The Swedish equivalent of an ISA as a model for Ireland?

Setforlife said:
The big downside is that looking into deemed disposal and tax rate on funds and unit trackers v shares has fallen away to be replaced but this, which is being touted by Harris as a big win for consumers, but has actually morphed into a grab for extra tax revenue. Clearly revenue and dept of finance have won out on the argument of trying to get at the billions on deposit to be able to tax it consistently.
Click to expand...
Even if deemed disposal and the 38% exit tax was ended in favour of a 33% CGT rate, you'd still be better off invested in an ISK-type scheme with a 1% tax on the total at end of year.

As for a tax grab, I don't think it would be politically palatable to set a tax-free amount too high. The Swedes have this set at about €27.5k per person, which feels about right. It's high enough that you can make the claim that you are helping the "squeezed middle" without it being seen to be overly generous to the well-off.

If the scheme is created in the correct manner, it can be a win for both Revenue and the consumer.
 
Raskolnikov said:
The Swedes have this set at about €27.5k per person, which feels about right
Click to expand...
This is clearly subjective and there is no ‘right answer’, but I think it feels way too low as a lifetime ceiling.
The minimum deposit on a median home in Dublin now is €50k. €27.5k is just not very much money in 2026.

If you assume a 6% average return on equity. It equates to an annual tax relief of €1,650. Not much more than the pitiful CGT allowance which hasn’t been indexed since the 1970s.

We throw out a new €14k p.a. (risk free) rent a room relief on a whim. That would be broadly equivalent to having the ISK tax free limit at €250k.
m.independent.ie

Homeowners set to get €14,000 tax-free to rent modular units in back gardens

Homeowners are in line to earn €14,000 tax-free by renting out newly-built modular units in their back gardens under new changes being examined by the Government.
m.independent.ie m.independent.ie
 
Last edited:
Just another reminder that ISK does not charge 1% on “the total” or “everything” per annum.

The rate of tax payable in 2025 was 0.888% on amounts over ~€14,000. In 2026, it’s likely to rise to about 1.065% on amounts over ~€27,500.
 
It looks like there's no limit to how much an individual can put into an ISK in a year? That would be quite close to a general wealth tax even if it's an opt-in version. (Personally I think I'd opt-in instead of dealing with the current tax mess)

Revenue, if they've any sense, should be the ones shouting loudest for this sort of scheme, though hopefully with someone more sensible than them deciding what the annual tax % should be.
 
ashambles said:
Revenue, if they've any sense, should be the ones shouting loudest for this sort of scheme
Click to expand...
I've long wondered about what goes on behind the scenes in Revenue / DoF. For several years now Joe/Josephine Soap have been able buy ETFs, Crypto, CfDs, Spread Bets etc, all with a few clicks from a device that fits in their pocket.

Given the complexity of the tax system, with its differing rules for differing instruments, the level of non-compliance must be sky high. How Revenue are able to deal with the sheer volume of transactions, and individuals taking part in the market, you'd have to wonder, especially when they can't even seem to get around to making something as simple as a CG1 form digital.

This type of account seems like a pragmatic solution to that problem.
 
It seems that an ISK helps to some extent with dividend withholding taxes too, e.g. for US taxes the 15% DWT can be used as a credit against tax due on the ISK. (The ISK does not recover DWT taxes for customers though)

I see that Sweden has other types of accounts AF and KF, AF seems to be like normal trading account except they keep track of the trades for tax purposes.

KF seems to be closer to what our life companies offer - however they also allow buying shares. KF is often the best choice for dividends, as the provider manages the withholding tax recovery for you. Seemingly, it is the recommended account for Swedish investors holding German stocks, as it handles the notoriously difficult German tax reclaim process automatically

Some decisions in the ISK (e.g. dividend tax handling) may make more sense in the context of having those alternate AF and KF accounts available. I mention that as we'll be lucky to get an ISK carbon copy - let alone the other types of accounts.
 
Last edited:
Zion2022 said:
8% is a fairly high long term assumption
Click to expand...
Ever since the recession of 2008, people have been warning not to use past average returns of circa-8% as they were over optimistic. So far, the majority of years have returned well in excess of this.

Of course, we need to use an overly pessimistic assumption in retirement planning as the result of returns being below expectations has major repurcussions. However, when assessing whether to use whatever product is introduced, I believe 8% is a very reasonable assumption to use for returns for an all-equity investment.
 
Its a great way by the government to increase recurring tax on long term investors, who try to compound wealth with minimal share sales.
 
If half the 170 billion savings on deposit was redirected to this scheme and taxed at 1%, year 1 tax take would be €850,000,000. Assuming 7-8 % average growth of the peoples funds, yearly tax take would increase from here. 10 years down the road the gov could be looking at 1.6 billion revenue from this initiative alone, and that figure could be higher as people contribute each year.
 
I'm making some assumptions*
But this is everything I've ever wanted! And far far far superior to the nonsensical Exit tax regime.

  • No Deemed Disposal, so you can compound your money and grow some serious wealth
  • All money/assets taxed at 1%, so you no longer care if something pays a dividend. No more avoiding dividends like the plague
  • All money/assets taxed at 1%, so you no longer care if something is an ETF or Investment Trust etc. etc. etc.
  • No taxable event on sale, so now you can move to a better invesment even if you have large capital gains (particularly useful at times like now, where you might want to sell most of your equities and invest in Energy stocks or Gold)
  • Stable predictable tax revenue for the government
  • No complicated tax filings, Easy to calculate, easy to pay, no tax avoidance, everybody pays
  • Government don't lose out on CGT if you die

Assumptions*
  • 1% Tax rate on the balance above the tax free amount of ~30K (i.e. a low tax rate)
  • Financial providers take the money and give it to the government -i.e. no tax filing
  • You can invest in whatever you want, not limited to in house provider products
  • ideally no limit on what you can put in or take out
I would be very happy with this :D:D:D:D
 
Protocol said:
People could move away from IL, Zurich, Standard Life, etc.. avoid 1.00 or even 1.50% AMC, and move into ETFs on the platforms at 0.20% AMC?

Brokers would also lose out?
Click to expand...
Protocol, you and i dont need a broker, but most Irish people don't have a clue when it comes to investing. They will actually need the aforementioned to a) put them into the ISK and b) help them pick suitable investments.
I would bet that this will actually drive a lot more business to brokers and providers.
 
C_Pike said:
But, crucially, an ISK system passes significant risk from the state to the individual end user.
Click to expand...
Actually this is not true for the Irish. The report mentions that in Sweeden

’the standard taxation model that applies to ISK de facto entails a transfer of risk from the state to the individual with savings on ISK’. They quote a 2017 paper from the journal Ekonomisk Debatt, by Jacob Lundberg, Research Institute of Industrial Economics, where the author argues, ‘For the taxpayer, conventional capital taxation is an insurance against large fluctuations because the state, somewhat simplified, takes 30 percent of both capital gains and capital losses. This disappears with ISK, as taxation is then based on the size of the investment and not on its return. For the state, ISK means a smaller but more stable income stream.’

However in Ireland with Exit tax, this is not true. The government only applies Exit tax on gains and does not allow you to offset losses, so somewhat simplified, the governemnt does not take 30% (or 38% in our case) on capital losses.
In Ireland this is win win. The state gets a stable income stream with better compliance, the investor gets rid of all the complexity and gets a better financial outcome.
 
Any ideas how the tax would be levied in practice? Would the annual rate be converted to an effective daily rate and applied to the account value at say the close of each day?
 
B042026 said:
Any ideas how the tax would be levied in practice? Would the annual rate be converted to an effective daily rate and applied to the account value at say the close of each day?
Click to expand...

Was wondering similar.

Would be simpler just to check the balance on a date but then you could move money in and out before and after.

I’d like to be able to pay the tax bill myself. How can it take a bit of multiple investments each day.
 
AJAM said:
Financial providers take the money and give it to the government -i.e. no tax filing
Click to expand...
The provider can also calculate the amount that's owed, send it to the government, where it's then added to your tax return. You can pay by cash or have it deducted from your salary.
 
#96
It seems hard to know how it would work. Could you theoretically transfer an amount in and make a large gain in say two months. Then withdraw and only pay one sixth of the annual tax as those moneys were only in the account for two months?
 
B042026 said:
Any ideas how the tax would be levied in practice? Would the annual rate be converted to an effective daily rate and applied to the account value at say the close of each day?
Click to expand...

The Swedish system is a flat 30% tax rate on annual imputed income.

Annual imputed income is a % of the capital base.

The current % is the (long-term Govt borrowing rate + 1.00%).

So for 2026, savers will pay 30% flat income tax on 3.55% imputed return on their capital base.

  • Note that the extra 1.00% was less in the past, and can be changed.
  • Note that the LT borrowing rate is variable over time.

(0.30)*(3.55) = 1.065% tax



This is how we apply the government borrowing rate

www.riksgalden.se www.riksgalden.se


1774909517199.webp
 
Last edited by a moderator:
You must log in or register to reply here.
Back
Top