The hope a crippling 41% exit tax on retail investing would be crushed didn’t happen today.
Instead, retail investors were treated to a side-show that serves nobody particularly well.
Who uses ETF’s?
A lot of people in their twenties and thirties use them as part of a sensible diversification strategy.
ETF’s serve as a way to invest in the stock and bond markets without the hassle of buying individual securities. And because they can be accessed through a range of online platforms, more and more people are using them.
Over the course of the last 6 months, the issue of the exit tax has arisen a lot.
Many people that use ETF’s are not wealthy. Most are working in regular jobs, hoping to beat the impact of inflation on their money. Many also know that going through the traditional brokerage route can be slow, cumbersome and expensive.
For example, I saw a communication from a well-known, traditional Irish brokerage that it was hiking its account fees. By comparison, the more efficient online brokerage cost 1/10th of their fees. Additionally, some traditional brokerages can take a week or more to set up a client account. By comparison, the latest investment platforms can finish the sign-up in a day or less. This includes all of the AML and other due diligence requirements.
Exit tax and compound killer
Retail investors in Ireland have it tough. The exit tax, even when it does reduce to 38% is still merciless. There is also the low tax-free threshold, which remains at €1,270. Plus, there is also a ‘deemed disposal’ trigger every 8th year after the funds were invested. This is the real compound killer. It means that funds need to be sold. Alternatively, funds must be found to pay an exit tax on an unrealized investment gain. At its core, it sends a message to retail investors. It tells them that their efforts to build some financial security are not viewed favorably.
Frank Conway is a Qualified Financial Adviser and Founder of MoneyWhizz.
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