OECD advises Ireland to increase inheritance taxes

[Purple]

Sinn Fein want to "Introduce a tax on individual net wealth in excess of €1 million euros, excluding working farmland and business assets." That seems utterly pointless from a practical tax raising perspective.
To get in to the top 10% of earners in this country you have to earn a whopping €69,511.01 a year. To get into the top 1% you have to earn €189,701.69. The Shinners are talking about taxing the top 0.1% of earners, less the value of their home, pension and business. That'll amount to bugger all. They also want to "Introduce a third rate of income tax on individual earnings over €100,000." That'll also raise bugger all, and increase wealth inequality.
And they are the only party who are talking about tax increases.

 

[Peanuts20]

Sinn Fein's Wealth tax would include 80% of the value of the family home meaning an awful lot of people in the D4 and other parts of Dublin would get dragged in. I agree however, it won't raise much but there is the political optics of it which would be very popular. It would be self assessed so it's open to abuse however.

 

[Purple]

Sinn Fein's Wealth tax would include 80% of the value of the family home meaning an awful lot of people in the D4 and other parts of Dublin would get dragged in. I agree however, it won't raise much but there is the political optics of it which would be very popular. It would be self assessed so it's open to abuse however.

Details here.
It kills me to say it but from the initial reading I like it, though I don't agree with the 20% exemption on Family homes. Their latest proposal that tax relief on Pension Contributions should be capped at the lower tax band is probably more significant and, in the interest of fairness and equity, would necessitate a massive increase in the Pension Levy and the imposition of BIK on Defied Benefit Pensions.

 

[Sarenco]

They also want to "Introduce a third rate of income tax on individual earnings over €100,000."

We already effectively have a third rate of income tax of 55% (including PRSI and the 3% USC surcharge) on non-PAYE income over €100k.

It would seem broadly equitable to extend that rate to PAYE income over €100K, although taking more than half of any income in tax seems a bad idea to me.

It kills me to say it but from the initial reading I like it

I don't understand the reference to a "taxable unit" in the document. If a jointly-assessed married couple have €2m in relevant assets, does the proposed wealth tax apply and, if so, to what amount?

Are mortgages or other liabilities taken in account? If they are, what's to prevent a taxpayer from mortgaging an asset to avoid the tax?

IMO, SF's proposed wealth tax will cost the exchequer far more than it will raise in revenue as it will result in the flight of some of our wealthiest individual taxpayers (think Michael O'Leary, etc.). That was certainly the experience in France, which scrapped their wealth tax a few years ago.

Their latest proposal that tax relief on Pension Contributions should be capped at the lower tax band is probably more significant and, in the interest of fairness and equity, would necessitate a massive increase in the Pension Levy and the imposition of BIK on Defied Benefit Pensions.

SF have also proposed reducing the SFT to €1.2m (which would bring it in line with the UK's lifetime allowance).

IMO, that would (indirectly) result in the early retirement of a significant number of high earning State employees (think hospital consultants), which would be a disaster.

 

[Purple]

All good points.

We already effectively have a third rate of income tax of 55% (including PRSI and the 3% USC surcharge) on non-PAYE income over €100k.

It would seem broadly equitable to extend that rate to PAYE income over €100K, although taking more than half of any income in tax seems a bad idea to me.

I agree. I'm not in favour of increasing taxes on wealth creation through work. In fact we should be reducing it.

I don't understand the reference to a "taxable unit" in the document. If a jointly-assessed married couple have €2m in relevant assets, does the proposed wealth tax apply and, if so, to what amount?

I presume they mean taxable unit the same way Revenue do. That would really hit single people.

Are mortgages or other liabilities taken in account? If they are, what's to prevent a taxpayer from mortgaging an asset to avoid the tax?

Will people really make out mortgages, with the insurance and interest costs, just to avoid a relatively small tax?
If they take out a mortgage then they get the money so the net change in wealth is zero, no?

IMO, SF's proposed wealth tax will cost the exchequer far more than it will raise in revenue as it will result in the flight of some of our wealthiest individual taxpayers (think Michael O'Leary, etc.). That was certainly the experience in France, which scrapped their wealth tax a few years ago.

SF have also proposed reducing the SFT to €1.2m (which would bring it in line with the UK's lifetime allowance).

IMO, that would (indirectly) result in the early retirement of a significant number of high earning State employees (think hospital consultants), which would be a disaster.

It is already the case that top State Employees on DB schemes enjoy larger pensions than anyone in the private sector can get. Reducing it further without a massive increase in the Pension Levy would be grossly unfair.

 

[Nermal]

Sinn Fein want to "Introduce a tax on individual net wealth in excess of €1 million euros, excluding working farmland and business assets." That seems utterly pointless from a practical tax raising perspective.
To get in to the top 10% of earners in this country you have to earn a whopping €69,511.01 a year. To get into the top 1% you have to earn €189,701.69. The Shinners are talking about taxing the top 0.1% of earners, less the value of their home, pension and business. That'll amount to bugger all. They also want to "Introduce a third rate of income tax on individual earnings over €100,000." That'll also raise bugger all, and increase wealth inequality.
And they are the only party who are talking about tax increases.

On that topic, did it occur to the OECD to recommend farmers and business owners pay the same inheritance tax as everyone else?

 

[joe sod]

It also had other statistics which were not reported in the media, Ireland had a modestly lower tax wedge for the average single worker of 32.3 % as compared 34.6% for the OECD average , however for a married couple with 2 children the tax wedge was substantially lower 24.2 % for OECD average but only 16.1% tax wedge for that couple in Ireland.
Therefore married people with children are substantially better off in Ireland as regards taxation

 

[NoRegretsCoyote]

for OECD average but only 16.1% tax wedge for that couple in Ireland.
Therefore married people with children are substantially better off in Ireland as regards taxation

Most of the difference is due to child benefit, not the tax system.

If I'm not wrong for two people earning on >€36.6k each marriage makes no difference to their net income.

 

[joe sod]

Most of the difference is due to child benefit, not the tax system.

If I'm not wrong for two people earning on >€36.6k each marriage makes no difference to their net income.

yes thats taken into account aswell for all OECD countries but in Ireland it is much more generous and universal
"Child related benefits and tax provisions tend to reduce the tax wedge for workers with children compared with the average single worker. In Ireland in 2020 this reduction (16.2 percentage points) was greater than the OECD average (10.2 percentage points)."

 

[Gordon Gekko]

Child Benefit is only €1,680 per year, handy, but hardly a dial-mover.

 

[joe sod]

Child Benefit is only €1,680 per year, handy, but hardly a dial-mover.

it cost 2 billion euros in 2018 , corporation tax receipts in 2018 were 10 billion, sure whats a billion here or there. The point is that if corporation tax receipts are halved in the future as per the OECD warning then all these extra billions in expenditure are significant. Its not the child benefit per se but that their should be more openess and honesty about the benefits that are given in Ireland in comparison to other OECD countries.

 

[Gordon Gekko]

it cost 2 billion euros in 2018 , corporation tax receipts in 2018 were 10 billion, sure whats a billion here or there. The point is that if corporation tax receipts are halved in the future as per the OECD warning then all these extra billions in expenditure are significant. Its not the child benefit per se but that their should be more openess and honesty about the benefits that are given in Ireland in comparison to other OECD countries.

That’s a strawman argument. I never referred to it at a national level; I was discussing it in the context of an individual’s earnings.

 

[Purple]

On that topic, did it occur to the OECD to recommend farmers and business owners pay the same inheritance tax as everyone else?

That would mean businesses and farms would have to be sold with each generation to pay the inheritance tax. That would cost hundreds of thousands of jobs.

 

[NoRegretsCoyote]

hat would mean businesses and farms would have to be sold with each generation to pay the inheritance tax.

Taxing farmers' inheritances would have precisely zero impact on the amount of arable land in the country, or the incentive to farm it.

Which is why it would be such a good tax

 

[Purple]

Taxing farmers' inheritances would have precisely zero impact on the amount of arable land in the country, or the incentive to farm it.

Which is why it would be such a good tax

Yes, but it would be much harder to raise a loan against an asset which was worth far less than it is now.
There are lots of farms which also have businesses attached and those businesses would have to close in order to pay the inheritance tax.
It would effectively give a massive advantage to publicly quoted companies to buy up farms and family businesses. Is that what we want?

 

[joe sod]

That’s a strawman argument. I never referred to it at a national level; I was discussing it in the context of an individual’s earnings.

It's not a strawman argument, I referred to the benefits to married couples with children of the Irish taxation system relative to other oecd countries, you threw in "ah sure it's only 1680 euros " it doesn't really matter , nothing to see here argument. I put it back into its proper context of total cost to the country in comparison to corporation tax .
I agree it's not massive but probably bigger than the inheritance tax totals. The point is there should be no sacred cows in the context of radical changes in taxation

 

[PMU]

My brother-in-law has paid very little income tax his whole life due to a spotty work history. He had an inheritance of €250k a few years ago and it seems crazy that not a cent of it was taxed.

A structure like the first €100k tax free with 20% after that would be far more equitable.

Not to your brother-in-law. It doesn't really matter if he had a spotty work history or just decided to pass his time in front of the telly swillng Dutch lager. He is clearly worse off than, for example, others who have had more success in their careers. Becase he's worse off the inheritance has a higher value to him than to e.g. other beneficiaries who had more successful careers. An inheritance to him distributes wealth more evenly; it brings him up. Why should he pay the same amount of tax on it as a better-off beneficiary?

This is the problem where beneficiaries pay inheritance taxes. It gives rise to all sorts of anomalies. All governments do or should tax money when it moves. So the state should just slice off a % of the value of the estate and then let it be distributed as provided for by the will. Wills distribute wealth where there are multiple beneficiares or where a single beneficiary is worse off than the disponer. The state should respect the distributional decisions of the disponer, who after all, accumulated the wealth and not try to impose politically determined decisions on how 'wealth' (a rather loaded word to decribe the family home and a few keepsakes) should be inherited.

 

[Purple]

The state should respect the distributional decisions of the disponer, who after all, accumulated the wealth

That seems to imply an intent or action on behalf of the disponer in the accumulation of said wealth, that it was acquired through deliberate action, hard work, planning, intellect and foresight rather than just happening to buy a house in the 1970's or 80's.
Something that is purchased for €30k (€212k now, adjusted for inflation) and is now worth €650k can and should be considered a form of wealth and calling it such is simply accurate an is in no way loaded.

 

[The Horseman]

That seems to imply an intent or action on behalf of the disponer in the accumulation of said wealth, that it was acquired through deliberate action, hard work, planning, intellect and foresight rather than just happening to buy a house in the 1970's or 80's.
Something that is purchased for €30k (€212k now, adjusted for inflation) and is now worth €650k can and should be considered a form of wealth and calling it such is simply accurate an is in no way loaded.

No it shouldn't. This is a person who purchased a property to stand on their own two feet. Did not rely on the State for accommodation. Maintained the property probably modernised it etc.

You now want to penalise someone for actually doing the right thing and worked to take care of themselves rather than rely on the State to do so.

Based on your stance people would actually be discouraged from trying to look after themselves and would be encouraged to rely on the State.

 

[noproblem]

No it shouldn't. This is a person who purchased a property to stand on their own two feet. Did not rely on the State for accommodation. Maintained the property probably modernised it etc.

You now want to penalise someone for actually doing the right thing and worked to take care of themselves rather than rely on the State to do so.

Based on your stance people would actually be discouraged from trying to look after themselves and would be encouraged to rely on the State.

Purple doesn't like it when a persons assets increase without their back being broken. More so if someone related to the unfortunate broken back person inherits that asset and doesn't pay another whopper of a tax on it, in order to give to someone who doesn't, or won't, work at all. Maybe purple should change colour to RED and learn to speak Russian.