Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

Ireland already has a variety of taxes on wealth, including capital gains and capital acquisitions taxes that levied on individuals or companies on the disposal of assets, in the case of capital gains tax, or the acquisition of an asset through gift or inheritance, in the case of capital acquisitions tax. The local property tax introduced in 2013 is based on the market value of residential properties and can also be categorised as a tax on wealth.

It is important to understand where Ireland stands in the context of the distribution of wealth. Officials examine all items relating to taxation, including wealth taxation, on an ongoing basis. For example, in 2016 and 2018, Department officials conducted two research projects in conjunction with the ESRI on the distribution of wealth in Ireland and the potential implications of a wealth tax. The resulting research papers, Scenarios and Distributional Implications of a Household Wealth Tax in Ireland, are available on the ESRI website. Both presented results on the composition of net wealth - assets less liabilities - across both wealth and income distribution in Ireland. A number of wealth tax scenarios, including regimes from other jurisdictions and hypothetical scenarios, were applied to the Irish data. In each case, the associated tax bases and revenue yields, the number of liable households across income distribution and the characteristics of the household affected were outlined.

Looking at the composition of households under the different tax scenarios, the studies found that even with a narrow base and high threshold, some households in low income deciles were affected. This is because of the imperfect correlation between income and wealth. Furthermore, if a wealth tax were applied in addition to the related forms of wealth taxation, it could have the disincentive effect of causing large changes in the level and type of assets held by Irish households. Households could be expected to respond to high effective rates of tax and capital income, for example, by reducing holdings of assets in Ireland or relocating wealth holdings to asset types facing a lower wealth tax charge. Additionally, the distribution implications of a wealth tax across different types of households should be taken into account. A larger proportion of a wealth tax burden would fall on older households than the share of net wealth might indicate.

With regard to increases to taxes on high-income earners, in 2020 it is projected that the top 1.5% of taxpayer units - those with annual income in excess of €200,000 - will pay 26.5% of the total income tax and universal social charge, USC. This is a very large proportion of the total income tax and USC take for such a small cohort of taxpayers. In comparison, 72% of taxpayers - those with annual income of less than €50,000 - will pay 15% of income tax and USC. To further demonstrate the high amount of tax being paid by high earners under the current income tax and USC system, figures indicate that in 2020 it is expected that there will be approximately 2.78 million taxpayer units, including married couples under joint assessment, bringing a yield from income tax and USC of just over €24 billion. There will be 2.3 million taxpayer units with incomes of less than €70,000 per annum and the remaining yield of over €17 billion will be paid by fewer than 440,000 taxpayer units earning over €70,000 per annum.

A broad-based progressive income tax system whereby the majority of income earners make some contribution but according to their means is the fairest and most sustainable income tax system in the long term. The Department of Finance will continue to monitor and consider any additional information or data that comes to its attention. It will continue to examine existing and alternative potential taxation sources. The Minister does not have any plans to introduce tax measures along the lines indicated in the report sought by the Deputy. As a result, I do not propose to accept the amendment.

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