How about a progressive Capital Acquisitions Tax?

Brendan Burgess

Brendan Burgess

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I have seen people on low incomes inheriting maybe €100,000 from their uncle. With a threshold of €32,500, they pay €22,000 CAT.

Whereas someone on a high income inheriting €300k from their parents pay no CAT.

It doesn't seem right.

How about something like the following

Get rid of the Small Gifts Exemption.
First €20,000 of gifts from anyone - taxed at 0%
Existing thresholds taxed at 10% -
Next €100k taxed at 20%
Balance at 40%.

So let's say your mother leaves you €220k and you had no other inheritances or gifts.

€20,000 @ 0%
€200k@ 10% = €20k compared to nil under the current regime.

If your uncle left you €100k
€20,000 @ 0%
€32,500 @10% €3,250
€47,500 @20% €9,500
Total: €12,750 compared to €22,275 at present.
 
Brendan Burgess said:
I have seen people on low incomes inheriting maybe €100,000 from their uncle. With a threshold of €32,500, they pay €22,000 CAT.
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Great idea. Plus if you also inherit from another uncle brother etc (someone from group b) you pay tax on the full amount
 
What is your rationale in suggesting this, Brendan? Bear in mind that CAT in overall terms is such a tiny money earner for the State compared in particular to income taxes and VAT, that if it was scrapped in its entirety tomorrow, it would be barely noticed. In fact, the increased economic activity from earlier transfer by gift of properties and portfolios otherwise transferring by inheritance would probably yield a net higher income for the exchequer.
 
T McGibney said:
What is your rationale in suggesting this, Brendan? Bear in mind that CAT in overall terms is such a tiny money earner for the State compared in particular to income taxes and VAT, that if it was scrapped in its entirety tomorrow, it would be barely noticed. In fact, the increased economic activity from earlier transfer by gift of properties and portfolios otherwise transferring by inheritance would probably yield a net higher income for the exchequer.
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That's an argument for reforming inheritance tax, not scrapping CAT.
 
Purple said:
That's an argument for reforming inheritance tax, not scrapping CAT.
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It's not, actually.

There is no basis, except perhaps in ideology, to retain a tax that yields an immaterial sum every year for the exchequer and that would probably yield a higher sum in annual receipts under other tax headings if it were abolished. That's plainly an argument for abolition.
 
T McGibney said:
Bear in mind that CAT in overall terms is such a tiny money earner for the State compared in particular to income taxes and VAT, that if it was scrapped in its entirety tomorrow, it would be barely noticed.
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It's about €600m. For example the entire Prisons Service budget is around €400m.

Saying that a tax that pays for the entire prison budget with a third left over is "a tiny earner" that is "barely noticed" is not a very solid argument.
 
NoRegretsCoyote said:
It's about €600m. For example the entire Prisons Service budget is around €400m.

Saying that a tax that pays for the entire prison budget with a third left over is "a tiny earner" that is "barely noticed" is not a very solid argument.
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It's less than one-thousandth of the 2021 tax take.
 
Hi Tommy

I do understand that argument.

I remember a guy from the Nevin Institute (I think) giving a paper on wealth taxes (as distinct from CAT and CGT). He made the point that wherever they are levied, they raise very little. So his argument was that we either do it properly and tax all wealth including land and homes or don't do it at all. He said that if we exclude land and homes, then it's not worth doing.

And CAT is probably the same. Effectively excluding farms and other businesses from it probably makes it not worth bothering with. So,
1) It should apply to all gifts and inheritances
2) It should be progressive

But I probably agree with you. If we don't bother applying it fully, then we should scrap it.

€600m only sounds like a lot of money. If that is all we are going to raise from it, then scrap it and raise that with higher Income Tax.
 
Brendan Burgess said:
I remember a guy from the Nevin Institute (I think) giving a paper on wealth taxes (as distinct from CAT and CGT). He made the point that wherever they are levied, they raise very little. So his argument was that we either do it properly and tax all wealth including land and homes or don't do it at all. He said that if we exclude land and homes, then it's not worth doing
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That could well be the first time I've agreed with anyone from the Trade Union's Nevin Institute.
 
T McGibney said:
It's not, actually.

There is no basis, except perhaps in ideology, to retain a tax that yields an immaterial sum every year for the exchequer and that would probably yield a higher sum in annual receipts under other tax headings if it were abolished. That's plainly an argument for abolition.
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The same can be said for lots of taxes that, collectively, broaden the tax base and raise a substantial amount of money for the exchequer. 1% of our total tax take is a fair bit of money.

On balance I'm more in favour of a meaningful wealth tax than CAT or inheritance tax. We know who owns the properties and we know who owns the pensions and they constitute the vast majority of the wealth in the country.
 
Brendan Burgess said:
€600m only sounds like a lot of money. If that is all we are going to raise from it, then scrap it and raise that with higher Income Tax.
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But inheritance taxes have no impact on the decision to work, or whether to work more.

Income taxes very much do!

Euro for euro, inheritance taxes are much less destructive of economic activity than income taxes are.
 
NoRegretsCoyote said:
But inheritance taxes have no impact on the decision to work, or whether to work more.

Income taxes very much do!

Euro for euro, inheritance taxes are much less destructive of economic activity than income taxes are.
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Exactly. Taxing wealth creation is a disincentive to create wealth. Taxing wealth retention is not.
 
Nicklesilver said:
You all seem to be obsessed with collecting more tax, you never look at how the money is being used. One thing is certain government has an inexhaustible ability to spend other peoples money.
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And it's by no means a given that collecting more and more tax is socially beneficial.

When the pandemic started, I worried that the existence of the USC for the previous decade had meant that most people had on average less ability to accumulate personal savings than they had in the years prior to 2008, and were correspondingly less able to weather a financial storm had Covid destroyed our economy. It is still a concern that I have as we inevitably face future crises.
 
Nicklesilver said:
You all seem to be obsessed with collecting more tax, you never look at how the money is being used. One thing is certain government has an inexhaustible ability to spend other peoples money.
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I don't think anyone could accuse me of that.
 
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