I don't like the high *tax* on dividends. An accumulating fund does nothing to help that : )
...
I might be wrong but I believe that depends on where you're tax resident?
If someone lived in say, Belgium, if a payment never reaches *their* personal bank account, only the ETF managers, then it's my understanding they would not pay dividend tax on it, nor would the manager pay something on the investors behalf (how could they? they don't know the tax situation of the holder of every ETF share). The dividend never leaves the accumulator fund bank account until its reinvested. Hence, people prefer Acc ETFs in Belgium. At least they seemed to, the last time I looked at it a few years ago.

There are two levels of tax.

My understanding of how that works here in practice:

The first level is the amount withheld by the country of each investee company's domicile, at a rate generally set by the corporate section of the double taxation treaty between that country and Ireland. These rates are not too high on average, but that tax is definitely withheld, whether the remainder is reinvested or not. In effect, the fund never sees that tax money, it's chopped off at source (lots of sources). Probably averaging something like 10-15% loss on each coupon, the same whether you opt for cash or reinvestment.

There is then your own country's tax on your coupons from an Irish domiciled fund. That varies widely and depends on your own domicile. The "accumulating" (DRIP) version of the fund does manage to defer those--your personal tax rate is not applied to the after-withholding-tax amount of the dividend before it's reinvested.


DRIPs are generally a bad idea. The company gives you some money, you pay tax on it, and the remainder is given back to the company. Value destruction every time. If the market tends to assign the company a price based in part on a multiple of book it's even worse, as you're getting handed "book dollars" but spending "multiple of book" dollars to buy the new shares.

Jim