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.
