Sir, – Currently the Category A inheritance tax threshold for children stands at €335,000, a 64 per cent decrease on the rate of €521,208 before the crisis in 2008. The tax rate itself is now a daunting 33 per cent. It was 20 per cent in 2008, and even that rate was very high by international standards. The combination of a lower threshold and a higher tax places an immense burden on families who wish to pass on their hard-earned assets to their children. For many families – particularly those who own homes in urban areas where property values have soared – these thresholds mean that even modest inheritances will attract substantial tax liabilities. A significant financial hit of this sort could force heirs to sell family homes. We are not only talking about rich people here, despite the statements made by some who support this tax. The median house price in Dublin is now €445,000, which is well within the range of the threshold. In 2008, the median house price in Ireland was €278,000, well below the threshold at that time.
When we compare Ireland’s inheritance tax regime with that of other developed countries, there is a striking disparity. Some countries, including Canada, Norway and Australia, do not have inheritance taxes at all. Five countries in the EU have abolished their inheritance tax since 2000: Austria, Norway, Sweden, Czechia and Slovakia. Note the inclusion of countries acknowledged as progressive and egalitarian on the list. Other EU countries without the tax are Cyprus, Estonia, Latvia, Malta, and Romania. In Italy, Germany and Portugal, the inheritance tax rates are significantly lower than our punitive 33 per cent – often between 1 per cent and 5 per cent – and thresholds are far higher: currently €1,000,000 in Italy, with a 4 per cent tax on the excess.
Ireland is a real outlier from European norms in this tax.
The punitive nature of our current system discourages saving, and penalises prudent financial planning. It creates an unnecessary strain during times of grief, forcing families to liquidate assets – sometimes even the family home – to meet tax obligations.
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The tax raised thereby is a very small part – 0.66 per cent – of government revenue, so complete abolition of it would have a very small effect on the tax revenue of the state. Proposed changes – either to repeal the tax or to significantly raise the thresholds – are not only fair, but necessary. Given the current rate of house price inflation – 8 per cent in the past 12 months alone, and 144.5 per cent in total since their trough in 2013 – maintaining the current law unchanged will accelerate the destruction of the middle class in Ireland.
I urge policymakers to take a compassionate, prudent and pragmatic approach on this topic in the 2025 budget. – Yours, etc,
STUART O’SULLIVAN,
Caherconlish,
Co Limerick.
Sir, – The issue of inheritance and taxation is a difficult one (“Inheritance tax is a modest payback for a massive benefit”, Opinion & Analysis, July 19th).
Undoubtedly with the huge increase in property prices, (not value, value is a different thing), far more family homes are being subject to inheritance tax, despite being quite modest homes, due to the crazy inflation of house prices.
Increasing the taxation threshold so that modestly sized but overvalued and overpriced family homes are not subject to a punitive tax which forces sale of that family home is certainly required presently, as the taxation threshold has not kept pace with the rampant increases in home prices.
If the inherited home is to be lived in by the inheritee, and especially if the recipient has been long-term renting or owns no other property, then perhaps the taxation threshold should be set higher.
But if the inheritee fully owns their own or other properties, or if the inheritance itself is a very large one, be it property, business or cash, then a case can be made that even the inherited family home would have a lower taxation threshold.
The truly wealthy can afford taxation far more easily than the less well-off, although they often employ tax planners to avoid the grubby business of paying tax. In this way, those of few means can benefit from the inheritance of a modest home without being taxed to the point where it has to be sold, perhaps helping to improve their standard of living and providing security out of the vicious rental market, which increasing numbers of potential inheritees are stuck in, while the already wealthy (in cash or multiple ownership of property terms) will suffer less in real terms than the less well-off when paying an inheritance tax bill.
Of course, the question of what is “wealth” must be answered. To me, a moderately sized and priced family home is not “wealth”.
Having a modest place one can call one’s own to live in is not true wealth, (though it is certainly of great value beyond the simple financial aspect, it is a simple necessity to have somewhere to live) but assets beyond that are now getting into the realms of real wealth which should be subject to an inheritance tax.
The truly wealthy have tax planners to protect their wealth, while the less well-off have tax bills to take theirs away. A more nuanced inheritance regime is required. – Yours, etc,
DAVID DORAN,
Bagenalstown,
Co Carlow.