Specialist
A gripe that I get from clients all the time is the high level of taxation on investments. Under current legislation, if you invest in a fund or ETF, you pay tax on your profits at a rate of 41%...
The rate used to be the same as DIRT but we have seen DIRT go down each year for the last few years. It is currently at 35% with plans for it to reduce to 33% from January 2020.
Meanwhile, the exit tax on investments and ETF’s has remained at 41% and shown no sign of change. There has been intense lobbying by the insurance industry to have the exit tax tied to that of DIRT (deposit interest is also subject to PRSI but exit tax isn’t. There was no mention of adding this tax).
The Department of Finance issued a short paper on The taxation of DIRT and LAET (Life Assurance Exit Tax) It is a rather pointless paper and it isn’t until you get the conclusion that you see what the point of the paper is. They say it was coincidental that both DIRT and LAET were both 41% and it is never their intention to tie them to each other. They consider deposit savings and investments as completely different products and as such, the taxation of both should not be viewed in the same way. In other words, they are not going to change the 41% rate.
The Department of Finance are completely missing the point. It was the insurance companies who were lobbying this as it hurts their sales when a low risk investor pays 41% tax on an insurance product but 33% on deposit. Investors aren’t looking to tie LAET to DIRT. They are looking for the Department to reduce the incredibly high levels of taxation on profits (41%!!!), an end to Deemed Disposal and for ETF’s to be taxed under CGT instead of LAET.
What do you think? Would you like to see LAET tied to DIRT or just reduced?
Steven Barrett is the Managing Director of Bluewater Financial Planning.