Indo - "State takes in record €1bn inheritance tax as Taoiseach Micheál Martin pledges reform"

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State takes in record €1bn inheritance tax as Taoiseach Micheál Martin pledges reform

The Taoiseach wants to see the inheritance tax system reformed, with new figures showing the State took in a record €1.121bn from it and gift tax revenue last year.
m.independent.ie m.independent.ie
Paywalled but here's a snippet...

State takes in record €1bn inheritance tax as Taoiseach Micheál Martin pledges reform​

‘Favourite’ nieces and nephews stand to gain, as Martin says current rules are discriminatory
...
Fine Gael’s pre-election manifesto pledged to raise the capital acquisitions tax (CAT) threshold for children inheriting assets from the current level of €400,000 to €500,000.

Finance Minister and Tánaiste Simon Harris has committed to reviewing the tax ahead of the next budget, after the Government reformed this tax base two years ago.

Mr Martin’s spokesman said: “The Taoiseach does believe there needs to be reform of the inheritance tax system. He thinks the current rules tend to discriminate against individuals who want to leave something to extended family members such as nieces and nephews, for example.”
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CAT affects a very small share of the population, primarily those receiving large, unearned transfers of wealth.
  • Only about 1/3 of households ever inherit anything.
  • Of the 1/3 that inherits anything, only about 1/10 exceed the CAT threshold, i.e. about 3% of the country.
  • And that is over a lifetime. Each year the actual number of people who make a Group A return is less than 0.05% of the population!
Should the government and media be giving so much time and attention to this?

For the lucky minority who ever inherit anything, the median inheritance is about €100k.
While there are no data available on mode/distribution of inheritance amounts, but we can reasonably estimate it is in the €35k-€50k range.
All well under the limit if it is parent to child (most common type).

Of the 3% of people who go above the threshold, we can extrapolate that the average inherit was €570k (conservative end of the range) and they paid a mean €80k in CAT. So their mean effective tax rate is around 14%. Hardly outrageous.
This is based on older data which has the lower €335k threshold, so it would actually be an even smaller number affected now and paying even less.

So why all the fuss over a minuscule, affluent subset of inheritors who are getting an unearned windfall?

Any self-respecting conservative or capitalist will agree that a tax system should reward people who actually earn their money and contribute to the economy. Governments should not spend time increasing tax breaks to those who get gifts for being born into the right family. We didn't escape monarchy only to mimic their corrupt system of passing wealth along narrow family lines.

If people want to be able to receive tax-free gifts, then let everyone have a personal lifetime limit for that amount that they can receive from anyone, not just relatives. Otherwise people are just writing rules to feather the nests of the tiny percentage of wealthy people who will actually benefit from something like this.
 
“He thinks the current rules tend to discriminate against individuals who want to leave something to extended family members such as nieces and nephews, for example.”

I’m not a big believer in inheritance tax, at least not anywhere near where the current threshold for within the family is but the article is a collection of quotes from people who seem to believe that a person is being discriminated against based on the tax that the person inheriting has to pay.

The focus seems to be on childless couples and how they should be allowed a favourite niece or nephew. I imagine childless couples often have the most money for inheritance and they are a demographic on the increase but it presents to me that they are envious that parents get to pass on their savings / house value to their kids with reasonable allowances (I know it’s not the parents paying the tax) and yet when it comes to there property and savings the tax man will take a decent share.

However it completely ignores the (usually) vastly different relationship between parents and their children and aunts / uncles.

In general for 18 (plus) years money earned by parents is family money and goes where needs are. Money and promotion / working hours decisions are all based on the family unit needs. That often starts to diverge early 20s but for many parents they still support beyond. Parents might find it hard to move on from not spending on themselves or putting their kids first as they have been doing for 20 years. They may die relatively young before enjoying their retirement. The asset of the family home has been the kids family home, the one all their memories are in etc.

There is no comparison between the link between a parent’s money and house and how intertwined it is in a kids life and that of an aunts or uncle.

Coincidentally I have noticed a major rise in childless couples perspective articles in the last few years, usually complaining of kids in cafes or some other very normal place for them to be.
 
faketales said:
However it completely ignores the (usually) vastly different relationship between parents and their children and aunts / uncles.
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faketales said:
There is no comparison between the link between a parent’s money and house and how intertwined it is in a kids life and that of an aunts or uncle.
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If I have a personal lifetime threshold of say €400k from any source, what difference does it make to the government or anyone else whether I receive the inheritance/gift from my mother or my aunt?

faketales said:
Coincidentally I have noticed a major rise in childless couples perspective articles in the last few years, usually complaining of kids in cafes or some other very normal place for them to be.
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The people I hear complaining most about children are parents! Most child-free people I know are positive and generous towards the kids in their lives.

Bringing it back to the topic of tax, working couples without children are heavily subsidising the lifestyles of people who choose to have kids.
 
CAT was €400m in 2015 and rose to €1,121m in 2025. A CAGR of 10.85%. Overall tax take went from €45,601m to €106,471m - 8.85% CAGR. Domestic asset prices have been rising pretty fast so you'd expect to see the delta on CAT I guess.

Overall CAT is levied on a small number of people with very generous allowances for most who will inherit. The idea of tinkering around the edges for changing family circumstances (no kids etc) makes some sense, but this is an example of a policy area where the noise doesn't really match the heat. If you have an ideological opposition to the idea of an inheritance tax, I probably can't convince you otherwise.
 
arbitron said:
Any self-respecting conservative or capitalist will agree that a tax system should reward people who actually earn their money and contribute to the economy. Governments should not spend time increasing tax breaks to those who get gifts for being born into the right family. We didn't escape monarchy only to mimic their corrupt system of passing wealth along narrow family lines.
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Well said. I couldn't agree more.

We should be taxing income generated from work at a lower rate than unearned capital transfers. Most wealth in Ireland comes from the value of the family home. In the vast majority of cases that value is the result of untaxed capital appreciation, so neither the parent or the child earned the wealth. Compounding that imbalance in the tax system in the vast majority of cases the child doesn't pay any tax on the transfer of that unearned wealth.

If anything the current system is too generous.
 
“He thinks the current rules tend to discriminate against individuals who want to leave something to extended family members such as nieces and nephews, for example.”

How can you discriminate against someone when they're dead? The recipients pay the tax and that proposal would give some people more relatives in their Group A threshold than others, that seems more discriminatory.
 
arbitron said:
We didn't escape monarchy only to mimic their corrupt system of passing wealth along narrow family lines.
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Nothing to do with a monarchical system. Sounds more like a wish for an extreme socialism where all unearned wealth is heavily taxed. As far as I am aware the USA escaped the monarchy and largely don't have inheritance taxes. If I work hard and have good fortune along the way, earn a large amount of money, pay plenty of tax on it along the way, why should my children have to pay tax once again on it again when I die? Other than the fact governments have to raise revenue somewhere - and obviously nobody likes paying tax - taxing inherited wealth is purely an ideological stance. If you take a socialist point of view, it's ok. If you take a more capitalist point of view, it's not so ok. (I now expect the floodgates to open. :) But I'm not looking for an argument. Just saying that individual views on this are likely driven by their ideological stance on taxing wealth. There is no absolute right or wrong. IMO anyhow.)
 
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patfert1 said:
Nothing to do with a monarchical system.
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The aristocracy pass power and wealth by birth, with minimal role of merit/competition. Economic position is largely predetermined by the family you are born into. There are barriers to outsiders as privilege is maintained by lineage and inter-marriage, with capital concentrated narrowly within families. Preservation of wealth is incentivised. Houses, land, tax avoidance.

Capitalism rewards merit and individual economic activity. Status is not fixed or automatically passed down and can changes between generations based on performance. Competition is valued and incentives are tied to creation and growth of wealth. Advantage is earned through effort, development of skills, and taking risks. Barriers to entry are lower. Capital flows towards productivity. Education, employment, tax generation.

Allowing unfettered transfer of wealth sounds much closer to monarchy than to capitalism, and I know which one I would prefer.

patfert1 said:
Sounds more like a wish for an extreme socialism where all unearned wealth is heavily taxed.
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The main discussion is about a tax break of €400k (example amount chosen as it is the current Group A threshold) that would apply to every individual receiving a gift from any source. That would actually reduce tax bills for some people as there would no longer be any Group A/B/C, it would all be in one pot. I don't see how giving everyone the same tax break is socialist, especially when no-one would be paying any extra taxes.

Most people never get any inheritance. And of the 3% of households that actually end up paying Group A CAT, the average effective tax rate is about 14%. So no heavy taxation, not extreme, and not socialist.

patfert1 said:
If I work hard and have good fortune along the way, earn a large amount of money, pay plenty of tax on it along the way, why should my children have to pay tax once again on it again when I die?
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You have paid the tax, your children have not. And they will each get a €400k tax-free amount which is very generous.

If we want to see how big a boost that €400k really is, look at what it would require to save that in terms of actual earned wages:

Income level​
Saving 100% of net salary​
Saving 25% net salary​
Minimum wage18 years70+ years
Average ind. wage10 years40 years
Consultant doctor3 years12 years

Who is saving 25% of their salary, never mind 100%?

If you don't think recipients of gifts/inheritance should ever pay tax on it because someone else has already paid tax on it then you are arguing to abolish all taxes. Because if my employer has paid tax on their profits, then they use that for my wages, why do I pay PAYE?

As long as workers have to pay tax on their income, it is reasonable that children (who are usually adults in their 50s and 60s mind you) might pay some tax on the amount remaining after they get €400k tax free.

patfert1 said:
Other than the fact governments have to raise revenue somewhere - and obviously nobody likes paying tax - taxing inherited wealth is purely an ideological stance. If you take a socialist point of view, it's ok. If you take a more capitalist point of view, it's not so ok.
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Even within capitalism there are ideological divisions:
Capitalists who value property rights (more libertarian) argue very strongly that taxing any gift is fundamentally wrong. That's fine, that's a perfectly reasonable view.
Other capitalists who place higher value on merit and effort argue equally vociferously that unearned windfalls (inheritance) should not be taxed less than earned income. I happen to agree that it's preferable to reward people who work more than we reward people who receive a gift.
 
polecon said:
Your employer is doing it wrong.
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Okay, if I pay a solicitor out of after tax income should they also have to pay income tax on what they get from me? And no, I haven't been asked for cash from a solicitor in decades (doctors yes, but not solicitors).
 
arbitron said:
The aristocracy pass power and wealth by birth, with minimal role of merit/competition. Economic position is largely predetermined by the family you are born into. There are barriers to outsiders as privilege is maintained by lineage and inter-marriage, with capital concentrated narrowly within families. Preservation of wealth is incentivised. Houses, land, tax avoidance.

Capitalism rewards merit and individual economic activity. Status is not fixed or automatically passed down and can changes between generations based on performance. Competition is valued and incentives are tied to creation and growth of wealth. Advantage is earned through effort, development of skills, and taking risks. Barriers to entry are lower. Capital flows towards productivity. Education, employment, tax generation.

Allowing unfettered transfer of wealth sounds much closer to monarchy than to capitalism, and I know which one I would prefer
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Superb post arbitron. Should be compulsory reading.
 
patfert1 said:
why should my children have to pay tax once again on it again when I die?
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Why should this particular transfer of value escape taxation? There aren't many that avoid taxation. Even that cup of coffee that might aid my cognitive ability this morning has VAT and corporation/income tax involved in the transaction
 
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Purple said:
if I pay a solicitor out of after tax income should they also have to pay income tax on what they get from me?
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Is there any product or service (other than whatever your job is) that you believe should be taxable on profits/income?
 
Fortune said:
Is there any product or service (other than whatever your job is) that you believe should be taxable on profits/income?
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All products or services should be taxable within the structures we currently have. The discussion here is about how we should tax the transfer of wealth. Whether the person giving the wealth is alive or dead is irrelevant. The recipient pays the tax.

When wealth is exchanged for the provision of goods of services the recipient of the wealth pays tax. Some people think that when wealth is given without an exchange of goods or services then it shouldn't be taxed.

On the basis that I believe that it is desirable to have a society which strives for equality of opportunity I find that illogical and grossly unfair. That same belief means I'm not a socialist either.
 
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