Capital gains tax is too high

airmech

http://townhall.com/columnists/stephenmoore/2015/08/04/five-myths-about-capital-gains-taxes-n2034046

We have one of the highest rates in the world. I have heard of landlords that will not sell property to tenants until the CGT is reduced as they will lose a fortune. Has this issue been lobbied already or is there any wise people that are currently in the process?

http://www.forbes.com/sites/robertwood/2015/03/25/u-s-capital-gain-rate-among-worlds-highest-but-president-obama-wants-more/#2163fd8920ce

m320325

airmech wrote: »

We have one of the highest rates in the world. I have heard of landlords that will not sell property to tenants until the CGT is reduced as they will lose a fortune. Has this issue been lobbied already or is there any wise people that are currently in the process?

If I understand correctly, CGT is only paid on the increase in value, so I can't see how they could lose money, can you explain?

Example1:
Property bought for 100k, sold for 110k, tax is paid on the 10k, so they still end up with more than 100k

Example2:
Property bought for 100k, sold for 100k, no CGT due.

m320325

Are you talking about capital gains tax in the US??

airmech

m320325 wrote: »

Are you talking about capital gains tax in the US??

I am talking about the high rate in Ireland, the article was just an example of how its not always the best to have these crazy high taxes.
In Ireland its a double hit, other countries with high tax at least allow a profit of 10000 or 20000 before you are taxed, here its 1270.

On a house bought for 300,000 sold for 400,000. 100,000 profit but CGT of 33000 to pay. A reasonably system would allow 20,000 tax free and tax the rest (80,000) at say 10 - 20% so CGT of 8000- 16000. Its a big saving, some landlords will hold off selling until its fixed.

wally1990

airmech wrote: »

I am talking about the high rate in Ireland, the article was just an example of how its not always the best to have these crazy high taxes.
In Ireland its a double hit, other countries with high tax at least allow a profit of 10000 or 20000 before you are taxed, here its 1270.

On a house bought for 300,000 sold for 400,000. 100,000 profit but CGT of 33000 to pay. A reasonably system would allow 20,000 tax free and tax the rest (80,000) at say 10 - 20% so CGT of 8000- 16000. Its a big saving, some landlords will hold off selling until its fixed.

Ya it's 33% with an annual allowance (deduction) from tax payable of €1270. Sickening really to have invested in an assets and sell it at the purpose of a profit and have to pay 33% tax!

I can understand property owners and others frustrations

jcon1913

airmech wrote: »

I am talking about the high rate in Ireland, the article was just an example of how its not always the best to have these crazy high taxes.
In Ireland its a double hit, other countries with high tax at least allow a profit of 10000 or 20000 before you are taxed, here its 1270.

On a house bought for 300,000 sold for 400,000. 100,000 profit but CGT of 33000 to pay. A reasonably system would allow 20,000 tax free and tax the rest (80,000) at say 10 - 20% so CGT of 8000- 16000. Its a big saving, some landlords will hold off selling until its fixed.

Generally only wealthy people pay Capital Gains Tax on their gains. Hard to have sympathy for them. The have sold some thing they have cash, and they have to hand over one third of their gain. High rate but if you have made a gain you have the few bob.

Landlords will sell when they have to. Many of them are selling, at a loss in ma good few cases.

Hopeful2016

jcon1913 wrote: »

Generally only wealthy people pay Capital Gains Tax on their gains. Hard to have sympathy for them. The have sold some thing they have cash, and they have to hand over one third of their gain. High rate but if you have made a gain you have the few bob.

Landlords will sell when they have to. Many of them are selling, at a loss in ma good few cases.

The CGT rules apply to everyone not just the wealthy. The nonsense that gets sprouted here sometimes

airmech

jcon1913 wrote: »

Generally only wealthy people pay Capital Gains Tax on their gains. Hard to have sympathy for them. The have sold some thing they have cash, and they have to hand over one third of their gain. High rate but if you have made a gain you have the few bob.

Landlords will sell when they have to. Many of them are selling, at a loss in ma good few cases.

Poor people have to pay the same rate, I don't believe that only the wealthy invest money. Interesting if there was different brackets of CGT for people with different salary scales alright. The government has already adjusted the rates for entrepreneurs.

fits

Its madness. You earn income, you pay tax on it. Then if you are wise and clever and save some and invest wisely you are penalised heavily for it. 33% on gains is just crazy. It should go back to 20%.

crc

airmech wrote: »

On a house bought for 300,000 sold for 400,000. 100,000 profit but CGT of 33000 to pay. A reasonably system would allow 20,000 tax free and tax the rest (80,000) at say 10 - 20% so CGT of 8000- 16000. Its a big saving, some landlords will hold off selling until its fixed.

The house example is emotive as most people can at least aspire to own their own home, and this would seem like a punitive tax on the appreciation in value of one's home. However it ignores the PPR relief, so in reality the example above only applies to people who like to speculate in the residential property market, therefore in my view the 33% rate is suitable.

airmech

crc wrote: »

The house example is emotive as most people can at least aspire to own their own home, and this would seem like a punitive tax on the appreciation in value of one's home. However it ignores the PPR relief, so in reality the example above only applies to people who like to speculate in the residential property market, therefore in my view the 33% rate is suitable.

Yes, but what if it deters people from selling. They will be more than happy to keep renting it out at the current rates. Renters cant get their own house because landlords wont sell.

Its a slightly different issue, but should there be different rates of CGT for shares then?
Different rates again depending on income?

jimmycrackcorm

crc wrote:

The house example is emotive as most people can at least aspire to own their own home, and this would seem like a punitive tax on the appreciation in value of one's home. However it ignores the PPR relief, so in reality the example above only applies to people who like to speculate in the residential property market, therefore in my view the 33% rate is suitable.

I agree. It depends on your perspective. If I were offered a new job paying an extra 100k, I'd be paying 52% of it in tax.

KomradeBishop

Capital Gains Tax is far far too low. It should be brought in line with Income Tax, as well as being taxed progressively in line with that.

CGT is unearned income - and at the end of the day it is Income overall - and should not have special privileged treatment.

If you want to attack excessively growing income/wealth inequality, and one of its most lucrative sources - then a solid Capital Gains Tax which (at least) matches the Income Tax, is one of the first steps.

It is a complicated issue to implement properly, yes, and you have to avoid special cases where double taxation will arise - but it's perfectly doable, and it must be increased in line with Income Tax.

jcon1913

Hopeful2016 wrote: »

The CGT rules apply to everyone not just the wealthy. The nonsense that gets sprouted here sometimes

Wealthy = someone who has an asset apart from their home that they have as an investment. The rules apply to everyone, but only the wealthy pay any chunk Of CGT - say above €33,000.

jcon1913

airmech wrote: »

Yes, but what if it deters people from selling. They will be more than happy to keep renting it out at the current rates. Renters cant get their own house because landlords wont sell.

Its a slightly different issue, but should there be different rates of CGT for shares then?
Different rates again depending on income?

Its a free market apart from govt interference. Landlords can choose to buy or sell whenever they choose to. They have to pay Capital Gains on their gains.

airmech

KomradeBishop wrote: »

Capital Gains Tax is far far too low. It should be brought in line with Income Tax, as well as being taxed progressively in line with that.

CGT is unearned income - and at the end of the day it is Income overall - and should not have special privileged treatment.

If you want to attack excessively growing income/wealth inequality, and one of its most lucrative sources - then a solid Capital Gains Tax which (at least) matches the Income Tax, is one of the first steps.

It is a complicated issue to implement properly, yes, and you have to avoid special cases where double taxation will arise - but it's perfectly doable, and it must be increased in line with Income Tax.

Crazy talk, we have one of the highest in the world. People take a huge risk in investing, its important to invest in business for growth in the economy. Why would you want to deter investors.

robp

jimmycrackcorm wrote: »

crc wrote:

The house example is emotive as most people can at least aspire to own their own home, and this would seem like a punitive tax on the appreciation in value of one's home. However it ignores the PPR relief, so in reality the example above only applies to people who like to speculate in the residential property market, therefore in my view the 33% rate is suitable.

I agree. It depends on your perspective. If I were offered a new job paying an extra 100k, I'd be paying 52% of it in tax.

Only at the marginal rate. The overall tax bill on a 100k salary is closer to 40% Of course still higher than 33% so I take your point, but all the same capital gains tax is frequently lower than income tax internationally.

KomradeBishop

airmech wrote: »

Crazy talk, we have one of the highest in the world. People take a huge risk in investing, its important to invest in business for growth in the economy. Why would you want to deter investors.

That's bollocks - Denmark has a higher CGT. 'Highest Capital Gains Tax in the world!' is just the standard propaganda piece used to push for a reduction.

Same with the 'deter investors' nonsense - CGT comes when you make a profit on an investment, there's nothing special about investment income which warrants a lower level of tax.

Where the hell are all these investors anyway? Eating up the QE free-lunch, rather than investing in areas where we actually need investment.

jcon1913

airmech wrote: »

Crazy talk, we have one of the highest in the world. People take a huge risk in investing, its important to invest in business for growth in the economy. Why would you want to deter investors.

Like Denis OBrien who relocated to Portugal to avoid paying Capital Gains Tax? That wouldnt work today because of revisions to the rules on residency vis a vis Capital Gains Tax.

People who invest in the hope of millions in profit should be taxed on their gains. Lower CGT leads to taxpayers making gains instead of taking a salary eg "selling" shares in their business etc

Maybe an entrepreneurs exemption could help investment in targeted industries - IT / pharma for example

newacc2015

fits wrote: »

Its madness. You earn income, you pay tax on it. Then if you are wise and clever and save some and invest wisely you are penalised heavily for it. 33% on gains is just crazy. It should go back to 20%.

I personally dont think it should go back to 20%. I prefer the American system of 20% for long term gains and I think 35% for short term gains. I think closer to 25-27% is fair for long term gains. 33% seems fair for short term gains. I think the yearly exemption should be increased to €3k like it is for gifts. The €1270 limit is clearly from when he adopted the euro ie 1000 Irish pounds is €1270

airmech

KomradeBishop wrote: »

That's bollocks - Denmark has a higher CGT. 'Highest Capital Gains Tax in the world!' is just the standard propaganda piece used to push for a reduction.

Same with the 'deter investors' nonsense - CGT comes when you make a profit on an investment, there's nothing special about investment income which warrants a lower level of tax.

Where the hell are all these investors anyway? Eating up the QE free-lunch, rather than investing in areas where we actually need investment.

One of the highest in the world. People are already paying their way through income tax in what is a fair enough system, why try and screw them every way you can. Who says this is the best way, since when is Ireland a world leader. I can acknowledge some of the points but really you should be allowed alt higher profit before you are taxed, not just 1270.

redlead

What tax isn't in this state though? There is shocking high taxes on everything.

Limestone1

KomradeBishop wrote: »

Capital Gains Tax is far far too low. It should be brought in line with Income Tax, as well as being taxed progressively in line with that.

CGT is unearned income - and at the end of the day it is Income overall - and should not have special privileged treatment.

If you want to attack excessively growing income/wealth inequality, and one of its most lucrative sources - then a solid Capital Gains Tax which (at least) matches the Income Tax, is one of the first steps.

It is a complicated issue to implement properly, yes, and you have to avoid special cases where double taxation will arise - but it's perfectly doable, and it must be increased in line with Income Tax.

Ha ha- can I take it Comrade that you are advocating communism. Punish those freeloaders investing their money and expecting some free money back! F**K them - how dare they expect a return on their investment. Increase the tax to 90% - that would be fair........There is no downside - communism has proved that.

KomradeBishop

airmech wrote: »

One of the highest in the world. People are already paying their way through income tax in what is a fair enough system, why try and screw them every way you can. Who says this is the best way, since when is Ireland a world leader. I can acknowledge some of the points but really you should be allowed alt higher profit before you are taxed, not just 1270.

Capital Gains are income - there is no reason they should have special treatment, relative to normal income - in fact, given that Capital Gains are unearned income, they should have significantly harsher treatment than normal income.

KomradeBishop

Limestone1 wrote: »

Ha ha- can I take it Comrade that you are advocating communism. Punish those freeloaders investing their money and expecting some free money back! F**K them - how dare they expect a return on their investment. Increase the tax to 90% - that would be fair........There is no downside - communism has proved that.

Actually - my username is a pisstake on the many posters who are incapable of actually making an argument rebutting my claims, and who instead just revert to throwing around the "Communist!" label, and pinning stupid straw-men on me (such as advocating high CGT, suddenly meaning advocating a command economy or other ridiculous nonsense).

True to form.

Limestone1

KomradeBishop wrote: »

there's nothing special about investment income which warrants a lower level of tax.

Completely incorrect - income is earned and taxed. Investment requires taking a risk and it generates jobs and wealth . If you stifle it with punitive taxes then investment dries up or goes elsewhere punishing your economy.

alb

KomradeBishop wrote: »

Capital Gains are income - there is no reason they should have special treatment, relative to normal income - in fact, given that Capital Gains are unearned income, they should have significantly harsher treatment than normal income.

In a world without inflation capital gains are income, in the real world you need to make capital gains just to maintain wealth even though you may have no actual gain in terms of purchasing power over your initial investment.

KomradeBishop

Limestone1 wrote: »

Completely incorrect - income is earned and taxed. Investment requires taking a risk and it generates jobs and wealth . If you stifle it with punitive taxes then investment dries up or goes elsewhere punishing your economy.

Citation Needed. Any evidence showing high CGT causing investment to dry up?

Again, CGT is applied to gains - i.e. it is applied after the risk has already returned fruit.

KomradeBishop

alb wrote: »

In a world without inflation capital gains are income, in the real world you need to make capital gains just to maintain wealth even though you may have no actual gain in terms of purchasing power over your initial investment.

Well, we're living in a world without inflation. We are in Deflation now - and we're going to be stuck like this for a while.

The primary inflation we've experienced over the last ~8 years, has been QE-style inflation which has massively boosted investor returns.

Limestone1

KomradeBishop wrote: »

Citation Needed. Any evidence showing high CGT causing investment to dry up?

Again, CGT is applied to gains - i.e. it is applied after the risk has already returned fruit.

The evidence Comrade is in all the failed economies where investing is punished rather than rewarded ......

CGT is applied to gains but my point is that nobody will take on any risks if their gains are going to be severely taxed.

KomradeBishop

So you're just spouting nonsense then - you're trying to pull off the "you're really advocating a Communist command economy - not just high CGT" straw-man.

You have zero backing showing a high capital gains tax, leading to what you claim.

robp

KomradeBishop wrote: »

Capital Gains Tax is far far too low. It should be brought in line with Income Tax, as well as being taxed progressively in line with that.

CGT is unearned income - and at the end of the day it is Income overall - and should not have special privileged treatment.

If you want to attack excessively growing income/wealth inequality, and one of its most lucrative sources - then a solid Capital Gains Tax which (at least) matches the Income Tax, is one of the first steps.

It is a complicated issue to implement properly, yes, and you have to avoid special cases where double taxation will arise - but it's perfectly doable, and it must be increased in line with Income Tax.

You haven't done the maths. If capital gains tax matched income tax many investors selling assets would actually pay lower tax than 33%. Income tax only breaches 33% once an income 40,000 Eur for a single person, or at 52,000 Eur for a married couple.

jcon1913

Limestone1 wrote: »

Completely incorrect - income is earned and taxed. Investment requires taking a risk and it generates jobs and wealth . If you stifle it with punitive taxes then investment dries up or goes elsewhere punishing your economy.

Buying a house to rent 20 years ago was a risk - a risk that you could lose your entire deposit? Then someone else pays your mortgage. And that shouldnt be taxed? Or taxed at low(er) rates? I cant agree with that.

robp

jcon1913 wrote: »

Limestone1 wrote: »

Completely incorrect - income is earned and taxed. Investment requires taking a risk and it generates jobs and wealth . If you stifle it with punitive taxes then investment dries up or goes elsewhere punishing your economy.

Buying a house to rent 20 years ago was a risk - a risk that you could lose your entire deposit? Then someone else pays your mortgage. And that shouldnt be taxed? Or taxed at low(er) rates? I cant agree with that.

If there was nearly risk as you claim, buy to lets would be as common as deposit accounts but they are are not. Most people don't have them.

KomradeBishop

robp wrote: »

You haven't done the maths. If capital gains tax matched income tax many investors selling assets would actually pay lower tax than 33%. Income tax only breaches 33% once an income 40,000 Eur for a single person, or at 52,000 Eur for a married couple.

If their combined CG for the year is less than 40,000, is that really a problem?

barneystinson

Limestone1 wrote: »

The evidence Comrade is in all the failed economies where investing is punished rather than rewarded ......

CGT is applied to gains but my point is that nobody will take on any risks if their gains are going to be severely taxed.

This assertion doesn't hold true though does it, since a huge proportion of property purchases in Ireland in the last few years have been cash buyers - hint: very few cash buyers are buying a PPR.

robp

barneystinson wrote: »

Limestone1 wrote: »

The evidence Comrade is in all the failed economies where investing is punished rather than rewarded ......

CGT is applied to gains but my point is that nobody will take on any risks if their gains are going to be severely taxed.

This assertion doesn't hold true though does it, since a huge proportion of property purchases in Ireland in the last few years have been cash buyers - hint: very few cash buyers are buying a PPR.

In fairness there was an extremely generous exemption from capital gains tax for all purchases from 2012 to 2014.

Hopeful2016

jcon1913 wrote: »

Wealthy = someone who has an asset apart from their home that they have as an investment. The rules apply to everyone, but only the wealthy pay any chunk Of CGT - say above €33,000.

I'm a Chartered Accountant and have studied CGT both in college and for my professional exams and yet I can't make any sense of your posts people pay whatever they're due to pay whether they are what you'd describe as wealthy or not. For instance someone who inherits an asset and goes on to sell it. Or is that something only "wealthy" people do?

Charles Babbage

Hopeful2016 wrote: »

I'm a Chartered Accountant and have studied CGT both in college and for my professional exams and yet I can't make any sense of your posts people pay whatever they're due to pay whether they are what you'd describe as wealthy or not. For instance someone who inherits an asset and goes on to sell it. Or is that something only "wealthy" people do?

Well poor people do not get assets, so do not have to pay CGT.

Eugene Norman

robp wrote: »

In fairness there was an extremely generous exemption from capital gains tax for all purchases from 2012 to 2014.

Yeh so these people get 0% tax on unearned income. Hard to feel sorry for them.

Pawwed Rig

Depends on your definition of wealthy. It could be argued that anyone with any disposable income is wealthy.

The easy solution to cgt would seem to be just to invest in a pension fund.

IME most of the really wealthy guys don't pay CGT as many are carrying massive losses forward. It is only the smaller investor with a few assets that ever actually pays it.

I would guess that it is a low proportion of the annual tax take by the govt.

Eugene Norman

Limestone1 wrote: »

Completely incorrect - income is earned and taxed. Investment requires taking a risk and it generates jobs and wealth . If you stifle it with punitive taxes then investment dries up or goes elsewhere punishing your economy.

Investment in housing doesn't create any wealth or produce any service. It's just landlordism.

And a lot CGT is on sold shares. The idea that all unearned income produces wealth is nonsense. And we have exemptions for real entrepreneurs.

Eugene Norman

Pawwed Rig wrote: »

Depends on your definition of wealthy. It could be argued that anyone with any disposable income is wealthy.

No it couldn't.

The easy solution to cgt would seem to be just to invest in a pension fund.

IME most of the really wealthy guys don't pay CGT as many are carrying massive losses forward. It is only the smaller investor with a few assets that ever actually pays it.

I would guess that it is a low proportion of the annual tax take by the govt.

the idea that the rich can make profits and continually hide them is probably a fantasy.

Eugene Norman

Hopeful2016 wrote: »

I'm a Chartered Accountant and have studied CGT both in college and for my professional exams and yet I can't make any sense of your posts people pay whatever they're due to pay whether they are what you'd describe as wealthy or not. For instance someone who inherits an asset and goes on to sell it. Or is that something only "wealthy" people do?

If someone inherits a sizeable asset then that is wealth yes. And I assume the tax is on the appreciation after they inherit it, not the whole inheritance.

Pawwed Rig

Eugene Norman wrote: »

No it couldn't.

Yes it could


poor response in a 'discussion' isn't it

Eugene Norman wrote: »

the idea that the rich can make profits and continually hide them is probably a fantasy.

I didn't say any different so not sure why my post is quoted?

marno21

Unearned income? What kind of ****e is that?

I pay income tax on my income, then decide to invest in an Irish company (rather than leave it sitting in a bank), actually invest in something that will grow Irish business, perhaps allow the company to expand and then employ more people (= pay more income tax). What's the point in using CGT as a deterant to investment which would allow the economy to grow?

Charles Babbage

I paid a great deal of CGT last year. I was one happy man, being inclined to the glass two third full view rather than the glass one third empty view.

jcon1913

Hopeful2016 wrote: »

I'm a Chartered Accountant and have studied CGT both in college and for my professional exams and yet I can't make any sense of your posts people pay whatever they're due to pay whether they are what you'd describe as wealthy or not. For instance someone who inherits an asset and goes on to sell it. Or is that something only "wealthy" people do?

No youve missed the point. Someone that pays say €30,000 on a €100,000 gain is relatively wealthy.

BTW ive prepared CGT returns and dealt with the individuals who paid the tax. Not one pauper amongst them.

Hopeful2016

jcon1913 wrote: »

No youve missed the point. Someone that pays say €30,000 on a €100,000 gain is relatively wealthy.

BTW ive prepared CGT returns and dealt with the individuals who paid the tax. Not one pauper amongst them.

You've missed the point that the rules are the same for everyone.

Relative to who, how can you define someone is wealthy on a potentially one off transaction without knowing anything else about their circumstance. There were probably many average Joe Soaps back in the boom disposing of property, inherited or otherwise, that made sizable profits due to the boom time selling prices.

I realise sweeping generalisations are the order of the day in these threads.

jcon1913

Hopeful2016 wrote: »

You've missed the point that the rules are the same for everyone.

Relative to who, how can you define someone is wealthy on a potentially one off transaction without knowing anything else about their circumstance. There were probably many average Joe Soaps back in the boom disposing of property, inherited or otherwise, that made sizable profits due to the boom time selling prices.

I realise sweeping generalisations are the order of the day in these threads.

There were probably many average Joe Soaps back in the boom disposing of property, inherited or otherwise, that made sizable profits due to the boom time selling prices.

The point is best illustrated by an example.

I inherit a piece of land. Capital Acquisition Tax is payable after deducting my lifetime exemption. If I inherited from a parent the exemption currently was at €225,000 3 years ago. The exemption at its highest was €542,000 up to 7th April 2009. After the exemption I pay 33%.

So say I inherit a house 3 years ago, it is worth €300,000. I pay €24,750 in CAT - €300k less exemption @ 33%.

Now I sell the house for €450,000. Gain is €450,00 less €300,000, CGT payable is gain of €150,000 at 33% or €49,500.

Now I have €375,750 after all taxes. Are you trying to tell me I am poor?

I have ignored the annual exemption and other complications to keep the above calculations simple.

Hopeful2016

jcon1913 wrote: »

There were probably many average Joe Soaps back in the boom disposing of property, inherited or otherwise, that made sizable profits due to the boom time selling prices.

The point is best illustrated by an example.

I inherit a piece of land. Capital Acquisition Tax is payable after deducting my lifetime exemption. If I inherited from a parent the exemption currently was at €225,000 3 years ago. The exemption at its highest was €542,000 up to 7th April 2009. After the exemption I pay 33%.

So say I inherit a house 3 years ago, it is worth €300,000. I pay €24,750 in CAT - €300k less exemption @ 33%.

Now I sell the house for €450,000. Gain is €450,00 less €300,000, CGT payable is gain of €150,000 at 33% or €49,500.

Now I have €375,750 after all taxes. Are you trying to tell me I am poor?

I have ignored the annual exemption and other complications to keep the above calculations simple.

It's €375k, not €3m it's certainly not what I'd consider wealthy, I never mentioned poor, that was all you. There's something in the middle between wealthy and poor, it's not a case of either or.

The point of my post was the rules are the same for everyone. Which they are. Define yourself as rich or poor or anyway you like.