Dáil Éireann Debate, Thursday - 16 June 2022
6. Deputy Bríd Smith asked the Minister for Finance if he has studied a recent paper on wealth taxes and the problems with previous attempts by European Union states to introduce wealth taxes (details supplied); the plans he has in this regard for the coming period; and if he will make a statement on the matter. [31246/22]
Amharc ar fhreagraI want to follow on the discussion that has been going on. The question I am about to ask is quite significant because we are constantly being told that there are not enough resources to do all we have to do to deal with the various crises. Has the Minister of State looked at the recent Oxfam report that dealt with wealth taxes and the problems with previous attempts across the EU to introduce same? Does he have any plans in this regard in the coming period?
I thank the Deputy for bringing this recently published paper on wealth taxation by Emmanuel Saez and Gabriel Zucman to the attention of the Department of Finance. The paper is being reviewed but, in summary, it describes the historical experience of wealth taxation in Europe and draws lessons from this. It concludes that the wealth tax base was narrow in European countries due to large exemptions, tax avoidance and evasion. The paper explains why such exemptions were granted and how the authors contend they undermined European wealth taxes. The paper examines the issue from an EU-wide lens, with some discussion of specific countries, but it does not refer to Ireland. It is important that we mention the context that it is a European report that does not specifically refer to Ireland. I acknowledge that the Deputy has highlighted that and the paper is being examined.
While the Government understands the background to calls for a specific wealth tax in Ireland, it is important for people listening to note that contrary to the general impression given by some of those calling for such a tax, it is not the case that a wealth tax does not exist in Ireland. Ireland's wealth is taxed and taxes on wealth are in place. These wealth taxes include capital gains tax, which is significant, and most people who buy or sell houses or property will be aware of that. It also includes capital acquisitions tax and the local property tax and between them, according to Revenue’s annual report for 2021, those taxes raised €2.77 billion net last year.
The biggest wealth in Ireland is the value of people's households. We have a wealth tax on that, notwithstanding some parties of the left opposing that. Any revenue raised from a new wealth tax may not, therefore, be additional to the existing forms of wealth tax, as revenues from the latter could be affected by the introduction of new taxes.
On the broader issue of inequality, it is important to note that the taxation system in Ireland is deemed generally progressive by most independent observers.
I do not want to go down a rabbit hole of arguing with the Minister of State about the significance of the property tax. He says people's homes are the biggest form of wealth but for many it is a struggle to keep the roof over their head, pay the mortgage, etc. Putting the property tax on those who can ill-afford it is obscene. However, that is not what I am here to argue.
The Minister of State is evading my question on tax on wealth in this country because it is not directly in the Oxfam report. However, using the method that report applies, the first thing it points out is that the wealth of the top tier of society has increased hugely in Ireland. Nine billionaires have seen their wealth increase by €18 billion since the start of the pandemic to an obscene figure of €50 billion. We know we do not get back what we should in tax from that. The method Oxfam advocates allows for an exemption of up to €4 million, which I think is way too high but I use that figure to show how modest the report is. If we take that exemption rate, after that we could introduce a serious wealth tax that would bring in the money we need to deal with the various crises we face.
It is expected the top 1% of taxpayers, who are those with an annual income in excess of €200,000, will have paid 25% of total income tax and USC last year. That is a very large proportion of our total income tax. In comparison, it is estimated that 75% of taxpayers, those with an income of less than €50,000, will have paid 18% of the total income tax last year. They are the most recent figures I have available.
The Deputy will be aware a Commission on Taxation and Welfare was established in June 2021 and is currently carrying out its work. Wealth taxes, along with any other form of taxation, could fall within this review but the commission is undertaking an independent review. It would not be appropriate for the Minister or me on his behalf to speculate about the specifics of the working contents of that report, which will be published as soon as practicable. We cannot suggest to the commission what it should do. Taxpayers in Ireland in the €100,000 bracket generally pay 40% of their income in income tax. We have a more redistributive tax system than most countries.
If the Minister of State reads the Oxfam report when he gets a chance, he will see it is looking at extreme wealth and how it has doubled, tripled and, in the US, increased tenfold in recent years. In the 1980s, we were told there was no money, we were bust and needed to tighten our belts. We know since there was plenty of it but it was held in Ansbascher accounts, offshore tax havens and brass plate companies. We have seen the studies from the Paradise Papers and the Panama Papers so we know there were and are ways for the extremely wealthy not to tell the truth about their wealth. We have quite a lot of millionaires and nine billionaires in this country. For a small island, that is staggering.
The paper suggests many ways tax could be taken from the wealthy. Not to have them self-reporting would be a start, but rather to have somebody delve into their wealth; as well as not giving them this obscure way of hiding their wealth but forcing them to show it. Many wealthy companies and people say they cannot afford the tax because it is all in shares. They also suggest the Government take the tax in kind and take shares. We have worked out that could yield €4 billion, which would do a lot to provide free public transport, double the number of buses on the road and give free childcare to every family. A lot could be done with that to address the multiple crises we face.
I understand there is a small handful of wealthy people. I do not know any of them or where they live. I have not encountered them but I take the Deputy's point. If they are tax resident in Ireland, they are covered for all taxation therein. A small proportion of taxpayers, some 1%, pay 25% of all income tax. We have a similar pattern in corporation tax, where a small handful of major companies pay the vast bulk of it. To that extent, we collect tax, whether wealth or income tax, from the very profitable, wealthy organisations.
I gave an example of how tax is progressive in Ireland and what we have done on wealth tax. The top three forms of wealth in Ireland are as follows: people's houses, with the value of houses being the most significant part of wealth. The second most significant is farmland. Land is valuable but is a working asset for the next generation. The third most significant is people's pension funds, about which I would be concerned if we started taxing. People invest to make sure when they retire they are not dependent on the State and have a pension fund built up over the years, some of it in shares. I would be horrified if we were to start attacking pension funds, thinking we were getting solely at the wealthy. Most people need those funds and have put into it on the basis that they will be able to draw them down.
It is disingenuous of the Minister of State to keep referring to people's homes, farms and pensions. We are talking about an obscene level of wealth that is not properly taxed, as pointed out by the Oxfam report. The wealthiest in the globe have seen their wealth jump by €4.35 trillion during the pandemic. The report states that, globally, billionaires have had a terrific pandemic. With the investment in all the industries leading from that, we would have been able to see-----
Thank you, Deputy. That is your question finished.
The clock says I have 30 seconds.
That is for the next question. We have gone into Deputy Calleary's time.
Okay. I am sorry about that.
