be published at a later stage in the Review process.
Anyone come across a new report yet?The Funds Review Team will consider further progress updates, consultations and industry events as we continue to progress in our work to report to the Minister for Finance by summer 2024.
Reported on in the IT today, wouldn't get your hopes up too much...i heard something on newstalk business that neale richmond was considering introducing personal savings accounts, presumably similar to UK one where you can also invest in stocks and shares free of taxation
but still the government have been talking alot lately about this topic whether it is the taxation of ETFs, and that 150 billion euros is just sitting in bank accounts earning nothing, this is a big anomoly in comparison to UK and Europe. Also the fact that the irish stock exchange is losing credibility with big name exits, they need to get some of this 150 billion invested in stocks. In the 1990s the irish stock exchange had lots of start ups and technology companies, now all it has is a few banks (much smaller than now ) and a few food companies and builders, it really has gone backwards.Reported on in the IT today, wouldn't get your hopes up too much...
"We’re open to any good suggestions that are reasonable. [But] they’ll all have to be taken into the context of the budget.”
Wouldn't disagree with anything you've said. Cumulative inflation since the start of 2021 is something like 20%. If you'd invested in the S&P500, you'd have easily seen that off (and then some). If you had your money in the bank, you wouldn't. Just like the green agenda, people need to be encouraged / coaxed into investing, otherwise they will be poorer in the long run.but still the government have been talking alot lately about this topic whether it is the taxation of ETFs, and that 150 billion euros is just sitting in bank accounts earning nothing, this is a big anomoly in comparison to UK and Europe. Also the fact that the irish stock exchange is losing credibility with big name exits, they need to get some of this 150 billion invested in stocks. In the 1990s the irish stock exchange had lots of start ups and technology companies, now all it has is a few banks (much smaller than now ) and a few food companies and builders, it really has gone backwards.
Another factor is the shift to the right by the government in last 2 months in order to win back their middle class voters, this proved very successful in the recent elections so I expect they will be doing more of this, helping the people that are going to work everyday paying taxes
On 6 April 2023, the Minister for Finance published the Terms of Reference for a Review of the Funds Sector in Ireland ("Funds Sector 2030: A Framework for Open, Resilient & Developing Markets"). As per the Terms of Reference, and following on from the recommendation of the Commission on Taxation and Welfare, the Funds Review was tasked with examining, inter alia, “the taxation regime for funds, life assurance policies and other related investment products, with the goal of simplification and harmonisation where possible; and to do so with a net revenue-raising or neutral mandate”.
The majority of responses to the Funds Review public consultation addressed the taxation of investment funds (including ETFs) and life assurance policies, with some proposing the introduction of a tax-advantaged, ISA-type, scheme. The Funds Review Team is considering a range of options in order to meet the objective of simplification and harmonisation. The Funds Review report is currently being finalised and I look forward to considering its findings. It would not be appropriate to speculate on the outcome of the review in advance of its completion.
The Tax Strategy Group (TSG) is in place since the early 1990s and is chaired by the Department of Finance with membership comprising senior officials and political advisers from a number of Civil Service Departments and Offices. Papers on various options for tax policy changes are prepared annually by Department of Finance officials.
The TSG is not a decision making body and the papers produced by the Department are simply a list of options and issues to be considered in the Budgetary process. The 2024 TSG will be held shortly.
but still the government have been talking alot lately about this topic whether it is the taxation of ETFs, and that 150 billion euros is just sitting in bank accounts earning nothing, this is a big anomoly in comparison to UK and Europe. Also the fact that the irish stock exchange is losing credibility with big name exits, they need to get some of this 150 billion invested in stocks. In the 1990s the irish stock exchange had lots of start ups and technology companies, now all it has is a few banks (much smaller than now ) and a few food companies and builders, it really has gone backwards.
I know that but it's "idle" from the depositors point of view as earning almost nothing in interest rates with government taking 41% tax off of that , also the banks are required to hold large proportion of government bonds so they get another cheap chunk of finance from depositors. Maybe that's the real reason for exit tax regime, it indirectly leads to money sitting in banks, which is good for banks, good for government and also borrowers .Much of the 100bn + in bank accounts is being used to finance lending to borrowers.
It is not "idle".
Yes, it is true that there are more deposits than loans, and as a result the three banks themselves deposit the money with the ECB.
But I often worry that some people think that all deposits are somehow idle. They are not.
Last year, on 6 April 2023, my Department published the Terms of Reference for a review of Ireland’s funds sector - ‘Funds Sector 2030: A Framework for Open, Resilient & Developing Markets’. The review is wide ranging and looking at a range of issues relevant to the funds sector, taking into account the recommendations in this area of the Commission on Taxation and Welfare 2022 report, Foundations for the Future.
A draft report was submitted to me for consideration during the summer, in line with the Review's Terms of Reference. The exact timing of the publication of the Funds Review report will be confirmed in due course.
As with all areas of tax policy, the taxation of savings and investments will be kept under review throughout the annual budgetary and Finance Bill process.
I emailed my local TDs - good to see the message got through, if anything will change who knows.There was a popular post on Reddit a few weeks ago with the steps for users to email their local TDs about their concerns with deemed disposal. The questions raised by Colm Burke and Michael Lowry is almost word-for-word the same email.
The answer is vague and unsatisfying but at least the message is getting through.
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