My submission to the Commission on Tax and Social Welfare

Brendan Burgess

Founder
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I have found the recent debate on Askaboutmoney very helpful in developing the suggestions I have incorporated in my submission, so thanks to all who contributed.

If you agree or disagree with some of the points I have made, I strongly encourage you to make a submission yourself.

Tomorrow, 17th Jan is the deadline. Send your submission in to consultation@cotw.gov.ie

They have extended the deadline from last year, so I suspect that they have not had many submissions.

Brendan
 

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Brendan Burgess

Founder
Messages
48,320
Submission to the Commission on Tax and Social Welfare
From: Brendan Burgess
17th January 2022

The writer is a consumer advocate and founder of the Consumer Forum, askaboutmoney.com where these issues are frequently discussed. The opinions are my own and not the views of the contributors to Askaboutmoney.

Introduction
My comments are on the overall operation and fairness of the system. Most do not involve an increase in the total level of taxation. For example, when I say that the CGT exemption on death should be abolished, it does not mean that I think more CGT should be paid. However, some would lead to an increase in the overall tax take, for example, the elimination of Business Relief for CAT.

Summary

Suggestion 1 Annual credits and limits should be replaced cumulative ones
For example, an employee aged 30 can contribute 20% of their salary each year to a pension fund. If they don’t use it, they lose it. It would make more sense for a younger person to save the deposit for a house, rather than to contribute to a pension fund. They should not lose out by doing so. I propose that a person should be allowed to contribute a cumulative €10,000 a year for every year they are resident in the country. Any unused contribution should be carried forward to later years. The same should apply to the Personal Tax Credit and the annual CGT Exemption.

Suggestion 2 The same tax treatment should apply to all types of investments
Some investments, for example, shares and property are subject to Capital Gains Tax and Income Tax. Others are subject to Gross Roll-up an Exit Tax. When a person dies, their Capital Gains Tax liability disappears with them, but their Exit Tax liability does not. The treatment should be the same as far as possible and it should be easy to understand without the need for expensive tax advice.

Suggestion 3 Capital Gains Tax should be progressive with lifetime thresholds
Something along the following lines for example:

1642344536188.png

Suggestion 4 The CGT exemption on death should be abolished

An investor who owns a property or shares is subject to Capital Gains Tax when they sell the asset. But when they die, the liability evaporates. There is no rationale for this and it leads to poor investment decisions driven by taxation rather than by good asset allocation strategies. This exemption should be abolished.

Suggestion 5 The Annual Small Gift Exemption of €3,000 should be abolished

There is a good rationale for exempting occasional small gifts from the administrative burden of CAT.

However, it has become an integral part of tax planning with wealthy parents each giving their children €3,000 a year over a period of 30 years. Thus, a person gets €180k of gift tax exemptions on top of the Class A Threshold of €335,000.

There is no need for this exemption as small gifts, even from strangers, have a lifetime exemption limit of €16,250. That should be enough for anyone.

Suggestion 6 Business Relief and Agricultural Relief from CAT should be restricted or abolished

The current system allows a person inheriting a business worth €3m to pay no CAT in most circumstances. While safeguards are needed to make sure that CAT liabilities do not result in the sale of the family farm or break-up of a business, exempting the beneficiary from CAT is not the fairest way to do this.

Suggestion 7 PRSI should become an Individual Account system

The current PRSI system is totally unsustainable. To make this fund sustainable the government would have to do all the following

  • Dramatically raise PRSI contributions, and
  • Significantly reduce the amount of Contributory OAP, and
  • Significantly raise the retirement age
I suggest that all PRSI should go into an Individual Account in the contributor’s name. The amount of Jobseekers Benefit, the amount of their weekly pension and the retirement age would all be determined by the size of their fund.

Whatever else is done, this approach must be adopted for the self-employed and company directors whose contribution of 4% is totally insufficient for the level of benefits they get.
 
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noproblem

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Significantly reduce the amount of Contributory OAP.

Seriously? Why?
In a lot of cases this is all the person has, or am I reading it wrong? If so, I apologise.
 

Brendan Burgess

Founder
Messages
48,320
I am just pointing out the obvious. The current system is unsustainable and if we don't fix it, we will be forced to do all of the following:

  • Dramatically raise PRSI contributions, and
  • Significantly reduce the amount of Contributory OAP, and
  • Significantly raise the retirement age
 

noproblem

Registered User
Messages
3,261
I am just pointing out the obvious. The current system is unsustainable and if we don't fix it, we will be forced to do all of the following:

  • Dramatically raise PRSI contributions, and
  • Significantly reduce the amount of Contributory OAP, and
  • Significantly raise the retirement age
Political suicide. Not going to happen.
 

noproblem

Registered User
Messages
3,261
So we should not do the right thing because it would harm our chances of getting elected?
No, but sadly or otherwise, that's the situation.

Will it change? No, not in a month of Sundays. Sinn Féin might change that perspective though when they assume their entitlement :confused:

Maybe instead of trying to introduce ways to get the right policies by Goverment, we should be thinking of a new way to elect Goverment cabinets who won't be out of a job if people don't like it.
 

Towger

Registered User
Messages
2,187
I am just pointing out the obvious. The current system is unsustainable and if we don't fix it, we will be forced to do all of the following:

  • Dramatically raise PRSI contributions, and
  • Significantly reduce the amount of Contributory OAP, and
  • Significantly raise the retirement age
The government have stated they are going to increase the population by emigration. This increases the tax returns and reduces the costs of educating the work force. In other words allows them to kick the pension time bomb down the road some more.
 
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