Dáil Éireann Debate, Tuesday - 9 November 2021
69. Deputy Richard Boyd Barrett asked the Minister for Finance if he will consider providing relief to low- and middle-income households struggling with the cost of energy through an exemption of VAT from domestic energy supplies or a rebate of VAT on domestic energy supplies in the winter months; and if he has discussed or will discuss these matters with the European Commission. [54745/21]
View answerDuring the past decade, corporate profits here have gone through the roof. I estimate there has been an increase of approximately 127% in corporate profits. Last year, net household wealth increased by €89 billion to a record €883 billion and more than 50% of that is in the hands of the richest 10% of the population. In the interests of justice, fairness and equity and to provide funds for public services and infrastructure, is it not time to introduce wealth taxes?
I should remind the Deputy of the many different ways in which wealth is currently taxed, for example through capital gains tax, deposit interest retention tax, or DIRT, and the local property tax. Any revenue raised from a wealth tax may not therefore be additional to the existing forms of wealth taxation, as revenues from those taxes could be affected by the introduction of a wealth tax.
On the issue of household wealth, late last year the Central Bank published a report, Household Wealth: What is it, who has it, and why it matters. It presents the results from the household finance and consumption survey, which collects data on households’ financial positions. That survey was undertaken before the pandemic, but it provides a starting point against which to benchmark its impact on household finance positions and consumption patterns. I am informed that the report indicates household net wealth grew by more than €76,000 for the median household, or by 74%, to €179,200 from 2013 to 2018, driven primarily by house price growth and declining mortgage debt. The report also highlights a significant portion of wealth for most households is tied up in the family home.
While the net wealth of the top 20% of households increased by approximately 52% from €560,000 to €853,000, the relative share of net wealth held by the top 10% of households decreased by 2.6% from 2013, and is 1.3% below the equivalent figure for the eurozone as a whole.
As was confirmed in the recent budget 2022 policy changes, a range of metrics demonstrate that compared to other countries the Irish tax and welfare systems contribute substantially to the redistribution of income and a reduction in income inequality.
The Minister has just confirmed correctly, although he said it has reduced slightly, that the richest 10% of our population owns more than 50% of all the wealth in a study to which he referred. People need to understand how much that is. Net household wealth, according to the Central Bank report, is €883 billion. That means the richest 10% have €440 billion in personal wealth. The Minister said that is tied up in the family home. Our wealth tax proposal explicitly excludes the family home. There are 160,000 people in that top 10%. Let us allow them €1 million each to cover the family home and that is being very generous. That would be €160 billion of the €440 billion. Why not tax the rest even by 2% in order to redistribute some of the wealth to the bottom 50% who have less than 2% of the wealth?
I noted in my reply the array and level of taxes we have on capital. Our capital gains tax and capital acquisitions tax are very high in comparison to many other countries in the European Union and OECD countries. We already tax capital at a very high level. The Deputy was right in saying I acknowledged in my reply that a share of the wealth is wrapped up in property that is owned in terms of the family home and in property investments some people may make. The reason we have a local property tax is to tax that form of wealth, which is a tax the Deputy wants to abolish and get rid of. If he believes the way in which we should tax a very high level of wealth is by the way in which we tax capital, that is what we currently do. We have an array of capital taxes at high rates. It is one of the rationales for having a local property tax.
We are not in favour of taxing the family home in our wealth tax proposal. We are very explicit. We are in favour of taxing the wealth in excess of €1 million in the hands of a small group of people. I will put it another way to the Minister. We have approximately 2 million workers, and the Minister can confirm the numbers. Last year, between them they earned €130 billion but they paid €27 billion in tax. The corporations earned €203 billion in pre-tax profits and paid €11 billion in tax. In other words, the corporations made twice as much as 2 million workers in profit or income, whatever way the Minister would want to put it, but paid half as much tax. Where is the justice in that? The wealthiest group saw their wealth very significantly increase by approximately €50 billion last year. Should they not pay a bit more tax?
How many of the workers the Deputy referred to are employed by the corporations to which he also referred? Many of those corporations are very large employers employing a large share of the workers he correctly identified. We receive income tax on the salaries those corporations pay those workers. We receive tax from the investments those corporations make here. It comes back to the challenge we face in that many other countries are competing for the level of foreign direct investment we have here. The benchmark for what the corporate tax rate should be, which as the Deputy is aware we are planning to increase for the largest companies, is not just how much revenue can be accrued through changes in rates, but also the need for that rate to be competitive with that of other countries. I acknowledge we have a low rate of corporate tax of 12.5%, albeit it will increase. The reason for that, in turn, is to create a country in which we have more people at work than otherwise we would have.
