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

I note that we have wealth taxes. We tax wealth in a variety of ways, including capital gains tax and capital acquisitions tax. These taxes are levied on individuals or companies on disposal of an asset in the case of capital gains or the acquisition of an asset through gift or inheritance in the case of capital acquisitions tax. We also have a wealth tax on the highest form of wealth in the State. This is a property tax. Of course Sinn Féin is against the property tax because it is populist. The local property tax was introduced in 2013. It brings in approximately €500 million.

It is important to understand where Ireland stands in respect of the distribution of wealth. Our officials examine all aspects, including taxation and wealth taxation, on an ongoing basis. During 2016 and 2018 the Department jointly with the ESRI conducted two research projects into the distribution of wealth in Ireland and the potential implications of a wealth tax using the CSO household finance and consumption survey. The resulting research papers are available on the ESRI website. Both papers presented results on the composition of net wealth - assets less liabilities - across the wealth and income distribution sectors in Ireland. A number of wealth tax scenarios, including regimes from other jurisdictions and other scenarios, were applied to the Irish data. In each case the associated tax bases and revenue yields, the number of liable households across the income distribution and the characterisations of the households affected were outlined. The composition of households under different tax scenarios was examined and 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, the distribution implications of a wealth tax across different types of households should be taken into account. A larger proportion of the wealth tax burden would fall on certain households than their share of net wealth might indicate.

If a wealth tax were to be applied in addition to the related forms of wealth taxation, it could have the disincentivising effect of causing large changes in the level or types of assets held by Irish households. Households could be expected to respond to high effective rates of tax on capital income, for example by reducing their holdings of assets in Ireland or reallocating their wealth holdings to asset types facing a lower wealth tax charge.

Reference was made to increasing taxes on high-income earners. In 2020 it is projected that the top 1.5% of those who have an annual income of over €200,000 will pay 26.5% of all income tax and universal social charge payments. This is a large proportion of the total of income tax take and USC take for such a small number of taxpayers. In comparison, 72% of taxpayer units, which is the cohort of those with an annual income of less than €50,000, will pay 15% of all the income tax and USC.

To further demonstrate the high amount of tax being paid by high earners under the current income tax system and USC system I note that in 2020 it is expected that there will be approximately 2.78 million taxpayer units, including married couples under joint assessment. The total yield from income tax and USC will be over €24 billion. The remaining yield of over €17 billion will be paid by less than 440,000 people earning over €70,000. Of that yield, approximately €7.2 billion will be paid in total by 2.34 million taxpayer units with incomes of under €70,000 per annum.

It is my view that a broad-base progressive income tax system where the majority of income tax earners make some contribution, according to their means, is the most fair and sustainable income tax system in the long term. The Department will continue to monitor and consider any additional information and data that come to its attention. The Department will continue to examine existing alternative potential taxation sources. The Minister has no plans to introduce tax measures along the lines suggested and therefore the recommendation will not be accepted. There is another aspect to this. I do not have the actual figure but approximately 30% of the people who earn income in the State pay zero income tax. That is an important figure to note as well.