Dr. Tom McDonnell:

Yes. It does not sound like a lot but the current long-term return on capital is approximately 4%, meaning it is tax of 25% of that amount. It would only affect the top 1% or 2% of households. A wealth tax operates from a different base from income tax and wealth inequality is much more pronounced. Many economists take the view that the best way to deal with intergenerational wealth inequality is inheritance and gift tax, which we call capital acquisitions tax. We tax the person who gets the money rather than the inheritance itself and that is a better system than the one in the UK. The problem is the system of reliefs is so inordinately generous for particular types of assets that many people can have an inheritance worth millions without paying a penny in tax.

I was asked whether I could be specific about the different types of taxes. I stated that we have an overall revenue problem and we are not so much a low-tax country as a low-revenue country. The big difference is social security contributions, which in Ireland are PRSI. Employer PRSI makes up 80% of the gap to the high-income EU average and that is the elephant in the room. It is often called a social wage because in many countries it goes towards benefits for workers. If the benefits went towards something such as child care subsidies it would be for the benefit of employers in the long run, as it would increase the size of the labour force. If it went to the retraining and upskilling of workers it would lead to a more productive workforce. Child care subsidies also lead to a more productive workforce by keeping women in the workforce and, as we know, women are more educated than men. Moreover, when they fall out of the workforce they often never fully come back.

Genuine reform will be necessary in regard to the sufficiency of revenue as there is a pensions time bomb, health care is going to increase year on year and we have an infrastructure deficit, which has been well flagged and of which the committee is cognisant. Our research and development deficit, compared to the top performers, is €0.5 billion per year. The literature on economics suggests one has to have a functioning innovation system to develop top companies but we ignore that completely and our spending is two thirds of that in Sweden and elsewhere. Such countries have the idea of the "entrepreneurial state" but we do not have that.

We discuss increasing employer PRSI and the property tax - there can be other types of property tax, for example, on stocks – and perhaps reducing consumption taxes. We are not just about increasing taxes - the distributive impact is important; for example, taxes on pollutants could be increased and used to subsidise renewable energies - but also about reforming the taxation and revenue systems and public spending to bring us into line with the best performing countries in the world in terms of policy. We are a long way off that. In our summer and autumn quarterlies and some of our working papers, we have tried to show what those countries do and describe what needs to be done to get us there.

The fiscal space is extremely small this year, but we view this as a five-to-ten-year issue and beyond. Improvements can be made year on year. Unfortunately, we cannot solve everything in one year, but at least we can make a start. Does that answer the question?