Brendan Burgess
Founder
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Wasn't there a substantial collection of CGT when the rate was reduced by Charlie McGreevey?An argument is used that a lower rate of CGT increases the overall tax take.
I doubt that is true. It might change the timing of it. If the rate were reduced to 20% in the morning, people would probably realise some gains. But these gains would be taxed eventually.
Brendan
+1, on all counts.Wasn't there a substantial collection of CGT when the rate was reduced by Charlie McGreevey?
If CGT rate was the same rate as income tax, where is the incentive to invest in equities when one considers risk and costs ?
People are slow enough to cash in equity gains as it is when paying 33% rate... I'd imagine people would fail to realise gains and miss out on potential benefits and government's miss out on potential tax..
Besides, almost nobody is paying an effective income taxes (plural) rate of 33%,
33% CGT is bad enough Brendan. 52% would be a disastrous disincentive against investment in anything. Remember we already have a grotesque housing shortage, a grossly undercapitalised indigenous business sector, and severe underinvestment in built property, a lot of it literally falling down. The higher you raise CGT, the more people will realise that taking a punt on something is just not worth it.Good point.
But why not combine them? Treat Capital Gains as Income and subject to the same taxes.
Brendan, the effective rate is irrelevant in any decision to dispose of an asset or otherwise realise a capital gain. If the person making the disposal is earning over €40k per year (which I would guess be typical of most CGT payers), they're almost definitely facing 52% tax on the resulting gain. They have already used their tax credits and lower tax band to cut the tax charge on their income.Good point.
But why not combine them? Treat Capital Gains as Income and subject to the same taxes.
The effective tax rate on combined income and CGT would be less than 52%
Brendan
You can also choose never to sell an asset if you want to avoid paying CGT. In 1980s Ireland it wasn't unknown for 70 year old men to be still working on their parents' farms, so Retirement Relief was introduced to incentivise over-55s to dispose of farms and other business assets. That pattern is now repeating itself in relation to housing where children are being reared in homes owned by grandparents who can't afford to dispose of them.In comparison to income tax, CGT is under much more competition.
You can sometimes choose when and where CGT gets paid, if you're living off inherited wealth - you can live anywhere you want.
If someone had built up large profits on a share portfolio you might move to Belgium for a few years and turn them to cash there at 0% CGT.
I imagine it goes back a long way when only the wealthy were able to afford for public office and they shaped the legislation to benefit themselves.I have separated this out from the other thread as they are dealing with different issues.
Let me tease this out a bit further.
If I have never worked a day in my life but inherited my wealth so I am living off my investment income.
Why should it be taxed at 33% while those who are working pay 52% on their marginal income?
OK, if I go to work, I am not taking any risk. I will get paid at the end of the month.
If I invest in a property or shares I am taking risk. So it is argued that I should be rewarded for that risk by paying less tax. But doesn't the reward for taking risk come from the expected higher returns?
Brendan
I wonder how many people have never worked a day in their lives and just lived off inherited income?
Not necessarily in Ireland though. The higher the rate the greater the motive for people with unrealised gains to relocate before realising them.But these gains would be taxed eventually.
Whatever I have to leave to my kids, I will already have paid Tax, USC+ PRSI on the earned income used to buy it- all at higher tax rates.That is a very good point. It's probably very few.
Brendan
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