Dáil Éireann Debate, Wednesday - 20 September 2023
175. Deputy Neasa Hourigan asked the Minister for Finance if his Department, as part of developing budgetary proposals, has examined the potential of introducing a one-off corporate windfall tax or a wealth tax, as recommended by a report (details supplied); and if he will make a statement on the matter. [40470/23]
View answerI am aware that Oxfam International released a report in January 2023 regarding global wealth inequality entitled “Survival of the Richest” which proposes new wealth taxes in Ireland and in other jurisdictions.
While I understand the background to calls for a specific wealth tax in Ireland, it is not the case that wealth in Ireland is untaxed, as taxes on wealth are already in place here.
The Government is committed to creating a fairer, more equal Ireland. While the calls for a specific wealth tax are often made, there are already a number of wealth taxes in place including Capital Gains Tax, Capital Acquisitions Tax and Local Property Tax. Revenue estimates that these taxes raised over €2.8 billion last year.
The Oxfam report notes that “Two-thirds of countries do not have any form of inheritance tax on wealth and assets passed to direct descendants.” I would remind the Deputy that Ireland has a significant inheritance tax regime in place in the form of Capital Acquisitions Tax which is charged (with limited exemptions) at a rate of 33%.
Oxfam's report also notes that “Rates of tax on capital gains – in most countries the most important source of income for the top 1% – are only 18% on average across more than 100 countries.” I would again remind the Deputy that Capital Gains Tax is in place in Ireland and it is charged, again with limited exemptions, at a rate of 33% which is well above the 18% average reported by Oxfam.
Any revenue raised from a new 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 such a new tax.
In addition to wealth taxes, the Government takes action against inequality through our tax and welfare system. For instance, the strong redistributive role of the Irish tax and welfare system is evident in the range of supports introduced to help mitigate the impact of the Covid-19 pandemic and the current cost of living pressures on vulnerable households and businesses. The overall distributional impact of Budget 2023 was strongly progressive, with the lowest three deciles experiencing the highest gains as a proportion of disposable income.
Ireland has one of the most progressive systems of taxes and social transfers of any EU or OECD country, which contributes to the redistribution of income and to the reduction of income inequality.
It is estimated that the top 1 per cent of income earners here, that is those earning in excess of €263,000, will pay 23 per cent of the total income tax and USC collected in 2023, while those earning less than €65,000, which represents 80 per cent of income earners, will contribute only 21 per cent of total income tax and USC receipts.
In relation to the Deputy’s reference to a one-off corporate windfall tax, as a small open economy, connected to Europe, the US and the wider world, Ireland has been and is committed to a competitive, transparent and stable corporation tax system. As the Deputy will be aware, the trading profits of companies in Ireland are generally taxed at the standard corporation tax rate of 12.5%. Ireland’s corporate tax regime has been built on certainty and predictability, and the 12.5% corporation tax rate on trading income has been a cornerstone of that regime for over 20 years. This stability has enabled companies to plan long-term investments in Ireland, generating employment and increasing economic activity.
The Deputy will be aware that Ireland, along with almost 140 other countries in the OECD/G20 Inclusive Framework, signed up to the two-pillar agreement on international corporate tax in October 2021. Pillar Two of the agreement will see the adoption of a global minimum effective tax rate of 15% applying to large corporate groups with global revenues in excess of €750m.
Pillar Two will be implemented in Ireland largely via the EU Minimum Tax Directive (Council Directive (EU) 2022/2523), and work is now well advanced to transpose the EU Minimum Tax Directive in October’s Finance Bill this autumn.
In conclusion, I can assure the Deputy that all potential taxation options are kept under consideration and it remains a priority of mine to ensure that Ireland maintains its progressive taxation system and continues to support substantial investment and economic activity in the State.
