Capital gains tax is too high

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.

valoren

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%.

It's like a financial punishment for being correct.

jcon1913

Hopeful2016 wrote: »

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.

Fair point. As someone that started out with nothing only a bike, the clothes I stood up in and a college degree, I consider someone that has €375,000 free cash to buy a house, yacht, farm whatever to be wealthy.

Just to put some context in to this heres a link to a report by NERI ( aka the Nevin Institute ):

http://www.nerinstitute.net/blog/2015/02/18/wealth-in-ireland-at-last-some-robust-data/

Heres a selected quote

'' On average the results imply that Irish households have a net wealth of almost €225,000 each. However, averages are very misleading for wealth data, as they are skewed upwards by high wealth households. Looking closer at the data, the CSO show that the bottom 50% of households have a net wealth of less than €105,000.''

So to summarise a household that has wealth of €225,000 is bang on the average. Lets say in my example of someone that inherits a house, pays CAT, sells the house pays CGT, and now has cash of €375,000 sitting in the bank. They may have other assets - like their Principal Private Residence, which would have equity of say €100,000. If they died, their estate is worth €475,000, conveniently over twice the average household wealth.

Now do you see where I'm coming from, saying that only wealthy people end up paying CGT? Because by definition if you pay €33,000 in CGT you might be worth a hell of a lot more, putting you in to the top half of society.

Champagne and caviar anyone?

Geuze

redlead wrote: »

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

Overall taxes are below average in Ireland.

Income taxes are below average.

Here is a comparison with the other OECD countries.

http://www.oecd.org/tax/tax-policy/taxing-wages-ireland.pdf

Hopeful2016

jcon1913 wrote: »

Fair point. As someone that started out with nothing only a bike, the clothes I stood up in and a college degree, I consider someone that has €375,000 free cash to buy a house, yacht, farm whatever to be wealthy.

Just to put some context in to this heres a link to a report by NERI ( aka the Nevin Institute ):

http://www.nerinstitute.net/blog/2015/02/18/wealth-in-ireland-at-last-some-robust-data/

Heres a selected quote

'' On average the results imply that Irish households have a net wealth of almost €225,000 each. However, averages are very misleading for wealth data, as they are skewed upwards by high wealth households. Looking closer at the data, the CSO show that the bottom 50% of households have a net wealth of less than €105,000.''

So to summarise a household that has wealth of €225,000 is bang on the average. Lets say in my example of someone that inherits a house, pays CAT, sells the house pays CGT, and now has cash of €375,000 sitting in the bank. They may have other assets - like their Principal Private Residence, which would have equity of say €100,000. If they died, their estate is worth €475,000, conveniently over twice the average household wealth.

Now do you see where I'm coming from, saying that only wealthy people end up paying CGT? Because by definition if you pay €33,000 in CGT you might be worth a hell of a lot more, putting you in to the top half of society.

Champagne and caviar anyone?

I'm not going to debate whether it's right or wrong, I was just stating the facts.

jcon1913

Hopeful2016 wrote: »

I'm not going to debate whether it's right or wrong, I was just stating the facts.

Ditto - you can decide - I am only giving my opinion that someone with that sort of money is wealthy.

They may not consider that they are rich, anyway it's a first world problem if you have that sort of money to invest as far as I am concerned. By extension I have little sympathy for someone facing combined tax bills of €75,000 leaving them with €325,000 in the bank, along with what ever property they have to live in / farm.

robp

jcon1913 wrote: »

Hopeful2016 wrote: »

I'm not going to debate whether it's right or wrong, I was just stating the facts.

Ditto - you can decide - I am only giving my opinion that someone with that sort of money is wealthy.

They may not consider that they are rich, anyway it's a first world problem if you have that sort of money to invest as far as I am concerned. By extension I have little sympathy for someone facing combined tax bills of 75,000 leaving them with 325,000 in the bank, along with what ever property they have to live in / farm.

Its a nice lump of money but if the person is an older person who doesn't own their own home or have a pension its not going to make them feel rich or even middle class.

airmech

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.

We seem to be all talking big figures here, my father invested 12000 in 2008 he made 4000 euro, only 1270 tax free. He has to pay 1000 in tax, i think its ridiculously low cut off point. He risked alot of money for him and then have to hand over so much of his little profit on high risk shares is a bit of a farce.

Hopeful2016

airmech wrote: »

We seem to be all talking big figures here, my father invested 12000 in 2008 he made 4000 euro, only 1270 tax free. He has to pay 1000 in tax, i think its ridiculously low cut off point. He risked alot of money for him and then have to hand over so much of his little profit on high risk shares is a bit of a farce.

Someone suggested here it was only a tax on the wealthy....

airmech

Hopeful2016 wrote: »

Someone suggested here it was only a tax on the wealthy....

Yes, a few people have. I am actually taken aback by the attitude on this forum to this particular tax, i thought most on this forum would be investors. Investors who are trying to make a small bit of extra cash, but no, we have people here who want to pay more tax. Unusual bunch of people we have, or are they just begrudge rs.

jcon1913

airmech wrote: »

Yes, a few people have. I am actually taken aback by the attitude on this forum to this particular tax, i thought most on this forum would be investors. Investors who are trying to make a small bit of extra cash, but no, we have people here who want to pay more tax. Unusual bunch of people we have, or are they just begrudge rs.

No I am not pro tax. Read back thru the posts. I said anyone that pays 30,000 in Capital Gains Tax is wealthy by definition. Because they just made a gain of €100,000.

Your father made 4,000 and paid 1,000. How much should he pay in your opinion -zero?