Written answers

Tuesday, 7 March 2023

Photo of Emer HigginsEmer Higgins (Dublin Mid West, Fine Gael)
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79. To ask the Minister for Finance his plans to review the 41% exit tax charged on life-wrapped funds sold by life assurance companies and from exchange trade funds. [11282/23]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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Exit tax charged on life assurance polices and investments in domestic funds including ETFs is a collection mechanism that is coupled with the gross roll-up regime. The gross roll-up taxation regime for investments in domestic funds and for investments in life policies was introduced in Finance Bill 2000. The general thrust of the gross roll-up regime is that there is no annual tax on income or gains arising within the investment. However, exit tax must be deducted on the occurrence of a “chargeable event”, which includes a “deemed disposal” at the end of every 8-year period to prevent indefinite roll-up within the fund or policy. The rate of exit tax applied is generally 41% in the case of an individual.

As the Deputy will be aware, the Commission on Taxation and Welfare, published their report Foundations for the Futurein 2022. The Commission considered how the overall balance of taxation might shift in order to sustainably fund public services over the longer-term and made a range of recommendations aimed at improving the sustainability of the taxation and welfare systems.

The Commission recommended the establishment of a working group to examine and make recommendations for modernising the taxation and administration of investments. That is why, in his Budget speech, my predecessor announced the intention to commence a review of these areas.

Specific detail on the parameters of such a review and timelines are still being worked out. Once a thorough consideration of the matter takes place, I will share the terms of reference.

Photo of Gino KennyGino Kenny (Dublin Mid West, People Before Profit Alliance)
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81. To ask the Minister for Finance if he is aware of an organisation's (details supplied) recent call for a wealth tax of graduated rates of 2%, 3% and 5% on wealth above €4.7 million, with the organisation stating that such a wealth tax would raise €8.2 billion annually and has the potential to transform Irish public services in health, housing and education; and if he will make a statement on the matter. [11371/23]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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I am aware that Oxfam International produced a new report on January 16th 2023 regarding global wealth inequality entitled “Survival of the Richest” which proposes new wealth taxes in Ireland and in other jurisdictions.

While I understand the background to calls for a specific wealth tax in Ireland, it is not the case that wealth in Ireland is untaxed, as taxes on wealth are already in place here.

The Government is committed to creating a fairer, more equal Ireland. While the calls for a specific wealth tax are often made, there are already a number of wealth taxes in place including Capital Gains Tax, Capital Acquisitions Tax and Local Property Tax. Revenue estimates that these taxes raised over €2.8 billion last year.

The Oxfam report notes that “Two-thirds of countries do not have any form of inheritance tax on wealth and assets passed to direct descendants."I would remind the Deputy that Ireland has a significant inheritance tax regime in place in the form of Capital Acquisitions Tax which is charged (with limited exemptions) at a rate of 33%.

Oxfam's report also notes that “Rates of tax on capital gains – in most countries the most important source of income for the top 1% – are only 18% on average across more than 100 countries.” I would again remind the Deputy that Capital Gains Tax is in place in Ireland and it is charged, again with limited exemptions, at a rate of 33% which is well above the 18% average reported by Oxfam.

Any revenue raised from a new wealth tax may not therefore be additional to the existing forms of wealth taxation, as revenues from those taxes could be affected by the introduction of such a new tax.

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 introduced to help mitigate the impact of the Covid-19 pandemic and the current cost of living pressures on vulnerable households and businesses. The overall distributional impact of Budget 2023 was strongly progressive, with the lowest three deciles experiencing the highest gains as a proportion of disposable income.

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 per cent of income earners, those earning in excess of €263,000 will pay 23 per cent of the total income tax and USC collected in 2023. While those earning less than €65,000 which represents the bottom 80 per cent of income earners, will contribute only 21 per cent of total income tax and USC receipts.

In conclusion, I can assure you that all taxes and potential taxation options are kept under constant consideration and it remains a priority of mine to ensure that Ireland maintains its progressive taxation system.


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