Inheritance tax has been in the news recently, with an advisory government tax commission proposing a reduction in the tax-free threshold of €335,000, from which point inheritance is taxed at 33%.
This proposal was quickly shot down by Micheál Martin and other government TDs who claimed there was not appetite for this reduction amongst the public.
On the flip side advocates of this reduction see income tax as a much-needed new source of income for the government to help deal with rising costs. For reference while Ireland’s 33% is not abnormal, in fact it ranks seventh amongst OECD nations, the fact that it only kicks in past €335,000 is strange.
With this reasonably high threshold most potential government income from inheritance tax is being left on the table and the majority of people get away without ever having to pay it.
For those in favour of inheritance taxes they are seen as serving a great importance. They are indirectly wealth taxes, as their income is derived from one’s assets, that can prove to be a great resource.
Across the Irish Sea inheritance tax has been in the news too, with King Charles receiving a fortune and variety of properties and assets upon his mother’s death are valued in excess of £400 million tax-free.
Were he taxed at the UK’s usual rate of 40% the state could put that enormous amount of money to use where it is needed, rather than lying unused in one man (who does not need it)’s bank account.
On the flip side, opponents of inheritance tax also frame the issue in terms of class; claiming that they are much more damaging to ordinary working-class people than wealthy elites.
To return to the aforementioned example of King Charles, even if he were to be taxed, he would still walk away with an incomprehensible fortune in inheritance.
Meanwhile for the average person, who already has enough financial woes to deal with, will suffer losing a significant chunk of what they inherited from their deceased relatives, who themselves had already been taxed for it in their lifetimes.
The debate over whether inheritance taxes are justified and if Ireland’s approach to them needs reform will continue on.
As the advisory committee that started this whole debate see it the Irish government is in desperate need of new sources of income to deal with the ever-increasing list of issues facing them and inheritance tax reform may go towards helping alleviate these woes.