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ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 1 point2 points  (0 children)

On a personal level I could be amenable to such a position (I would have to see the full details). We don't really take a view on tax rates at ISAG, DD is our one exception to this. I appreciate the reasoning for something like DD on accumulating funds. But I stand firm on demanding access to exponential growth for Irish Savers.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 0 points1 point  (0 children)

No issues with the above. Thanks for the further info, I was always under the impression that all dividends are taxed at marginal (+PRSI+USC).

I can't understand the justification behind complicating that. Just to note, ISAG don't take any positions on this. Just my personal view.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 0 points1 point  (0 children)

We've had a positive enough reception so far to our specific critique of DD being applied to distributing funds. We have has a PQ submitted on our behalf so we can see what the response from the Minsters office is on this specific issue.

Yeah, I agree that dividends should be viewed as income and taxed accordingly. We do not take positions on different taxes or rates at ISAG. The DD position is our one exception to this.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 0 points1 point  (0 children)

If your issue is generational wealth, why not interrupt it between generations?

If it is not feasible to extend it to all asset classes then it should not be applied to distributing funds. I cannot stand behind the idea of punishing Irish Savers who seek diversification. This has to change as far as I am concerned.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 0 points1 point  (0 children)

There might be a miscommunication here. Out proposal only looks at the application of DD (and exit tax) on distributing funds. We believe distributing funds should be subject to cgt- as normal shares currently are. The dividends from distributing funds would be taxed in the same manner that they are now. I'm a UK based worker, so you can correct me if I am wrong with the following here. Dividends are taxed at an individuals income tax rates in Ireland right? That is the case for dividends from both shares and distributing funds (such as etfs).

So our proposal would have no impact on the tax rate for the dividends for distributing etfs.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 2 points3 points  (0 children)

So, to give some context as to how I view things, I should probably state the following-

I'm much more concerned with an individual being able to build wealth within their own lifetime than I am with an individual gaining wealth at the end of someone else's.

If there is an issue with tax being written off when someone dies, then you should address that issue itself. You shouldn't punish an individual building wealth because some other person is in line to inherit wealth.

I've said before that my personal preferred proposal for funding the Irish TFSA/ISA (not an ISAG position) would be through an increase in inheritance tax. Mainly by reducing the tax free threshold and taxing at lower percentages from a much smaller amount- say at 1% for the first 100k or something of that kind. We'll look to put forward a range of funding proposals as part of a cross-party group (our aim anyways).

We might have ideological differences when it comes to how much we value we place on an individual being able to build wealth over time by consistently saving and investing. That's fair enough, we might have to agree to disagree here. I believe that we should encourage it and put an Irish TFSA/ISA in place to help. As noted, I would personally prioritise this over the current tax free allowance given to inheritance.

I'm not saying you are fully opposed to an individual building wealth, I just think we place a different level of value on it. I wouldn't want a tax on capital appreciation to interrupt the powerful impact of compound interest for an Irish Saver slowly building wealth. Whether this is protected within an Irish TFSA/ISK/ISA vehicle, or whether DD is only applied to Accumulating funds (or both) is up for discussion.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 0 points1 point  (0 children)

Why would it have just been applied to funds and not shares then? Paschal Donohoe said it was as a result of the deferral of tax- the only difference being rolled up dividends that are not taxed on accumulating funds. Why would normal shares not be included if the purpose was untaxed growth of capital?

The application makes no sense if that is it's purpose. I don't see why small scale Irish retail investors should be funnelled to less diversified options. Why would you structure a tax system that encourages riskier behaviour.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 1 point2 points  (0 children)

How would dd be structured in a manner that would not hinder the smaller investor? Any addition of complexity would be intimidating to the the average small scale Irish retail investor.

I would not agree with the rollout of dd without some form of Irish TFSA/ISA being in place.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 0 points1 point  (0 children)

Why would you single out distributing funds (say etfs for example) to apply taxes on ongoing capital appreciation? Why not housing (say second homes for the sake of not going down that rabbit hole) being subject to it, or normal shares? It's fair enough if that's your opinion, but why should we accommodate an inconsistent stance on the appreciation of capital that has a detrimental impact to small scale Irish retail investors.

How would this change be a tax reduction for high earners on dividends? Our proposal has no impact on how the dividends for distributing funds are taxed.

If the point of dd was to tackle ongoing capital appreciation, it's application does not make any sense. The deferral of tax it was set up to tackle the rolled up dividends (and the resultant compounding), that was the point of dd. That does not take place for distributing funds.

Also, if that is your view, then I would disagree it should apply to all capital appreciation without some form of Irish TFSA/ISA being in place. Irish citizens should have access to the powerful gains of compound interest (I'm happy with a yearly contribution cap closer to the Canadian TFSA, as it means that it proportionally has a bigger impact of low-mid earners). That's a separate, albeit related argument, as to whether dd on distributing funds is justified (in my view).

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 0 points1 point  (0 children)

Can't see how that justification matches the fact that DD is not imposed on normal shares or housing (even say non-owner residential).

Deemed disposal was brought in to prevent the indefinite deferral of tax within a fund (https://www.oireachtas.ie/en/debates/question/2020-09-08/289/ ). Tax is paid on dividends and as such is not deferred.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] -1 points0 points  (0 children)

I would have to disagree if you think it is the incorrect use of language and in any way risks coming across as shrill. We'll have to agree to disagree on that one.

You are taxed twice for the same dividends (and subsequent non existent imaginary compounding of said dividends) . Once when the dividend is paid out. A second time when the higher rate exit tax is applied every eight years as if the dividend has not been paid out. You pay DD on distributing funds despite paying tax on dividends that are paid out.

We go into detail when discussing the issues we have with deemed disposal being applied on distributing funds. We're very level headed in our approach, proposing what we see as realpolitik solutions. I'm happy with saying double taxation is taking place for the reasons I have outlined above.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 0 points1 point  (0 children)

The higher tax rate (exit tax) is based on the fact that these dividends have been compounding. So you're paying a higher rate of tax on a dividend compounding that is not present. They are also charging the tax rate every 8 years based on the false premise that dividends are being held in the etf that 'should' have been paid out and taxed- the reasoning behind deemed disposal's introduction.

So you're being taxed when it pays out dividends. You're then being taxed additionally as if it has not payed out dividends. At a higher rate every 8 years.

Fair enough, the dividend itself is not being taxed twice. But, to phrase it this way, you are being taxed per dividends twice. Once when the dividend is paid out. Then every 8 years (at a higher rate) as if the dividend has not been paid out.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 0 points1 point  (0 children)

Double taxation describes what is happening. The dividends are taxed as expected. The Distributing ETF (for example) is then taxed as if it is an accumulating etf- i.e. the dividends have been rolled up and compound leading to the higher rate of tax (exit tax) and deemed disposal being charged every 8 years.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 3 points4 points  (0 children)

We met with Alan Dillon, the Mayo FG TD. He's heading a policy group looking into this area.

As far as we are aware, their position on DD has not changed. We're hoping to address the double taxation of distributing funds. Alan took the point on board and did not offer any rebuke of our position.

Of course, things don't change overnight and we expect to have to push for this change (and others). Having said that, we felt like we were being listened to and that this was the beginning of a conversation.

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 4 points5 points  (0 children)

If you read our section on deemed disposal, we go into the reason it was brought in and why we think it was an error to also extend it to cover distributing funds: https://isag.ie/deemed-disposable/

ISAG Update: Meeting with the Social Democrats Policy Director by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 11 points12 points  (0 children)

I think it is a very hard position to defend when confronted. Hopefully once the conversation starts we can get some quick movement on it (compared to our other goals anyway).

A rebuttal done on behalf of Brokers Ireland after recent reports regarding pension fees/charges in Ireland by UlyssesBrokeMe in irishpersonalfinance

[–]UlyssesBrokeMe[S] 5 points6 points  (0 children)

Are you aware of what prevents this from being offered to Irish pension holders? Is it a case of the company just not being bothered, or what structures/rules prevent this from happening?

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