The inheritance tax should be scrapped rather than increased, according to Financial Advisor and Analyst Karl Deeter.
Speaking during an interview with Newstalk Breakfast on Wednesday, Deeter went toe to toe with Green Party TD Nessa Hourigan to argue that he had never heard a “proper justification” for the tax.
Inheritance tax in Ireland – or Capital Acquisitions Tax (CAT) – is charged at 33% on the taxable portion of an inheritance, with recent figures from the Central Bank showing that up to 2020, over a third of Irish households have received an inheritance, with an estimated accumulated value of €97 billion.
The report found that inheritances in Ireland contribute little to wealth inequality, and may even have reduced it over time, similar to findings seen in Britain and the United States.
“I have an issue with the morality of it,” he told the programme. “You pay tax all your life, then when you die, the Government wants to swoop in and take a third of your wealth above certain limits.”
“I think everyone acknowledges that it hasn’t always been there – it only came in in the seventies – but it’s also considered a scumbag tax because you barely have time to put away the measuring tapes to get the person in the ground and there can be a tax liability there.
“The issue that we need to remember is that there is a basic question there: if you pay your taxes and you own what you earn, then upon death, how much of what I own belongs to the Government? And why?
“I’ve never really heard a proper justification for that. It’s also why we go to such lengths to avoid it” he said.
He disputed the argument that the tax followed a natural progression of the tax system, pointing to the fact it hasn’t been there since the formation of the State, and was only brought in during the 1970s.
“If it was following natural progression, it would have been there since the formation of the State and it wasn’t” he said.
He said that great lengths are gone to in order to provide loopholes for protected groups of people – including farmers and those with family businesses and family homes.
“When you talk about the big money ones, where there’s a huge amount of wealth, those people have the capacity and access to the advice that gets them to avoid it altogether,” he said.
“It is actually a drag on entrepreneurship. It’s a drag on intergenerational upward mobility. People can say ‘we need equality’ – but you don’t have to get it this way. And in fact, we should be looking more at why we should repeal this tax, rather than try to get more aggressive on it. Because it already got more aggressive on the last few years.
“They upped the tax rate by 60 per cent. When it came in, it was 100 times’ average wage – today it’s more like seven times average wage, before you start giving away a third of what you got for dying.”
Ms Hourigan argued that the tax base needs to be broadened to pay for the services that “make our society a nice place to live”.
The Green Party TD said the best way to tax the wealthy is to focus on property.
“We prefer to tax assets than tax income because we don’t want to affect people’s employment,” she said.
“We actually really have to look at taxing property … the versions of that are property tax, which, as an EU standard, our property tax in Ireland isn’t particularly high, or inheritance tax.
“The reason we do that is because we know that intergenerationally that’s a very equitable way to do it, and it’s less likely to have an impact on the housing market.”
She also pointed to the housing crisis, saying: “If we allow people to simply hold on to the property and trade it between the generations, we are deepening the housing crisis and then obviously removing that sum from the exchequer,” she said.
Deeter slammed what he called “disjointed Green party thinking.”
“The morality of hating people who obtain wealth is different to the morality of the question at hand,” he argued.
“[The Green Party] say they want to tax property,” he continued. “They actually don’t want to tax property, because that’s actually too hard to do, despite the fact that in 2020, they had a policy paper from their own party calling for Site Value Tax.”
The 2020 paper argued that introduction of SVT would “address various issues such as poor usage of land and land hoarding, it would incentivise land and property improvement, and so reduce homelessness and the lack of housing.”
“That’s the way to tax property,” Deeter said. “That’s the correct way to do it – do it on the asset, do it actively, do it in life, have it joint to local services. Or take the cowardly way out, which is to just say, ‘Oh, let’s get the tax authority to do this,’ and then they can coerce you into it because it’s much easier. And if you don’t think it’s coercion, see what happens if you don’t pay the tax.”
Ms Hourigan agreed that Site Value Tax was “the more equitable” approach.
You can listen to the interview in full here.
Loading ...