Dr. Tom McDonnell:

I thank the Deputy. It is a brilliant question. It comes down to the heart of the problem. Ultimately, the lack of taxation on capital gains and capital acquisitions, the loopholes and the existing system of tax expenditures are about political economy rather than economic decisions.

I know from speaking to people in Revenue that more effort goes on avoiding CAT than all the other taxes combined, of course, with the exception of corporation tax, albeit by different people. It is emotive because wealth gives power and privilege and people become defensive and threatened when their power and privilege comes under threat. When people talk about increasing or reducing CAT, they feel attacked and under threat. The reality, of course, is that a large majority of households are not affected by the current system at all. We have €1 trillion of net household wealth, yet the revenue that we yield each year from CAT is minuscule. Effectively, the rates are close to non-existent for a great many transfers.

We have a problem and the base needs to be broadened. The focus, in our view, was that this was one of the areas where there needed to be significant uprooting and overhaul, that the system was broken and did not work, and that there needed to be a significant shift in the composition of how we raise taxation towards capital stocks in general. That includes the site value tax and the local property tax, but CAT is very much to the fore of that debate as well.

Inheritances are, as the Deputy said, what makes someone a millionaire. More than half of wealth is inherited in many countries. We can see that the same families are often dominating generation after generation, regardless of competence or otherwise. It is the system overall. It is not about the rate. It is not even about the threshold. It is about the agricultural and business reliefs, and their enormous generosity. Median net wealth in 2020 was under €200,000. It is almost certainly higher now. The agricultural and business reliefs can effectively exempt one from paying on €3 million or so of one's assets. It is completely out of whack with what it should be.

I agree with Dr. Collins that we need an overall system where all of these things are effectively benchmarked against something. In my view, annual earnings is a good benchmark and setting thresholds for all of these things, including on the welfare side, should be in some way linked to annual earnings. That would be an appropriate way to do it. I would not have it at many multiples at all. Two or three would be appropriate to me. After all, these are windfall gains that are undeserved.

Finally, the economic impact of increasing CAT and the other property taxes is extremely modest compared to increases in income tax or the regressive impact of increasing taxes on consumption. I encourage the Oireachtas to engage with this issue, which is challenging from a political economy perspective. We need to have a mature and honest debate about inheritance tax and not have it based on media hot takes or whatever. We need to treat this issue seriously.