Wednesday, 17 July 2013

Questions (72)

Terence Flanagan


72. Deputy Terence Flanagan asked the Minister for Finance if he will consider the introduction of a wealth tax in budget 2014; and if he will make a statement on the matter. [35672/13]

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Written answers (Question to Finance)

As the Deputy will be aware, the Budget 2014 will be announced in October of this year, some two months earlier than in previous years. While all taxes and potential taxation options are constantly reviewed, it is a long-standing practice of the Minister for Finance not to comment specifically, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.

A number of considerations would need to be taken into account, as regards the potential for imposition of a wealth tax, in the sense of an annual recurring tax on wealth. Firstly, to estimate the potential revenue from a wealth tax, one would need to identify the wealth held by individuals, which is not possible from the data available at present.

I am informed by the Central Statistics Office that the CSO institutional sector accounts do not give an indication of the number of households or persons classified by the categories of wealth they hold. These statistics are based on aggregate information collected from financial institutions and do not contain the demographic details which would enable such a breakdown of the statistics. So while the CSO’s Institutional Sector Accounts show that households held c. €126 billion on deposit in 2010, this is not broken down by income or wealth categories.

However, I understand that, following discussions between the Department of Public Enterprise and Reform, the CSO and the Central Bank, the CSO has commenced a “Household Finance and Consumption Survey”, which will collect information on household wealth. The first results of this survey will be available in 2014. The data to be collected by the CSO as part of its Household Finance and Consumption Survey is not being collected for the purposes of calculating the potential yield from a wealth tax but to collect general information on the financial situation and behaviour of households.

I am informed by the Revenue Commissioners that they have no statistical basis for compiling estimates in relation to a potential wealth tax. Although an individual’s assets and liabilities are declared in a limited number of specific circumstances - for example, after a death - Revenue states it is not in a position to link an individual’s income to her/his financial assets.

Secondly, asset values increase and decrease over time and in the context of recent economic circumstances, they may have declined considerably in many cases. Thus, if the value of an asset or of an individual’s wealth is measured at a particular time there is no guarantee that the asset value or the individual’s wealth will remain at that level or increase from that point. This would make it difficult to predict the potential yield from a wealth tax and would have to be borne in mind in terms of its consistency as a source of revenue.

Finally, Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT) are, in effect, taxes on wealth, in that they are levied on an individual or company on the disposal of an asset (CGT) or the acquisition of an asset through gift or inheritance (CAT). However, they are not annual taxes on an individual’s wealth. The rate of both these taxes is currently 33%, which I increased from 30% in Budget 2013. I also reduced the CAT group tax-free threshold for gifts and inheritances by 10%, following a number of reductions in recent years. The introduction of a wealth tax could have a negative impact on receipts from CGT and CAT.

In the context of taxes on wealth I will also refer to the introduction in Budget 2010 of the Domicile Levy. The levy is currently charged on an individual who is Irish-domiciled whose world-wide income exceeds €1m, whose Irish-located property is worth more than €5m, and whose liability to Irish income tax was less than €200,000. The levy applies for the tax year 2010 and subsequent years. It is payable on a self-assessment basis on or before 31 October in the year following the valuation date, which is 31 December of each year. A total of 11 taxpayers paid the levy in 2011 (for the 2010 tax year) with a total yield of €1.67 m, and a total of 10 persons paid the Levy in 2012 for tax year 2011 and these persons paid a total of €1.64 m. In Budget 2012 I expanded the application of the Domicile Levy by removing the citizenship condition. This will affect returns for 2012, which are due to be made in October 2013.