Sunday Independent writing rubbish about CAT

I can't understand why people have such a problem with inheritance and are so keen to punish the transfer of money with inheritance tax. Say I work hard all my life, earn as much money as I can and pay all my taxes. Say my aim is to be financially secure, to enjoy the advantages of my wealth but also, most importantly, to provide for my children so that they will have more advantages, more opportunities and more choices than I did. What is so very wrong with this? Historically this is what everyone has always wanted.
 
Silvius said:
I can't understand why people have such a problem with inheritance and are so keen to punish the transfer of money with inheritance tax.
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It is literally the fairest tax of all. The donor is dead. The recipient is gaining a windfall. You are not being taxed for working or for buying something. There is no disincentive to work.

For the government, more tax on inheritance means less income tax and excise. What's not to like?!

I say this as an only child who will one day probably pay about 10% overall tax on an inheritance. The current regime will be personally hugely beneficial. It's just not fair when lots of people are (at the margin) losing half the income they have sweated hard for to the taxman.
 
The point is that the money has been heavily taxed already.

If I earn €100, the State takes €52 and I only get €48.

I should be free to do what I want with my €48, including gifting it to my children.

Or at least the level at which inheritance tax kicks in should be higher.
 
There isn't a direct correlation between inheritance tax and income tax and if you're really worried about disincentives to work better have a look at social welfare. As Gordon says, the money has already been taxed, every step of the way. The earner should be free to do what they want with what they have earned and 'sweated hard' for. It's arguably the unfairest tax of all.
 
Gordon Gekko said:
Or at least the level at which inheritance tax kicks in should be higher.
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It takes nearly ten years hard work at average wages to earn a child's tax-free threshold for inheritance. It's not equitable.

I have a work-shy family member who hasn't worked in years, has no plans to do so and lives a reasonably comfortable life on benefits paid for by you and me.

Last year he inherited €200k. The only opportunity the state ever has to tax him is on on inheritance yet he sailed in well under the threshold!
 
No regrets coyote - I still don't see how those two issues are related. The state missed the opportunity to tax your family member by setting up a system that allowed them to live a reasonably comfortable 'work-shy' life on benefits and avoid work by choice, thus costing the tax payer a lot. The fact that they can now inherit €200k is a completely different issue. In relation to your argument about disincentivising work - there are very few (in this country anyway) who would ever inherit enough to be able to choose not to work at all, and even if they did so they wouldn't be costing the taxpayer anything.
 
No mention yet of the significant tax break you get by dying! Significant CGT on assets and income tax on pension assets forgone by the state!
 
torblednam said:
But the person who earned it and paid tax on it, isn't the person who is being taxed on it...
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;) emphasis on 'unearned' makes it sound as if nobody ever earned the money....if instead of leaving it to their nearest and dearest the donor left it to the dogs and cats home would there be the same objections to the charity receiving an 'unearned' inheritance tax-free?
 
Itchy said:
No mention yet of the significant tax break you get by dying! Significant CGT on assets and income tax on pension assets forgone by the state!
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CGT can be offset against CAT arising on the same event. So, if you gift an asset to a child (or to me - I'm always available for gifts!) then any CGT you pay is available for offset against any CAT arising to them on the gift.
 
Silvius said:
;) emphasis on 'unearned' makes it sound as if nobody ever earned the money....if instead of leaving it to their nearest and dearest the donor left it to the dogs and cats home would there be the same objections to the charity receiving an 'unearned' inheritance tax-free?
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There's specific exemptions in the tax code for charitable and similar organisations, and a clear public policy objective behind that.

Do you oppose that exemption, or perhaps you do not see a distinction between the receipt of money by charities versus the receipt of money by individuals?

I personally think CAT is a great tax. From the State's perspective it is something of a sitting duck to an extent. It is also an entirely progressive tax, since it is a form of wealth tax. If ever there should be a tax that the great unwashed could get behind it should be this - the vast majority of people will never find themselves liable to it, so to the extent that it's a tax on other people, and "the rich" (a group that most people like to define as not including themselves), it should be a slam dunk.

I don't buy the whole, "but it's already been taxed" line at all. Sure all money in the economy has "already been taxed", isnt the whole point of money that it circulates, getting sliced, diced, and taxed, along the way.

The bottom line is, if the State wants to broaden, or maintain the width of, the tax base, then it absolutely shouldn't water down CAT. Particularly since the inevitable result of paying all the wealthy Pauls, will be the further robbing of the put upon Peters in the middle.
 
The thing with CAT is it isn’t that equitable. The really wealthy hardly pay it at all.
 
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torblednam said:
There's specific exemptions in the tax code for charitable and similar organisations, and a clear public policy objective behind that.

Do you oppose that exemption, or perhaps you do not see a distinction between the receipt of money by charities versus the receipt of money by individuals?

I personally think CAT is a great tax. From the State's perspective it is something of a sitting duck to an extent. It is also an entirely progressive tax, since it is a form of wealth tax. If ever there should be a tax that the great unwashed could get behind it should be this - the vast majority of people will never find themselves liable to it, so to the extent that it's a tax on other people, and "the rich" (a group that most people like to define as not including themselves), it should be a slam dunk.

I don't buy the whole, "but it's already been taxed" line at all. Sure all money in the economy has "already been taxed", isnt the whole point of money that it circulates, getting sliced, diced, and taxed, along the way.

The bottom line is, if the State wants to broaden, or maintain the width of, the tax base, then it absolutely shouldn't water down CAT. Particularly since the inevitable result of paying all the wealthy Pauls, will be the further robbing of the put upon Peters in the middle.
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I wonder how much of otherwise taxable assets is moved offshore and into trusts to (legitimately) avoid CAT? I suspect that the wealthier you are the more likely you are to do this. You are also far more likely to benefit from the 90% farm/business relief. Meanwhile, the average Joe who has accumulated a house and a modest lump of cash or investments sees his surviving relatives getting whacked. (Ok, he doesn't really see it but you know what I mean.)

It's particularly harsh on those without spouse or children.

Would it not be fairer and more efficient to reduce the rate to something like 5% which would mean engaging in tax planning and complex avoidance mechanisms simply wasn't worthwhile? You could then justify reducing the threshold by a modest amount. It would keep money in the economy and the state would get a smaller slice of a bigger pie.
 
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It’s tricky enough to avoid CAT but I guess it’s not that tricky if you put your mind to it. If I had €5m and a child going to college in the UK or living in Australia, I’d give strong consideration to moving to Fermanagh for a few years with a view to gifting them the €5m. It’s essentially a €1.5m saving. And I’m still only 90 minutes from Dublin without the need to take a flight.
 
Gordon Gekko said:
It’s tricky enough to avoid CAT but I guess it’s not that tricky if you put your mind to it. If I had €5m and a child going to college in the UK or living in Australia, I’d give strong consideration to moving to Fermanagh for a few years with a view to gifting them the €5m. It’s essentially a €1.5m saving. And I’m still only 90 minutes from Dublin without the need to take a flight.
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Start a business in your child's name and use that capital to help grow the business (investing in the business, buying product, directors loans, sponsoring connections and all the other ways you can support a business when you have money to spare). If the business goes well you might end up with your €5m back and still have the CAT issue, but either way you would have used your wealth to make significant wealth for your child without any CAT liability. Even without the €5m you can achieve something similar by starting a business in your child's name and working in it to grow it for them. I see quite a bit of both.
 
Zenith63 said:
Start a business in your child's name and use that capital to help grow the business (investing in the business, buying product, directors loans, sponsoring connections and all the other ways you can support a business when you have money to spare). If the business goes well you might end up with your €5m back and still have the CAT issue, but either way you would have used your wealth to make significant wealth for your child without any CAT liability. Even without the €5m you can achieve something similar by starting a business in your child's name and working in it to grow it for them. I see quite a bit of both.
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Most businesses fail and there are carve-outs for ‘makey-up’ property-type businesses. Plus there’s an element of forcing the child down a particular path (not in terms of being involved day-to-day but more generally). I’d question the wisdom of such an approach.
 
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