The Department appears to be asking why Irish people do not invest more while simultaneously preserving many of the tax features that investors identify as barriers to investing. If policymakers are unwilling to accept some short-term revenue risk in order to encourage long-term capital accumulation, retail participation may remain low, which in turn makes further reform harder to justify politically.
- Policymakers worry about immediate Exchequer costs and avoidance risks.
- Therefore they are reluctant to give substantial tax advantages to retail investors.
- The resulting tax regime makes long-term equity investing less attractive than it might otherwise be.
- Household savings remain concentrated in deposits, pensions and property.
- Because retail participation remains low, policymakers continue to view investment incentives as niche measures benefiting a relatively small group.
- Reform therefore remains politically difficult.
This strikes me as a coherent "Catch-22" story.
Ireland had an opportunity to make low-cost diversified investing substantially more attractive by addressing deemed disposal and the differential tax treatment of ETFs. Instead, the roadmap largely preserves the existing framework and proposes further review. The result may be an Investment Account that changes the wrapper through which investments are held without materially changing the underlying incentives.
Ireland has historically channelled large amounts of household wealth into property. The State says it wants more participation in capital markets. But the roadmap does not currently offer sufficient clarity for a saver choosing a globally diversified ETF over existing alternatives. Instead, it reflects a mentality that prioritises securing tax receipts today over maximising the future stock of taxable wealth. The question is whether collecting somewhat less tax from successful long-term investment compounding might ultimately produce a larger tax base twenty or thirty years from now.
Before this "roadmap", investors wanted answers to questions like is DD8 going? is the 38% rate changing? Will ETFs move closer to CGT? will loss treatment improve? What exactly are the terms of the new account? After publication, we got few answers. If the Government had announced "DD8 will remain, but investors can use a low-cost account with a transparent 1% annual levy instead", people could at least evaluate the proposal.
Instead, we have a roadmap that hints at a new account while leaving most of the economically important details unspecified.
The biggest unanswered question remains exactly the same as before this roadmap - will Ireland ever address DD8 and the broader taxation of ordinary ETF investing, or will reform be confined to a new provider-managed limited wrapper? The danger is that once the Government becomes invested in the success of the new Investment Account, policy attention shifts from reforming the underlying tax regime to promoting the wrapper itself.
