Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank both Senators. The recommendation seeks the preparation of a report on the revenue that would be raised from, and the distributional impact of, a wealth tax of 1% on all households with assets over €10 million within six months of the passing of this Bill into law.

As Senators from all sides of this House will be aware, wealth can be taxed in a variety of ways, many of which are already levied in Ireland. These include capital gains tax and capital acquisitions tax, which are, in effect, taxes on wealth, in that they are paid by an individual or company on the disposal or acquisition of an asset through gift or inheritance. There is deposit interest retention tax, currently charged at 33%, with limited exemptions, on interest earned on deposit accounts. There is local property tax, a tax based on the market value of residential properties. Another is stamp duty, which is charged on the transfer of shares, stocks and marketable securities of Irish-registered companies, as well as on the purchase of property, both residential and non-residential. It follows that any revenue raised from a wealth tax, no matter what form it takes, may not be additional to the existing forms of wealth taxation, as revenues from those taxes could be affected by the introduction of a wealth tax.

On the issue of household wealth, in September 2020 the Central Bank published a report entitled Household Wealth: What is it, Who has it, and Why it Matters. It presents the results from the household finance and consumption survey, HFCS, which collects data on households’ financial positions.That survey was undertaken before the pandemic, but in time will provide a starting point against which to benchmark its impact on household finance positions and consumption patterns. It reports that the survey data indicates an improved financial position and resilience for households prior to the Covid-19 crisis when compared to the situation leading into 2008.

I am informed that the Household Finance and Consumption Survey indicates that household net wealth grew by over €76,000 for the median household, or by 74%, to €179,200 from 2013 to 2018, driven primarily by house price growth and declining mortgage debt. The report therefore is clear that a significant portion of wealth for most households is tied up in the family home. This net wealth grew across the entire wealth distribution while inequality, as measured by the Gini coefficient, fell over the same period. The decline in negative equity from 33% in 2013 to 4% in 2018 was a key driver of this. While the net wealth of the top 20% of households increased by approximately 52%, from €560,000 to €853,000, the relative share of net wealth held by the top 10% of households, which stood at 50.4% in 2018, decreased by 2.6% from 2013 and is 1.3% below the equivalent figure for the eurozone as a whole.

In examining the topic, the Commission on Taxation and Welfare, which reported in 2022, identified challenges that would impede the implementation of such a tax. It concluded that a new tax on net wealth should not be introduced without first attempting to substantially amend Ireland’s existing taxes on capital and wealth. As an alternative to introducing a new tax on wealth, the Commission believes the more productive route is to re-examine the capital gains tax and capital acquisitions tax. These are, as I have already noted, existing taxes on wealth that have well-established but distinct bases, and are well understood in their operation.

In addition to wealth taxes, the Government takes action against inequality through our tax and welfare system. For instance, the strong redistributive role of the Irish tax and welfare system is evident in the range of supports that were introduced to help mitigate the impact of the Covid-19 pandemic and in the series of measures designed to limit the impact of the current cost-of-living pressures facing so many. Ireland has one of the most progressive systems of taxes and social transfers of any EU or OECD country, which contributes to the redistribution of income and to the reduction of income inequality. It is estimated that the top 1% of income earners, those earning in excess of €290,000, will pay 24% of the total income tax and USC collected in 2023, while those earning less than €69,500, which represents the bottom 80% of income earners, will contribute 21% of total income tax and USC receipts.

In conclusion, I can assure Senators that all taxes and potential taxation options are kept under constant consideration It remains a priority of mine to ensure that Ireland maintains its progressive taxation system. I do not see the benefit of committing to a further report on these issues.