Greens recently blocked CGT reduction to 20%

azerogo

Frequent Poster
Messages
52
A bit late to this as only seen it recently, that the plan was to drop CGT to 20% in july for 18 months to stimulate the economy and was blocked by the Greens, details below.


Surely this made perfect sense with people currently sitting on assets rather than pay 33% - currently one of the highest rates in the OECD. (I'll disclose I'm one of them)

https://www2.deloitte.com/ie/en/pages/tax/articles/capital-gains-tax-for-budget-20203.html argue that when the reduction previously went from 40% to 20% the related tax yield increased exponentially.

I suppose the question I'm wondering if the next budget will see this finally reduced if it's already in the back of the minds of the current government?
 

bmount

Frequent Poster
Messages
88
very interested in this, we are holding our only investment rental cottage due to the terrible % hit of CGT, quite sickening. And the indexing stopped in 2002.

Bought in 1995, is supposed to be a major component of a modest
pension contribution (or might need it sold sooner for offsprings college costs) but that post-crash CGT increase from 20 to 33%, wow, how annoying.
 

Brendan Burgess

Founder
Messages
41,544
How would bmount's selling of his holiday home stimulate the economy?

How would my selling of shares in CRH and Ryanair stimulate the economy?

I think that the rates are too high and that reducing them would increase the number of sales but I don't see how it would stimulate the economy?

Brendan
 

Dublinbay12

Registered User
Messages
97
It doesn't directly but very well could indirectly. More cash in the Governments pocket means less need to go and generate tax income from either means, for example, raising income tax.
 

Aamstrong

Registered User
Messages
10
Government will get 20% sooner rather than 33% later.

Sellers will have more cash to splash.
 

azerogo

Frequent Poster
Messages
52
Because the cash generated from the sales will go back into the economy through purchases, new cars, house extensions, staycations and numerous other activities, it's not like anyone will sell assets and leave it on deposit
 

NoRegretsCoyote

Frequent Poster
Messages
1,602
And the indexing stopped in 2002.
This is a much bigger issue. You shouldn't be taxed on the increase in your wealth that is due to inflation.

A tax system should be stable and predictable to encourage investment. Re-introducing indexation on capital gains would be a sensible, structural change to the tax base.

Temporary holidays to get everyone trading would not be.
 
Last edited:

bmount

Frequent Poster
Messages
88
Yes restarting indexation from 2002 would be a fair and sensible thing to do.

A modest drop in CGT to 30% even in 2021 budget would help too.
 

Zenith63

Frequent Poster
Messages
588
I'd much prefer to see the government introduce a UK ISA style scheme, where individuals can put a capped amount of their savings in each year and it can grow tax/complexity free. This allows the average person benefit from the tax cut as well as get access to the much better returns available in markets/bonds compared to deposit accounts.

Also would like to see them increase the Entrepreneur Relief on CGT scheme, I'm not sure the right figure but the UK's is £10m compared to our €1m. This should increase company and hence job creation.

The CGT rate should stay where it is or be wrapped into the income tax regime so you pay your marginal rate on all income, whether it be from capital or your labour.
 

bmount

Frequent Poster
Messages
88
that idea would be severe on marginal rates of 50% here.

people have different focusses, sounds like you want to help entrepreneurs but hammer people with a modest 2nd property....
 

Zenith63

Frequent Poster
Messages
588
people have different focusses, sounds like you want to help entrepreneurs but hammer people with a modest 2nd property....
I don't want to hammer people with modest second properties at all. What I want to avoid is helping out a small number of average people who happen to be selling a 2nd property and might benefit from the reduction to the tune of €5-10k once in their lifetime, while giving a big tax cut to very wealthy individuals who might benefit much greater amounts every single year. I'd have no problem with something like a capped lifetime CGT exemption, so somebody can have one significant capital gain in their lifetimes without being hit too hard.

Reducing the tax burden on wealthy individuals (by decreasing the CGT rate) just to save a handful of people a couple of grand makes no sense to me at all.

Also FWIW I'm not too pushed on helping entrepreneurs specifically, it's the side-effects of entrepreneurship on our society/economy that I think is worth encouraging.
 
Last edited:

bmount

Frequent Poster
Messages
88
Thanks, yes I like the lifetime cap idea, very good, so who is in a professional capacity to put such fair ideas forward to government ? Or has this been dome somewhere ?

I work in IT.
 

Drakon

Frequent Poster
Messages
814
I’m not surprised by this in any way and I think it’s a good idea.
IIRC it was during Charlie McCreevy’s time that CGT dropped from 40% to 20%. The country was awash with money and the government finances (in terms of the bottom line) had never been so good.
The Deloitte view may be accurate, however, we had economic expansion back then.
2020 is different. We’re in recession. Unemployment is high. We’re in the midst of a once-in-a-century pandemic. There has never been so much uncertainty worldwide. The government coffers are stretched.
Few with assets are going to be incentivised to sell if CGT is dropped down to 20%. What are they going to do with the cash? Splurge? I doubt it; don’t forget the pandemic. Invest? With so much uncertainty? Round-the-world trip-of-a-lifetime? Ha!
The only people that are going to sell assets at the moment need the money. And sell they will regardless of the rate. And the state needs its cut. Leaving it at 33% is prudent on every level.
 

Gordon Gekko

Frequent Poster
Messages
4,476
Also would like to see them increase the Entrepreneur Relief on CGT scheme, I'm not sure the right figure but the UK's is £10m compared to our €1m. This should increase company and hence job creation
The UK reduced their figure from £10m to £1m in the most recent Budget.

The logic being that the relief is expensive and only benefits a small number of already wealthy people each year.
 

Nicklesilver

Registered User
Messages
17
It’s simple lower tax means more transactions and an increase in revenue. Also more fees and vat Re estate agents and lawyers and accountants who all pay more income tax and the economy grows. The greens far left ideology despises profit and wealth and does not encourage self reliance and hard work to better the lot of yourself and your family by taxing you to death and then once your dead they want even more.
 

Zenith63

Frequent Poster
Messages
588
It’s simple lower tax means more transactions and an increase in revenue. Also more fees and vat Re estate agents and lawyers and accountants who all pay more income tax and the economy grows.
There’s a tipping point in most taxes though where going lower no longer increases activity sufficiently to replace the lost revenue, the divining of that point is anything but simple.

To quote from the Dept of Finance on the topic, who in summary don’t believe there is sufficient evidence to suggest a CGT reduction would be beneficial -
...it is difficult to find contemporary studies in Ireland that provides accurate and empirical evidence that a reduced rate of CGT would help achieve higher or improved levels of investment, improve entrepreneurship and ultimately economic growth.
Indeed, the CGT rate reductions in the UK and the changes to CGT entrepreneur relief have been promoted on the basis of their economic and business impacts but it is difficult to find published evidence to support this view.
Therefore given the increasing focus on the analysis of tax expenditures to justify changes in allowances or reliefs it is important that there is some empirical evidence as to the economic and wider entrepreneurial as well as the investment benefit of a reduction in the rate of CGT in Ireland.
The increased Capital Gains Tax receipts in the early 2000s is often attributed to the reduction in the CGT rate from 40% to 20%. It has also been suggested that after Australian CGT rates for individuals were reduced by 50% in 1999 CGT revenue grew strongly and the CGT share of tax revenue nearly doubled over the subsequent nine years.
However, as regards Australia the reference period included the increase in asset prices from 2000 to 2007 and excluded the 2008 financial crisis, which caused a significant decline in CGT revenues. Likewise in Ireland, the period coincided with a growth in asset prices and the purchase and sale of assets which was a significant driving force in the increase in the CGT yield and the fall off in the yield subsequently also coincided with a fall in asset prices.
It is difficult to determine how responsive capital gains realisations are to changes in the capital gains tax rate. Lower rates of capital gains tax can increase the volume of sales of assets and potentially Exchequer revenue in the right economic environment. The initial response to a reduction in CGT is that there are likely to be more sales of assets than would normally be the case and this effect is likely to subside as investors take account of the rate cut and the rate reduction is normalised.
However it is difficult to determine whether a reduction in the rate of CGT could increase yield sufficiently to counter the effects of a lower tax rate certainly in the medium or long term. Ultimately this depends on the “elasticity” of capital gains sales or the percentage change in sales of assets that result from a change in the tax rate and how long that effect would last. There is no agreement on the extent to which there may be increased revenues or how long such revenues might be sustained from a CGT rate reduction. It may be difficult to determine the indirect effects of a CGT rate reduction with significant accuracy.
There are so many better ways to reduce tax that could target low and middle income earners more accurately it’s a bit mind boggling to think this was suggested, especially in the current climate where people are marching in the streets against landlords etc.
 
Last edited:

NoRegretsCoyote

Frequent Poster
Messages
1,602
Here's a proposal:

Re-introduce indexation backdated to 2002. Commit to keeping the 33% rate for the lifetime of the government.


This would reduce the base a little bit as inflation has been 23% since 2002, but most of this inflation occurred before 2008, so there would be very little effect on gains made in the last decade or so. In the long term indexation is much better as you shouldn't be penalised or advantaged for gains brought about by inflation.
 

Purple

Frequent Poster
Messages
9,970
There are so many better ways to reduce tax that could target low and middle income earners more accurately it’s a bit mind boggling to think this was suggested, especially in the current climate where people are marching in the streets against landlords etc.
Low an middle income earners pay little or no income tax so a reduction in indirect taxes such as VAT and duties would impact them more. If we want low and middle income earners to feel better off the best thing we could do is reduce the cost of living. The best way to do that, by far, is to reduce the cost of service delivery by the State as that is the biggest contributor to the overall cost of living.
 
Top