At the outset, I wish to outline Ireland’s position regarding the distribution of wealth. In 2013, the Central Statistics Office conducted the Household Finance and Consumption Survey (HFCS), which provided the first comprehensive data on Irish household wealth.
The net wealth Gini coefficient is a commonly used measure of inequality, where a figure of 100 indicates that one household holds all the wealth and 0 indicates that wealth is evenly divided among all households. This measure, based on the HFCS data, indicates that wealth inequality in Ireland (64) for 2013 is lower than the euro area average (69). In addition, the HFCS results also show that wealth in Ireland is less concentrated at the top of the distribution (i.e. the top 1% of the population) than the euro area average.
The Irish Government is committed to various targets, policies and initiatives to further reduce inequality in Ireland. Firstly, we are committed to further implementation and progress towards our inequality reduction goals within the Programme for Partnership Government, particularly in the context of the budgetary process. Our highly progressive income tax and well targeted welfare systems are notably successful at reducing income inequality. In fact, the most up-to-date OECD data available show that Ireland’s tax and welfare system creates the largest improvement in the equality of income distribution of all OECD countries for which data are available. We are also dedicated to further advancements in the area of limiting tax avoidance, which is evident, for example, through our involvement in the OECD BEPS initiative. Furthermore, additional policy measures such as regular reviews and/or increases of the national minimum wage also support the goal of a more equal income distribution.
The charging structure for the LPT is progressive. The basic rate of 0.18 percent applies up to property values of €1 m with a higher rate of 0.25 percent applying on the portion of value above the €1 m threshold. In addition to the progressive rate structure, and to the extent that better off people tend to own more valuable properties, the LPT is a progressive tax particularly over the life cycles of tax payers.
In January I announced a review of the Local Property Tax (LPT) which is looking in particular at the impact on LPT liabilities of property price developments. The review includes an examination of the outstanding recommendations of the 2015 Thornhill review of the Local Property Tax. A number of these recommendations call for the existing LPT deferral provisions should be continued and be reviewed and revised at frequent intervals in line with movements in the CPI so as to maintain their real value and that the period of relief for income-stressed owner-occupiers who have outstanding mortgages should be extended beyond the end of 2017. In addition there is a recommendation that for owner-occupiers over 80 years of age or those with stated certified long term illnesses and disabilities who are also living alone that consideration be given to raising the eligible income limit for deferrals to €20,000.
It is expected that the review will be completed at the end of August and that the review report will provide a number of policy choices for consideration. The review will be informed by the desirability of achieving relative stability, both over the short and longer terms, in LPT payments of liable persons.