Committee on Budgetary Oversight debate -
Wednesday, 14 Jun 2023

Taxation of Assets and Wealth: Discussion with Oxfam

An Cathaoirleach

I welcome Mr. Jim Clarken, Mr. Simon Murtagh and Dr. Sheila Killian from the University of Limerick, and Professor José Antonio Ocampo, commissioner from the Independent Commission for the Reform of International Corporate Taxation, ICRICT. We expect he will be joining the meeting shortly online.

It is our first meeting examining in more depth the taxation of assets and wealth. Before we begin I will explain some of the limitations to parliamentary privilege and the practice of the Houses as regards reference witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected, pursuant to both the Constitution and statute, by absolute privilege. However, witnesses who are giving evidence remotely from a place outside the parliamentary precincts may not benefit from the same level of immunity from legal proceedings as a witness who is physically present.

Witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable. I remind members of the constitutional requirements that they must be physically present within the confines of the place in which the Parliament has chosen to sit, namely, Leinster House, in order to participate in public meetings. It will not be permitted for a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting.

After that housekeeping, I now invite Mr. Clarken to make his opening statement.

Mr. Jim Clarken

We appreciate the opportunity to be with the committee today and to make a contribution on the committee's deliberations and work on this issue. I am also very pleased that my colleague, Simon Murtagh, is here and that Sheila Killian, a professor at the University of Limerick, has joined us as well. We may have Professor Ocampo, who is a former minister for finance of Colombia, who is a leading expert on the movement for progressive tax reform.

The invitation comes on the back of work that Oxfam is doing on inequality and the taxation implications. Before I get to that I will give a little bit of background as to who we are. Oxfam is a global movement of people seeking to end poverty and injustice. We speak out on the big issues that keep people poor, like inequality and discrimination against women. We are an independent all-island organisation. We are part of a global confederation working in 90 countries. Oxfam Ireland works across the island of Ireland. We have been here for more than 60 years, supported by people across all communities. We are an independent, secular and non-profit organisation. Our programme focus is in east, central and southern Africa but we respond to emergencies worldwide. We campaign on a wide range of issues that we believe keep people locked into poverty.

In the last decade or so we have honed in on the issue of inequality. We have identified that unless we can tackle inequality, we cannot tackle poverty. A focal point of that work has been our annual report, leading into the World Economic Forum in Davos, Switzerland. In recent years, these reports have tracked the rising rate of inequality, the extreme nature of it, and the fact that it continues to get deeper and wider. What we are talking about is a gilded age like in 19th century America, when staggering wealth existed alongside devastating poverty. In terms of that inequality in today's world, I refer to the single graph in the paper from the Davos report. The graph is taken from Forbes, which shows that billionaire wealth increased from $500 billion in 1987 to $14 trillion today, a 28 times increase. It is important to note that these figures are adjusted for inflation, so that is a real increase. This large glut of wealth is held by a very small minority. It is non-productive in many instances. It is just sitting there generating more money. It is not being put to economic use. It is often built from carbon-intensive industries and it is avoiding taxation and benefit to wider society. We talk about it as a possible billionaire problem. At the same time, our Survival of the Richest report, which is the one we produced this year, identifies that over the past two years an additional 140 million people have been driven into extreme poverty. Women and girls have suffered the most in terms of economic losses, low-paid work, being forced out of education and an additional spike in gender-based violence.

We wanted to be involved in the delivery of the sustainable development goals, SDGs, which had the ambition to eradicate extreme poverty by 2030, which is just around the corner. The extreme poverty line has a very low minimum threshold. People living above it are still very poor. That was the ambition for the SDGs, which Ireland was heavily involved in negotiating, but we are actually going backwards. More people are living in extreme poverty than had been for quite a long time.

Getting back to wealth; the pattern of wealth that we see across the world is similar in Ireland. We use a methodology in conjunction with the wealth consultancy, Wealth-X, that shows the elite wealth in Ireland falls into two categories: those with the equivalent net wealth of more than $5 million – it is based on US dollars, and those with net wealth of more than $50 million. Those two categories have doubled over the past decade. That is also adjusted for inflation. It shows that the extreme wealth that we see across the world is no different from what we are seeing here in Ireland. Wages are stagnating and wage increases are not keeping up with the cost of living, so working people are actually poorer than they were, while this group of people continues to accumulate additional wealth.

We believe in the principles of equity and sustainability at home as well as abroad. Therefore, in the recommendations for taxation and welfare, we sought to propose policies not just to face the demographic and environmental challenges we have talked about but also to do it in a progressive and socially just way. We looked at Social Justice Ireland's submission on housing, health, disability and carers, pensions and older people, children and families, and the just transition, as well as the cost of delivering on our commitment on overseas development aid, ODA. Members will know that we have a very long way to go to deliver on the commitments we made a number of times. We are nowhere near it. If we introduce a wealth tax, these are some of the things that could be delivered upon. We proposed some taxes for these groups of people. There are 20,575 people who have a net wealth in excess of $5 million net and 1,435 with a net wealth in excess of $50 million. With very modest taxation, we believe we could produce between €5 billion and €8 billion for the Exchequer. We put some suggestions in that regard. It is just illustrative. We are not being prescriptive on this. These are just thoughts that we have on how this could be done.

We agree with the Commission on Taxation and Welfare regarding the foundations for the future proposal that we can look to increase existing capital taxes and close loopholes and windows that exist. In addition, a wealth tax should be considered. Finding a way to increase taxes on those who have the most in society seems like a smart thing to do.

We propose starting a national conversation. We do not pretend to have all the answers but we believe the moment is right for this conversation. Ireland is in a temporary position where it has very large corporate tax levels and earnings but everybody knows that is not sustainable in the long term and will disappear as tax reforms happen throughout the world. We need to consider how to broaden the tax base and find ways to tax that elite group. Oxfam suggests that can be done by bringing a wide range of stakeholders together, perhaps using a citizens' assembly type of approach.

The recommendations in our Survival of the Richest report are non-prescriptive. There is a lot Ireland can do, not just within this country but where it participates in international spaces, on the concern we all have in respect of the opaqueness of money flows. There is a significant lack of transparency globally. Ireland can be part of a progressive system to transform that in areas such as the creation of a global asset registry and public registries of beneficial owners, which should include trusts. There are a range of new international taxes that Ireland could support, such as new forms of wealth, dividend, windfall and climate taxes and so on. Some of these will be discussed at the summit in Paris next week on a new financial pact. We hope the Taoiseach will attend that summit.

In addition, we need to come back to the wealth tax itself. There is an increasing narrative across a wide political, social and economic spectrum globally that this should be seriously considered. Even the World Economic Forum has stated that the accumulation of global wealth and the way it is being accumulated, with a lack of economic benefit to anybody apart from those few who hold it, suggests that we need to make that money work. One way to do that would be to tax.

We launched today a European citizens initiative on wealth tax. It seeks to raise 1 million signatures in favour of an EU-wide wealth tax and is being supported by a range of European economists, including Thomas Piketty.

That is a quick snapshot of where we are coming from with this. The time is right. It is right across the globe. Other countries have been seriously considering how this could work and some of them are already initiating it. If we do not get a handle on extreme wealth and inequality, we will struggle to reach goals here in Ireland, as well as for the poorest people in the world. The time is right. I hope that will be of interest to the committee.

An Cathaoirleach

I thank Mr. Clarken. I now invite members to ask questions of our guests or elaborate on their views, impressions, considerations or recommendations on the issue. I call Deputy Boyd Barrett.

Deputy Richard Boyd Barrett

On a point of order, should we first hear from Dr. Killian?

An Cathaoirleach

Yes, rather than-----

Deputy Richard Boyd Barrett

It would be good to hear from her as well.

An Cathaoirleach

Mr. Murtagh and Dr. Killian are free to contribute before members come in with questions.

Dr. Sheila Killian

I thank the Cathaoirleach and Deputy Boyd Barrett. I fully agree with what Mr. Clarken has laid out. I emphasise that there is a great opportunity for Ireland to do something now in the area of secrecy. Unlike many other countries, Ireland is not categorised as a secrecy jurisdiction. Tax and wealth secrecy have three main problems, namely, moral hazard, risk and trust, with the latter being the most important of the three. The big piece of research on trust is the Edelman Trust Barometer, which is published every year. It shows that Ireland still has a good deal of trust in social cohesion. Most people are a little concerned about cracks appearing in social cohesion. We have seen that with the small but growing populist movement, which is obviously of concern to members of the committee, as politicians and leaders. That is not the kind of society in which we want to live. It creates risks for politicians when people lose faith in the institutions and the Government. Ireland has not yet reached the level of polarisation and lack of trust that the UK or the Netherlands, for example, have reached.

In order for people to have that kind of trust, they need to believe the taxes they pay are reasonably equitable and to have a sense of what other taxes are being paid, who else is being taxed and who has wealth within the country. It is important to document that in order to avoid a narrative, which is beginning to grow, that it does not matter what the small people do and the wealthy are doing what they like in Ireland. There is a need to counter that narrative and the only way to do so is with an evidence base. That involves using some form of wealth tax or wealth register as a reporting initiative so that people know what wealth is in the country, who owns it and approximately what tax they are paying. That also brings in the risk management aspect because it allows the Government and the Department of Finance to manage risk within the economy. For example, we saw the fallout in London when it became apparent how much wealth was being held by Russian oligarchs. It is important for the Government to know who owns what in the country and it is important for citizens to know who owns what so that we can continue to have that trust and social solidarity. It also creates more accountability, which creates more trust in the organs of the State, as well as in politicians, so that they are free from accusations of being lobbied unduly by the wrong people.

Recent research, some of which I was involved in, shows that when there is a lot of secrecy, particularly tax secrecy, that creates a significant moral hazard for everyone involved in financial services. A recent EU-funded study we carried out showed that when tax professionals operate in conditions of tax secrecy, they are much more inclined to fall back on what their organisation states is right or wrong rather than on what their profession states is right or wrong. That kind of moral hazard is a problem for those countries.

Separate entirely from the amount of revenue a wealth tax might raise, having a conversation about it and having some form of wealth register and asset register delivers a significant amount of non-financial benefits to society and managing the economy. In a way, an effective wealth tax might not raise that much money, in the same way as a plastic bag tax, if successful, does not raise a lot of money because people divert from using plastic bags. The amount it will raise is the bonus but the core thing is countering growing populism, maintaining the level of trust and social solidarity in the country and managing risk within the economy.

Mr. Simon Murtagh

I am delighted that Dr. Killian raised that point on a values-based discussion on taxing wealth. That is very much what we in Oxfam Ireland want to do, both in this country and internationally. The citizens' assembly model shows how these things can be discussed and the ground prepared. One can hear from an inclusive and wide range of stakeholders and people who will try to create the parameters for this and envisage it through the years ahead, just as the Commission on Taxation and Welfare tried to do in a more technical way. The basic principles on taxing wealth go back to Thomas Piketty, to whom Mr. Clarken referred.

There are three main outcomes from taxing wealth, two of which are quite obvious - a revenue that accrues and a reduction in inequality, hopefully. However, the last one, and the one that Piketty in a sense says is most important, is that kind of democratic reporting law. He says a wealth tax can make that happen and can empower revenue authorities to do that and, therefore, create a register of the wealth that is held in the country and allow a national discussion to emanate from that. That is the more values-based principle, which Professor Killian brought out perfectly. I would start on that point, which is our position on a national conversation.

An Cathaoirleach

Thank you. I ask the members present to respond to the presentation and comments by our witnesses, if they have any specific questions. I call Deputy Boyd Barrett.

Deputy Richard Boyd Barrett

I thank Mr. Clarken and Mr. Murtagh of Oxfam and Professor Killian for their contributions. I am very glad the committee is examining this. As Mr. Clarken said, it is a discussion whose time has come. I would say it is overdue but it has never been more appropriate that it should happen. I overwhelmingly agree with what Oxfam said. What it is proposing in its wealth tax proposal is, if not exactly the same, then very similar to what People Before Profit have proposed for a number of years in our submissions. With us, it is also about trying to trigger a conversation, which is the important point. I would be interested in the witnesses’ views as to why it has not been a major conversation.

Maybe I am a nerd, but I read these Central Bank reports that come out. Maybe Oxfam could talk a little more about its sources, but we put our wealth tax proposal together largely by looking at the Central Bank quarterly report – I think it is the fourth quarter when it usually brings that out, although the witnesses can correct me. The report shows the net household assets and the increase on the previous year, and although it is amazing what is happening, it is not discussed.

This year, as we see from our budget submission, for the first time, net household wealth has gone over €1 trillion and there has been an increase of €134 billion in just one year. The witnesses might say a word on the distribution question because there is not enough information about that distribution, and it relates to what Professor Killian said about the register and about getting some detail on this and estimating the distribution of it. The committee secretariat in its paper, which it bases on CSO data, is saying that the top 10% have 49% of that, and I have also seen estimates that suggest the 10% have maybe 53%, but it is in that kind of territory. I see the Oxfam paper is saying that the richest 1% gained 63% of the net wealth created between 2020 and 2021, although that is a global figure.

They are remarkable figures and most ordinary people would be shocked to discover this. That increase has been consistent for pretty much the past decade and, except for the depths of the austerity period, we have consistently seen those increases. What is Oxfam's view on why there is no conversation on this, given there virtually is none? In fact, if you do bring it up as a conversation, invariably, somebody will say, “Oh, Deputy Boyd Barrett thinks there is a magic money tree out the back garden somewhere but there is not.” However, the Oxfam figures and the Central Bank figures bear out that while it is not quite a magic money tree, there is real wealth out there and it is at staggering levels.

Why is that conversation not happening? How do we start to compile this register? What do we know at the moment about how that distribution is assessed, even between financial assets and property assets? We often hear the argument that it is all just the value of property inflating and it is not really extra wealth that could be taxed. That is another narrative I hear in response: you are wasting your time, really, because you are just talking about taxing people's family homes. Our proposal and the Oxfam proposal are largely not about that and they are largely about surplus wealth. The witnesses might comment on that. They might also say something about other jurisdictions that have done or are doing this, and what the experience has been there. That will do for a start.

An Cathaoirleach

The questions are why there is no conversation and what form it should take, the position of other jurisdictions, the type of successful overreach involved, what has failed thus far and what Oxfam might recommend.

Mr. Jim Clarken

It is bizarre that there is not a screaming moment about this. Every year, when we produce the report, the statistics get worse or the numbers get higher, or whatever way you want to describe it. In the early years, we talked about the global piece and about the number of billionaires that owned as much wealth as the rest of the entire population put together. It certainly grabs the imagination and it grabbed attention at that time. What to do about it is the bit that it has been difficult to cut through on. To have this recent work carried out by the committee has given us an opportunity to contribute.

Globally, we have been chipping away at this for quite a while. People become more and more interested in this because they see it, and not just people like us, but people in economic expert advisory positions. Across the globe, we have a group of millionaires who are very much decrying the fact that they are not being taxed enough. As I say, we have the World Economic Forum and a number of other alternative actors who are also saying it is crazy to allow this to continue. Even since the start of the pandemic, there has been that massive spike in wealth, that windfall of benefit that companies got, often through taxpayer-funded investment in the pandemic and so on, and even that part has not been taxed back yet. It has been a bit of an uphill battle to get it to the point where the conversation is at, but it is there now and it certainly feels like it is an ongoing narrative.

Globally, governments understand the demands, particularly due to things like climate, where the massive investment demands are universal and it is accepted that they are required, and we would like to think that eradicating extreme poverty is another. These massive global challenges require creative global thinking and not the continuation of trying to chip away at this in the way that we have. Our sense is that that narrative has shifted but it has taken a long time. As I say, from the occasional spikes, we have moved from, “Oh my gosh, that is a lot of wealth for a very small group of people”, to, “Hold on a second, we need to do something about this and we can.” They should contribute something, ultimately, to the economies, societies and infrastructure that have built their wealth for them. That wealth did not come out of nothing. It came out of labour and out of companies that require infrastructure, services, good governance and all of those things that have to be invested in by the public.

The sense is that the moment is clearly now. I ask Mr. Murtagh to answer some of the more specific questions.

Mr. Simon Murtagh

As to the Deputy's question about why there is no conversation on this subject, we have to be clear that wealth taxes have suffered from a bad reputation in recent decades and even as far back as the war we had. The reason was, in brief, that they were badly designed and that allowed them to be politically attacked. One of the main principles, going back to Piketty on this, is that when trying to design a wealth tax, it must have no exceptions insofar as possible in order that it is not subject to political attacks or attacks by certain interests that allow it to unravel very quickly. The context has changed a great deal, not just because of the galloping inequality that has been documented, as described by Mr. Clarken, which goes back to the work of the major economists; it has also changed because of the technical means of taxing and tracking wealth across bank accounts using electronic data. It is much more feasible now to tax wealth, both for political reasons and needs and for those technical reasons. It is happening already. America has the Foreign Account Tax Compliance Act, a financial transaction tax which is able to stop expatriation of wealth and charge American people taxes when they are abroad. All that computerisation is a major part of the change, along with the OECD's standard, which is another major change and innovation. We are talking about a completely different context for taxing wealth and we are seeing across a number of European countries new and improved wealth taxes. There was a big wealth tax commission in the UK that recommended an ambitious wealth tax.

The other context is Latin America, where there is a wave of reform. The best example so far was in Argentina, where a one-off wealth tax accrued $2.6 million in a much smaller economy than ours. It shows that high yield can be achieved-----

Deputy Richard Boyd Barrett

Billion or million?

Mr. Simon Murtagh

Billion. That is broadly along the same kind of level of ambition we are positing. It is such a pity that Professor Ocampo, who is one of the leading international advocates of reform in this area, could not join us today. I just got a message that he has been prevented from joining us. He was, until recently, minister for finance in Colombia, a country which is still pursuing a wealth tax. One of the big events in Latin America is the advent of tax summits, which have just started this year. The Latin American countries will come together to look at progressive taxation, en bloc and as a group, to stop capital flight, which is one of the main concerns when it comes to wealth tax and has been one of the problems in the past.

A narrative existed that wealth taxes do not work, which would be heard in business circles. Oxfam has been aggressively refuting that in recent years. It is also a matter of facing down media stories which are imbalanced or rely on wealth advisors' opinion, rather than empirical fact. In Norway, there was quite a scary story about a flight of billionaires. I think there were approximately 30 individuals, but the facts we have based on the International Monetary Fund, IMF, fiscal monitor is that revenue has increased in Norway and inequality has decreased since its wealth tax. Those are the important facts about the quality of Norway's revenue collection and its society. Since its wealth tax was introduced, Spain has a greater revenue and a greater number of people pay taxes. France is an interesting example where wealth tax was attacked, in a sense, in that financial wealth was taken out of it by Macron. However, there are benefits in that one can see more productive investments since France brought in a tax on dividends. Success stories can be seen in new wealth taxes right across those examples.

The Deputy asked about statistics. In Oxfam we use a consultancy called Wealth-X, which allows Oxfam's statisticians to do is to delve more deeply into the fractions of wealth holding. The Central Bank, which he mentioned, tries to reduce it to deciles but as he knows, we are talking about the top 1% and in fact, we are talking about the fraction of extreme wealth even within that 1%. The group is target-based for the wealth tax model. We have proposed 0.36% or 0.4% of the Irish population who hold more than €5 million or €50 million of net wealth. It is a tiny cohort of individuals. Wealth-X looks at patterns of wealth holding by high-net wealth individuals, that is, where they hold their wealth in terms of assets and stocks and then it tries to understand, when it looks at national statistics of wealth, how those high-net wealth individuals would structure their wealth. However, Wealth-X does not base its analysis on income because that is the great failing in trying to assess wealth. Traditionally, we have had income tax returns but that does not tell us patterns of wealth. We have had income tax returns, but that does not tell us patterns of wealth. Statistical surveys by the CSO are notorious for underestimating high wealth, because there is no obligation to report. Of course, there are the national and international statistics, the CSO and the Central Bank and the OECD would analyse wealth at international levels, but our analysis allows us to delve more deeply into the fractions and centiles. That is an outlay of the sources. We have a full methodology note to our report we will try to pass on.

An Cathaoirleach

Does Deputy Moynihan have some questions or observations he wishes to make?

Deputy Aindrias Moynihan

I thank the witnesses for the presentations. It has been an interesting conversation. They might be able to shed some light on one or two areas, because I am trying to get a handle on what they would consider for the tax. How is wealth measured? Is it in the area of buildings such as a family home or shares, which are more tangible? Is it in less tangible areas such as intellectual property, patents or licences that might be held for activities overseas and so on. I wish to get a handle on that area. What kinds of thresholds are we talking about? The perception might be that it is about oligarchs, but is it also John and Mary's family home over the road? Where are the thresholds? I see there are different schemes in place in areas such as Norway, France and other jurisdictions. I am trying to get a handle on where one would see Ireland sit on that.

Mr. Jim Clarken

We have intentionally pitched this at people who are wealthy. Anybody with net wealth of in excess of $5 million or €4.6 million is a wealthy person. We are looking at a possible tax of just 2% for that category and 3% for those who are above €50 million dollars or €46.6 million. The Deputy can see the thresholds are high. With regard to where the wealth comes from, one of the big challenges in transparency is with regard to where the wealth sits. It is part of the bigger discussion as to how we gather data and ensure we have access to full data of those other kinds of wealth holdings the Deputy mentioned. That will be an important part of it. We are certainly not going after Pat and Mary who have a nest egg. This is about wealthy people and a modest tax.

Our proposal is just to create some conversation about it. There may well be ways to do this better but we are saying that for very modest taxes for people with the kind of wealth we are talking about and more, we can generate quite a lot of money to meet our needs.

Deputy Aindrias Moynihan

What is the position where there might be some assets or income generated beyond the State? For example, somebody could have a very popular YouTube video that is generating money, or maybe a licence for something very valuable elsewhere. How is this wealth assessed or identified?

Mr. Simon Murtagh

On asset classes, my answer is similar to the one I gave earlier regarding no exceptions. The best form of wealth tax, on which economists across Ireland who have written on this are pretty much agreed, is that there should not be any exceptions insofar as is possible. However, our argument is that the threshold should be above the high one we have mentioned. It would not affect people by impoverishing them in any way. They are already at such a high threshold, having the equivalent of $5 million. I am conscious of the context of this discussion-----

Deputy Aindrias Moynihan

Where does the $5 million come from?

Mr. Simon Murtagh

It is in order to go for the elite wealth that we see increasing so much. Having examined the trend over a decade in Ireland, there is a valid argument for saying those in the top decile have increased their wealth. However, there is no doubt but that within that – this is what Oxfam has determined across the world – the most dynamic increase in wealth is among the 1%. We believe it is fairest if the richest in society make a contribution but the economic research shows that people at the very high end have a much better return on their capital and access to much better financial advice so they can earn returns of well beyond 5% or 6%, which you might expect on property, and right up to 10% and percentages in double figures. When a wealth tax is imposed on these kinds of sums, it is really only placing a check on the increase in the individuals' fortunes. That is why we would go for the very highest earners. It is also because we believe there is a genuine revenue base.

To go back to the report of the Commission on Taxation and Welfare, when Mr. Clarken says we are non-prescriptive, it should be noted that it is in our report that we do not quite care how the richest sections of society in Ireland and the rest of the world are taxed as long as they are taxed effectively. We agree with the commission's emphasis on the State raising much more revenue, which it needs to do because we have an ageing population and face the challenges that we and the commission have documented. However, we believe the revenue can be raised much more progressively through making our existing capital taxes much more efficient. They can also be made more progressive by having higher tax bands for the richest. This could be the case with capital gains tax, for example. We would like to push up the thresholds and make the commission's recommendations more progressive to aim at the 1% we have mentioned.

Reference was made to the classes of assets. It is true that the highest echelons of society hold much more wealth in the form of financial assets. This can be seen from the CSO returns, which show a lot more variation in the types of assets the top 10% hold.

The point the Deputy made about intellectual property is interesting in the context of what are called unrealised capital gains. A major aspect of the thinking of the American movement for tax reform and taxes on elite wealth in America, led by President Biden, is that where wealth is held in stock and has not yet been realised, it should also be taxed. The movement is very interesting, particularly in the US. Professor Killian might have something to say about that. It shows that a lot of the elite wealth is often not actually held; it is held in some of the assets the Deputy has mentioned and in stock market value. There is a broad international movement to tax it.

Dr. Sheila Killian

Deputy Moynihan's questions were excellent. They are exactly the kinds of design questions required. I am referring to questions on what the scope and thresholds should be. To me, it is a matter of having the discussion on the tax in as inclusive a way as possible. To return to what Mr. Clarken said at the beginning, if people have the conversation and decide to set the level at €5 million or €10 million, the value of having had that conversation in terms of social cohesion and transparency will still be evident. Social cohesion is not just a nice thing to have. With the changing nature of society and the damaging effects of false narratives, we have seen the beginnings of why it is pretty urgent in Ireland. We are not yet swamped with false narratives or at the level of polarisation of some of our neighbours, such as those to the east and west. There is an opportunity to avoid it by introducing the kind of conversation to which I refer.

To echo what Mr. Murtagh said about applying the tax to all the asset classes, applying it in this way is pretty necessary. I worked as a tax consultant for three of the big four firms before joining academia. If there are five asset classes and three of them are taxed, all the wealth will be transformed into the untaxed two. The tax has to be universal but set at a level that works for our society. Really, there is a great opportunity to have the conversation to inform what is being done, through the likes of a citizens' assembly. Whatever would be decided would be decided, but it would create trust, including in the political and financial systems, and ultimately reduce inequality, which would create a pipeline of talent through society. I see no downside to having the conversation.

Deputy Bernard J. Durkan

I am sorry for coming in late. I was at another meeting. I listened to the contributions that were made and am concerned about them. I have expressed my concerns many times in the past. A wealth tax is ill-advised for our open economy, which is subject to the whims of society around us. We do not have the biggest economy in the world. I keep hearing the phrase that Ireland is a very wealthy country. It is not; our wealth comes from our property values and incomes – our wages and salaries. We saw in the not-too-distant past, when the crunch came to this country and a difficulty arose, that our wealth suddenly disappeared, and we were standing nowhere near the centre of power and authority.

I was listening to the commentary earlier for a while and seem to recall the charity that we are dealing with here was involved with Mo Ibrahim, an entrepreneur and very wealthy telecommunications businessman who was very much in favour of a wealth tax here. However, it appears he was also in favour of investment for charitable donations. In other words, he could foresee circumstances in which society could benefit from charitable donations to poorer countries. I believed we were opposed to that kind of thing. Big businesses could be tempted to use their charitable donations to third countries as a means of paying their taxes. It would be in return for their donations. I do not accept or agree with that and it would not work in our economy.

The final point I want to make is on the concept of a wealth tax.

We did have a wealth tax in this country once upon a time. We abolished it on the grounds that it was driving people who had created wealth to leave the country and take that wealth elsewhere.

We must always be careful because those in the business sector might decide to take their wealth and so on elsewhere. That would not be good from our perspective. We must encourage people of wealth to invest in this country. That is what we have been trying to do for years. There is a contradiction. The bit of wealth that we have we need. If and when the crunch comes, as it did in the not-too-distant past, we need people who will continue to invest in all circumstances, even when things are not going so well for us. We need to be very careful. We have a wealth tax. We have a residential property tax, and I am not sure that people are clamouring for an increase in that. I am not a great supporter of the concept. We need to be cautious and make sure that we do not scare people who have wealth to take their wealth elsewhere, particularly when we know that their assets are mobile and that they can walk.

An Cathaoirleach

Before I ask our guests to respond, I will ask Deputy Michael Healy-Rae if he wishes to come in.

Deputy Michael Healy-Rae

I thank the Chair. I will be very brief. I apologise that I was delayed for a long time in the Chamber as I waited for my time to speak. I am glad to be here and to have heard some of the evidence.

On taxation, I have always dreaded frightening people who want to invest and create employment and who want to come here from abroad and set up business. Only early this morning I had a meeting with a person who reminded me of the clothing and shoe industry and how much of both we produced in Ireland at one point. Every bit of that business left us. It went to China, for instance, and now it is moving from there. It will make more moves again because it is a very fluid type of industry that goes to where the cost base is low. Our cost base is so high for all types of production that we are losing out on a lot of jobs. People might say that is an unusual statement to make when we are nearing full employment. However, I know people will understand what I mean when I explain that a high rate of tax can stifle.

Look at what has happened in the housing market and the rental market. Does anyone scratch their heads and wonder why 80,000 people sold property and no longer let it over the last eight or nine years? It is very easy. It is because they did not like paying 56% tax and having all the other issues that go with renting out property. They bailed out, much to our loss. There are people for whom we are seeking local authority housing that we cannot provide; we could get housing in the private market for them before but now we cannot because so many people have left. Like every public representative, I am getting calls every day about housing. We have lost so many from that sector. One of the reasons I am sure that we lost them is because of the high rate of tax. If anyone wants to debate it, it is not 50%. I often hear people in the Dáil say that it is expensive and that it is 50%, but it is not; it is 56% tax. That is what people are paying on their rental income. The Government has promised that it will do something, but it will be too late for all the people who have left that business and whose properties are no longer available and never will be because it will never again make sense to buy a property and rent it out.

I would love if the Government was able to build enough housing and we did not need to use the private sector at all, but, unfortunately, that is not the real world. When we talk about additional methods of taxing people and increasing taxation, the first thing we would want to do is look at whose tax we would reduce in order to try to stimulate the economy and encourage work. There are so many politicians in Dáil Éireann who seem to have something against work. They do not like work; they do not like the word or the idea of work and are of the view that it is not necessarily important to have to work. Everybody who can should work. People who are not able to work, older individuals or those who are disabled, should have every type of service and help in the world given to them, but the people who are young, fit and able should be encouraged to work. It should be attractive to work. If there are two choices between working and not working, it should not be attractive to not work. It should be obvious that you would roll up your sleeves and go away early in the morning and do a day’s work. And if you can fit two days work into one day, then that is exactly what you should be doing, especially when you are young. You should knock the most out of yourself and not be sparing yourself. Some of the politicians here do not think like that because they have a different mindset.

I am very sorry for going on too long. I thank the Chair for his indulgence.

An Cathaoirleach

The Deputy is welcome. We never would have expected that everyone would be of the same mind on this. It is a conversation and a debate in which people are entitled to lay their opinions on the table and have them challenged, digested and scrutinised with a view to recommendations emanating from the majority thereafter. The committee has met previously to discuss its report on the Commission on Taxation and Welfare recommendations. This issue will focus the minds of committee members to make a response on this.

Mr. Clarken spoke of the national conversation about taxing wealth in Ireland. He acknowledged that we are in a temporary position of very high yields from corporation tax but, as we have to keep stating, it is a base that is very narrow. Unfortunately, it is likely to be unsustainable despite the recent windfalls. I am also conscious of the Government’s actions and proposals in respect of windfall taxes. There will be legislation this side of the summer recess and after it, with a view to capitalising on the massive profits that have been made in energy generation. It will also deal with our unfortunate inability to keep pace with the options that could, should and may still be available in the future in the context of alternatives and having less reliance on fossil fuels and how, when the wind does not blow, we are back to the old reliables that are very expensive to maintain. They are very expensive to produce and the kind of market we have lends itself to one rather than others. That is something we are catching up on. In the meantime, however, we recognise that the windfall tax, as belated as it is, is a way to capture the colossal wealth that has been generated recently, which, in my opinion, is not all down to the war in Ukraine and so on. That is something to be conscious of.

I thank our guests for their presentations, contributions, responses and recommendations.

This is an ongoing discussion taking place within the committee. There is a duty of the committee to seek to come to a mind regarding recommendations. The first test of that, as I said, will be in the compilation of its response to the Commission on Taxation and Welfare report and the various recommendations within it, and our opinions and views and subsequent recommendations to those that we are answerable to, that being Dáil Éireann. I thank the witnesses for their contributions.

Deputy Richard Boyd Barrett

Will we get to hear a response from-----

An Cathaoirleach

Briefly, the witnesses may to respond to the issues that have been raised. Much of what has been said, with due respect to those who put the contentions to us, were their opinions and their response to the witnesses’ contributions, rather than specific questions.

Mr. Jim Clarken

I will be brief and I was happy with the Cathaoirleach's summation. In fairness to the people who asked questions, Deputies Durkan and Healy-Rae may have missed some of the earlier presentation where we talked about experience in other countries where this has not led to a flight of capital. If they are happening right now, they are not leading to a flight of capital. We acknowledge that they were poorly designed in the past in other places and we need to find something. That is why it requires careful deliberation and discussion. It is now becoming something that is being rolled out in a number of countries. Because of the nature of technology and the nature of the way we can track money, it could be much more possible to ensure that there will not be a benefit to people fleeing elsewhere. This comes back to global tax alignment and global tax discussions.

On attracting business, we have done much work on corporation tax as well over the years and we do much work with multinationals. Multinational companies in Ireland will tell you the reason they are here is because the quality of the people, primarily. The educated workforce, the access to the European market, the infrastructure, the Government supports and all the rest is a primary driver of that multinational investment in Ireland and that high-calibre employment investment. The Deputies might remember that. The summation was helpful.

Finally, on the windfall taxes, we had also been looking for windfall taxes for the pharma industry, which was supported by Government and taxpayers’ money during the pandemic and benefited tremendously from what happened subsequently.

The time is right for the conversation. We appreciate our opportunity to discuss with the committee today. I thank members for their time.

An Cathaoirleach

I might have been premature in my summation, to be honest. I had not noticed Deputy Patricia Ryan is online and wants to come in. Apologies to Deputy Ryan.

Deputy Patricia Ryan

That is okay. I apologise. I was late because I was in another meeting. I have been reading statements. I thank everyone for their time and indulgence. If I ask a question that has already been asked, I apologise for that as well.

When defining which wealth and assets would fall under the umbrella for higher or equitable taxation, what cost factors to the economy and to the attractiveness for investors, entrepreneurs and business will be taken into account? What measures would be necessary to prevent these sectors from moving elsewhere and taking their capital employment elsewhere? If someone could answer that, I would appreciate it.

Dr. Sheila Killian

This is exactly why we need the conversation. There are different forms of capital. There is capital that is used to create, generate or facilitate employment in real industry and there is capital that is used to take day trips into space. We have seen both of those happening in recent years.

The concerns of Deputies Durkan and Healy-Rae around productive capital are very important. I am glad Deputy Healy-Rae brought up the shoe industry. Looking at the whole fast fashion industry, it is deeply unsustainable and driven by inequality. If there was some form of equalising wealth tax at perhaps an EU level, we would see much of that inequality and drive towards cheaper production being moderated. It would be better for the overall level of employment and sustainable production within the country and the EU.

These divergent views, which are expressed well and forthrightly, show the value of a structured conversation in the form of a citizens’ assembly. Get all of these views on the table and design a tax that is appropriate for us.

An Cathaoirleach

Deputy Conway-Walsh has joined the meeting now as well. We had an extensive discussion, we had our presentations and asked questions. It may be that the Deputy will be repeating those questions but it is only fair to give her an opportunity.

Deputy Rose Conway-Walsh

I really do appreciate that. I must apologise. I got caught in the Chamber and I just could not get out. This is a subject I am extremely interested in. I will look back on the transcript and I look forward to the exchanges there. If the witnesses have answered any of these questions already, please ignore them. It was said the wealth tax has become more feasible due to technical and political reasons. If the technical barriers and how they became more surmountable in recent years has not already been elaborated on, perhaps the witnesses could do that, but if they have done so, it is fine.

It was mentioned that Elon Musk legally avoided all capital gains tax that would have incurred had he sold the shares to purchase Twitter. How significant a challenge is the collateralisation finance in terms of effectively taxing wealth?

Regarding the citizens’ assembly, why is it the right way for moving forward on effective wealth and tax distribution?

Public registries of beneficial owners were mentioned. What are the challenges in implementing such a registry with a current lack of financial transparency? Finally, should clear transparency on beneficial ownership be a prerequisite for any company hoping to win a public contract or to have a transfer of public money?

I really appreciate the Chair letting me in.

An Cathaoirleach

There were five specific points or questions: the technical barriers-----

Deputy Rose Conway-Walsh

The witnesses can just ignore the ones that have been addressed.

An Cathaoirleach

-----the collateralisation finance versus taxing wealth, why the citizens’ assembly – I think that is merely an opinion that has been repeated by all guests whereby they believe it is a wide-ranging debate on the issue that can inform the Oireachtas thereafter into the particular journey it wants to take – the public register of beneficial owners and finally the transparency issue versus the awarding of public contracts. I know what relevance that has but it may have some specific relevance in the context of those who have sufficient wealth that you deem necessary to be taxed prior to any further public contracts of any nature. I ask the witnesses to be as succinct as they can in response to those five points please.

Mr. Simon Murtagh

We covered many of those points. On technical barriers, we looked at the OECD processes, which are now including a common reporting standard and are covering a huge amount of international wealth as it is traded. I can follow up with the statistics on that. In America, there is the Foreign Account Tax Compliance Act, FATCA, which is the financial transactions tax. Because of the capacities of electronic bank data transfer, they can not only work out what US citizens are due to pay abroad but also prevent them from allowing repatriation of wealth of more than $2 million. There are steep fines. In a sense, that question of capital flight is answered by the question the Deputy asked. We have the tactical means to stop it through border taxes. If a US citizen renounces citizenship to evade taxes, there are steep fines for that as well. That is the technical base for it.

I would like to bring in Dr. Killian on those questions, which really are her area of expertise. I can certainly talk to the Deputy afterwards about all those questions.

An Cathaoirleach

Does Dr. Killian wish to repeat some of-----

Dr. Sheila Killian

I am conscious of time. The technical aspects of this are best worked out in a cultural context subject to, as Mr. Murtagh said, this being an inclusive tax that covers all asset classes and does not give opportunity to evade and create evasion opportunities. It is important. There are serious technical challenges arising from the general opacity of our financial system. The opacity of our tax system and where wealth lies and does not lie is symptomatic of that. It would be a step towards greater transparency that would allow the Irish Government and other Governments within the EU to more effectively manage risk within their jurisdictions, if they can see who owns what.

If there is a decent asset register, they will be able to see who owns what. We really should know who is investing, particularly in sensitive assets such as housing, as referred to by Deputy Healy-Rae. We should know who is investing in this critical infrastructure in our country. It is basic information to add to the conversation.

An Cathaoirleach

Did Deputy Ryan want further clarification on an issue she raised?

Deputy Patricia Ryan

I thought we had ten minutes for questions. I was just about to ask a second question when the Cathaoirleach moved on to another speaker. I apologise if I picked that up wrong. May I ask one more question?

An Cathaoirleach

Of course.

Deputy Patricia Ryan

I thank the Cathaoirleach. In Oxfam's briefing paper, Survival of the Richest, recommendations 2 and 3 talk about imposing the highest possible tax on the 1%, that is, the richest of the richest. How does Oxfam envisage stopping those obscenely rich folk from merely avoiding taxes? It is one thing to tax wealth that is measurable in the form of assets and goods in the State. Is it something else entirely to tax citizens who offload wealth to tax havens outside the State or divert it to shell corporations or syndicates of which they happen to be the benefactors? I would appreciate a brief answer on that.

Mr. Jim Clarken

We have been working on tax transparency issues for years as part of the OECD process and as part of a wider global process. There needs to be a global agreement on these issues. We need the public registers of beneficial ownership and an understanding of what is owned by whom and how money is being transferred. It does not benefit society at all if the ownership of money or assets is being shipped to the Caribbean. It does not benefit the Caribbean either, for that matter. There is a real necessity to push this issue. We hope that when the OECD base erosion and profit shifting, BEPS, process moves into its next phases, we will see a more proactive approach to lifting the lid on these matters. Ireland being a proactive country in terms of its involvement in these processes is to our benefit. There are lots of companies registered in Ireland and we do not have full details on them. It is in our interest and should be a priority to address that.

Dr. Killian might like to comment on this point.

Dr. Sheila Killian

I echo what Mr. Clarken said, which was perfectly expressed.

Deputy Patricia Ryan

I thank the witnesses.

An Cathaoirleach

I thank our guests for their time. They have given us no little information. If there are any other issues they wish to share with us after the meeting, they can do so by communicating with the committee secretariat. I thank members for their time. Our next meeting will be on Thursday morning, rather than Wednesday, to accommodate the witnesses from the Economic and Social Research Institute, ESRI.

The select committee adjourned at 7.03 p.m. until 9.30 a.m. on Thursday, 22 June 2023.