Is the 41% Exit Tax Soon to be Scrapped? Michael McGrath to Review

Well, I don't know about democratic, but they are certain accessible. They are suitable for a not especially sophisticated investor who
  • understands the characteristics of equities as an asset class
  • feels unable, or doesn't wish, to engage in analysis and selection of individual stocks
  • doesn't wish to pay an investment manager to do the analysis and selection for him (either because the cost of management would reduce his return or because he is not convinced that active management adds much value)
Only one-third of Irish income tax payers pay any tax at all at the higher rate. For a standard rate taxpayer, two-thirds of the total, the 41% exit deemed disposal/exit tax rate is grossly unfair. If the dividends and capital gains earned within the fund were actually distributed to him and he accounted for tax on them, the effective tax rate would be much, much less than 41%.

Now, it may well be that, in practice, the great bulk of earnings on ETFs (and other managed funds) does in fact accrue to higher rate taxpayers, because it is largely higher rate taxpayers who make investments of this kind, and they tend to invest larger amounts of money.

But, if so, this would partly be the consequence of the tax penalty that a standard rate taxpayer would suffer. It may also be due to the lack of an equity investment culture in Ireland. It would be impossible to disentangle those two factors and, in any case, the tax penalty would reinforce and sustain that anti-equity culture.

So, if you think that Irish reluctance to invest in equities is a Bad Thing and you'd like to see it change, then the DD/ET rate is a problem that must be addressed.
 
True. But I don't think it detracts from my main point.

(For the "not especially sophisticated investor", I don't think the availability of actively managed funds necessarily makes his life easier. For how is he to choose the managers who will secure above-average performance in the future?)
 
Thoughts on investing in ETFs now or waiting for the budget (and start of 2026 min.) for better clarity and possible simplicity if there is two an old and new process.

How likely is it we get a "more time needed" or "not a time to make changes given uncertainty regarding tariffs" or have signs been more positive lately.
 
faketales said:
Thoughts on investing in ETFs now or waiting for the budget (and start of 2026 min.) for better clarity and possible simplicity if there is two an old and new process.
Click to expand...
Depends - are you going to keep your cash on deposit while you wait or are you investing in something else?

This review was announced in Feb 2023 and the same questions were asked, if you were waiting this long for clarity you'd have been better to have just gone ahead and invested.
 
Last edited:
Corola said:
Depends - are you going to keep your cash on deposit while you wait or are you investing in something else?
Click to expand...

It’s on deposit with Trade Republic so a little bit of interest…

I probably wasn’t ready in 2023 as there were a few life things up in the air to make a medium term investment. I am now.

Just trying to judge how confident/ unconfident people feel about a change happening.
 
I'm confident about the changes happening, I'm not confident about the timeline or whether it will operate on an old/new or replacement basis.

But I wouldn't let that stop me moving money from deposits into equities (ETFs or otherwise) for a long term investment.
 
Won't surprise me if this takes a few more years.

If new ETF rules are eventually enacted that are more tax favourable for investors and they only apply to new ETF policies/funds I suppose a person could sell off their old ETF, pay the taxes, then put what's left in a new ETF.
 
 
I dunno if JCMcN opining on tax policy is helpful, particularly on this one. However next month the D/fin tax strategy group papers are unusually published and this can be a roadmap to thinking and what could feature in the 2025 finance bill. Also early in the political cycle is the time to do this particularly as you can expect opposition politicians to criticise and object etc.
 
Fiver Spare said:
I dunno if JCMcN opining on tax policy is helpful, particularly on this one.
Click to expand...
I agree if she is taking an interest it won't be so easy for Pascal Donohue to stone wall or obfuscate like he usually does, she will see through the usual nonsense and call him out if he is talking rubbish
 
joe sod said:
I agree if she is taking an interest it won't be so easy for Pascal Donohue to stone wall or obfuscate like he usually does, she will see through the usual nonsense and call him out if he is talking rubbish
Click to expand...
I dunno. If a Minister whose business it isn't starts calling out the Finance Minister for "talking rubbish" about his own portfolio, that's a battle the Finance Minister will pretty certainly win, and the other Minister will bitterly regret ever having expressed an opinion at all.

I'm with nest egg on this. I think JCMcN is only going public with this opinion becuse she's reasonably confident that this is the direction in which Donohue is going to move. She could be right or wrong about that, but she sits at the Cabinet table and gets all the Cabinet submissions and the minutes of Cabinet committees, so she is in a better position than we are to know what Donohue will do.
 
nest egg said:
It mightn't be helpful, but it's positive.
Click to expand...

I get what you mean but the messaging is important and I’m sure she is the right person to deliver it or “create wealth “ is the best language.

I’d focus on “opportunities for people who are working hard to save to get a fair return without being taxed unfairly…”
 
faketales said:
I’d focus on “opportunities for people who are working hard to save to get a fair return without being taxed unfairly…”
Click to expand...
Yeah. I'd be careful about over-egging the pudding there. You don't have to be working at all to have investments in managed funds and the like, never mind working hard. Trying to categorise a tax on what is, after all, unearned income as a tax on "people who are working hard" is a bit risky.
 
TomEdison said:
careful about over-egging the pudding
Click to expand...
Perhaps

It’s why I think an ISA style tax free account would have been a better sell. Start with a 5k investment limit a year.

Although we might be in a situation where anything that benefits anyone who is a medium earner and above is a no go politically.
 
You must log in or register to reply here.
Menu
Log in
Register