There was a time when if you wanted to invest, you had to go to a stockbroker and they would place the trades for you. They earned a commission on placing the trades, so it was only worth their while making sizable investing. In other words, you had to be rich to invest.
Fast forward to today and that is certainly no longer the case. I can open my phone and buy stock in a few clicks from my Revolut account. Or I can open up a low cost trading account and buy shares and funds at virtually no cost.
Similarly , if I want to invest using a life company, I can set up a regular saver plan for as little as €75 a month. Once the account is set up, it is collected by direct debit and invested automatically.
Investing is open to everyone these days and it is so easy to do it. With interest rates still very low and inflation very high, people are looking to invest so that they can beat inflation over the long term. And we are seeing all walks of life investing, not just wealthy people.
So why are we taxing people’s investments as if only rich people invest? If you invest in funds or ETF, you are taxed at 41%!!
There was a time when exit tax (as it is known) was DIRT plus 2%. In 2018, DIRT started coming down with a plan to gradually reduce it to 33%. But there was no mention of reducing exit tax. In 2020, DIRT was reached its target of 33% but the exit tax hasn’t moved, it is still 41%.
And it doesn’t look like it will either. There is certainly lobbying going on to once again tie it to DIRT but it is ignored in successive Budgets. The Revenue carried out a review of the taxation of investment funds last year and lots of people (me included) were hopeful that they would see sense and tax Irish investors in line with the rest of Europe. The review changed nothing.
Politicians are afraid to do anything about it out of fear of being seen as giving tax breaks to the rich.
Yes, wealthy people will benefit from a reduction in exit taxes but there are so many ordinary PAYE workers who save that are also being taxed at this rate. We have amongst the highest taxes in Europe on investments with those who tax higher being the countries that also provide their citizens with a lot more social benefits than we do.
It is time that governments woke up to the fact that ordinary people invest too and it is not just for the rich.
Steven Barrett
14 November 2022