Pandemic deficit erased as exchequer returns show €5 billion surplus
The public finances have improved by €10.7 billion since the end of July last year.
5Billion surplus, surely we could save and invest a bit for the rainy days
Why are Capital Gains taxed at a lower rate than Income?
- Thread starter Brendan Burgess
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5Billion surplus, surely we could save and invest a bit for the rainy days
Brendan Burgess
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Hi Horseman
We are going a bit off topic, but...
I have been campaigning for years to reduce mortgage rates in this country.
Having said that, anyone with a mortgage is paying far less interest than anyone who is renting an equivalent house.
Take a €250k house - the rent would probably be around €1,500 a month?
With a 90% mortgage at 3.5%, the interest charge would be around €650 per month. Even if rates rise to 5.5%, the home owner will be paying €1,000 a month in interest.
Brendan
NoRegretsCoyote
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The €335k tax-free threshold is about a decade's labour at the average wage.
I'm not sure what "adequate" would look like
T McGibney
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A million euro combined for inheritances and gifts from all sources, would be my best guess of that.The €335k tax-free threshold is about a decade's labour at the average wage.
I'm not sure what "adequate" would look like
The Group A threshold was circa €500k 15 years ago.
Only the rich should be paying CAT. As things stand the Group B threshold would barely cover the inheritance of a new car, the Group C limit a second-hand car. That's a joke.
Remember in the UK, there's no tax whatsoever on gifts.
The Horseman
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Hi Brendan
I am not trying to take this off topic. But the specific example quoted above relates to HAP. So the rent is by an large paid for by the State and not the tenant. The tenant pays the councils differential rate which is mostly single mothers with one or two children and I am personally aware of two such cases where both are contributing €75 a week in rent. Between their HAP contribution and the top up to meet the monthly rent.
I am trying to show how what you are proposing possibly could be a disincentive for people to be prudent in planning for their future. My initial post is posing the question why plan for your future and rather rely on the State to look after you.
Which ironically is why we have a pensions timebomb because they are paid out of current income.
Brendan Burgess
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Interesting comments from the ESRI on the topic.
Page 24 (PDF 35)
It would also allow for the equal treatment of capital gains and cash income, which
currently have separate allowances and rates for reasons that are hard to justify. The effect of this is to leave better-off taxpayers whose income comes exclusively from employment or rental income subject to a higher effective tax rate than those with the same income but from both employment and capital gains. Conversely, the differential treatment encourages those with lower levels of income to take that in the form of earnings rather than capital gains.
This treatment inhibits the ability of government to raise income tax revenues from higher earners, given the ability of company owner-managers to convert income into capital gains. For these reasons, Adam and Miller (2021) and the Office for Tax Simplification (2020), among others, have proposed aligning the rates of tax on capital gains with those on employment income in the UK.19 Harmonising the treatment of these different income sources would provide more scope for a future tax-raising government to increase not only rates of CGT, but rates of
income tax and USC too.
Page 24 (PDF 35)
It would also allow for the equal treatment of capital gains and cash income, which
currently have separate allowances and rates for reasons that are hard to justify. The effect of this is to leave better-off taxpayers whose income comes exclusively from employment or rental income subject to a higher effective tax rate than those with the same income but from both employment and capital gains. Conversely, the differential treatment encourages those with lower levels of income to take that in the form of earnings rather than capital gains.
This treatment inhibits the ability of government to raise income tax revenues from higher earners, given the ability of company owner-managers to convert income into capital gains. For these reasons, Adam and Miller (2021) and the Office for Tax Simplification (2020), among others, have proposed aligning the rates of tax on capital gains with those on employment income in the UK.19 Harmonising the treatment of these different income sources would provide more scope for a future tax-raising government to increase not only rates of CGT, but rates of
income tax and USC too.
Brendan Burgess
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Interesting table from the Tax Strategy Group. Many countries tax Capital Gains at the normal PIT (Personal Income Tax) rate.
Extract from report that Brendan referenced above...
This is a tentative exercise based on matching two different systems (income tax and capital
gains tax) and does not include any behavioural change. This is an important point as it is
likely that an additional charge could influence behavior to try to minimise tax liabilities in terms
of how and when gains are realized.
Increases in rates may have a significant behavioural impact. CGT is dependent on individual
behaviour and a change in rate may not produce a corresponding increase or decrease in tax
yield. In current economic conditions, any estimate of additional yield must be treated with
caution. The realisation of any estimated yield from an increase in taxation on assets relating
to property is subject to movements in the value of such assets, which are currently occurring
in the economy. In addition, increasing the rate could, in theory, lead to a reduction in yield
from the tax...
This is a tentative exercise based on matching two different systems (income tax and capital
gains tax) and does not include any behavioural change. This is an important point as it is
likely that an additional charge could influence behavior to try to minimise tax liabilities in terms
of how and when gains are realized.
Increases in rates may have a significant behavioural impact. CGT is dependent on individual
behaviour and a change in rate may not produce a corresponding increase or decrease in tax
yield. In current economic conditions, any estimate of additional yield must be treated with
caution. The realisation of any estimated yield from an increase in taxation on assets relating
to property is subject to movements in the value of such assets, which are currently occurring
in the economy. In addition, increasing the rate could, in theory, lead to a reduction in yield
from the tax...
And MNC's have invested vast sums of capital in order to create highly efficient and therefore highly profitable businesses. That point is often ignored.
Sophrosyne
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Absolutely!
That is to their credit. It is the best way to grow their businesses.
You remain tax resident in Ireland for up to two years after you leave so it'd require a fair bit of foresight.
Yes but what about the details in the taxation in each country most especially index linking gains to inflation and reducing nominal gains to account for inflation. Therefore for Ireland this year the gain associated with year 2022 should be reduced by 10%.
It's easy to put up a table that compare Ireland with other countries based on one parameter but then not give the background to this taxation. How many of those countries allow for inflation indexation, that would reduce quite considerably the total CGT gain.
Another factor where Ireland is a complete outlier is regarding deemed disposal and 41% tax on sale of investment funds and ETFS, with no loss relief and again no indexation for inflation.
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