Dáil Éireann Debate, Tuesday - 15 June 2021
123. Deputy Ged Nash asked the Minister for Finance his views on a recent ESRI report (details supplied); his further views on whether the recurrent tax levied on wealth and assets could raise substantial amounts of revenue; his plans to conduct an analysis into the additional revenue which could be raised for the Exchequer through targeted growth-friendly wealth taxes; and if he will make a statement on the matter. [31610/21]
View answerMy officials and I are familiar with the ESRI report entitled “Options for raising tax revenue in Ireland” and I welcome this type of research, which is very beneficial to informing policy decision making and which can aid budgetary decision making.
The ESRI’s key finding is that “increases in taxes on income, consumption and property may be needed to fund future public spending.” This report also provides significant insights into the exchequer, distributional and income effects of tax changes, which are important considerations for budgetary policy.
In the context of discussions around taxes on wealth and assets, it is important to note the ESRI’s findings that the vast majority of household wealth is held in the form of residential property, and for that reason, the Local Property Tax functions as an effective wealth on tax. In particular, the ESRI refer to potential for increased revenue by bringing properties built since 2013 into the charge for tax. This supports the Government’s recent decision to take this course of action which is projected to deliver a yield of €560 million.
Aside from the role of the Local Property Tax as a functional wealth tax, it is also important to note the ESRI’s findings of the difficulties associated with introducing a wider wealth tax. Namely, that it would be difficult to raise substantial revenues from a wealth tax without applying it at a low level, with few exemptions. However, without such exemptions, tax liabilities would fall heavily on low income households. Furthermore, the authors refer to a number of economic distortions which could result from the introduction of a wealth tax, such as potential disincentives for earnings, to a further increase in the price of owner-occupied housing.
It should be noted that, as well as the Local Property Tax, Ireland already taxes wealth in a variety of other ways, such as through our Capital Gains Tax and Capital Acquisitions Tax (CAT), which are levied on an individual or company on the disposal of an asset in the case of CGT, or the acquisition of an asset through gift or inheritance, in the case of CAT.
I would also highlight that analysis previously undertaken by the ESRI, using OECD data, shows that Ireland’s tax system does more than any other country in the EU to reduce the gap between market and disposable incomes, which is an important consideration in wider discussions around the redistributive role of our tax system.
My Department keeps tax options under ongoing review, but there is no plan at this time for it to conduct a specific analysis of the type the Deputy suggests.
