Michael McGrath (Cork South Central, Fianna Fail)
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Officials from my Department continue to monitor developments in the vehicle taxation area. New proposals are considered and current vehicle tax policies are kept under review as part of the Tax Strategy Group and Budgetary cycle. Going forward, it is possible that vehicle taxes may shift to a weight-based approach in order to protect the vehicle tax base.

Recently, other European countries such as Norway, Belgium and the France have introduced a form of weight based vehicle tax. However, it should be noted that the existing vehicle tax structures in the State currently have a very strong environmental rationale, with the more pollutant vehicles paying higher rates of tax. Additionally, as many heavier vehicles currently on the market are more pollutant – with the exception of large Electric Vehicles - those heavier vehicles incur higher rates of tax, between Motor Tax, Vehicle Registration Tax and the Nitrogen Oxide Charge. Vehicle weight generally correlates with vehicle emissions, therefore within the existing vehicle tax system the heaviest internal combustion engine cars are already subject to higher rates of tax whereas lighter, more efficient cars are subject to lower rates of tax.

Vehicle Registration Tax is an emissions-based tax and is calculated based on the Open Market Selling Price and tailpipe emissions of the vehicle. The rates were changed in Budget 2022 to further incentivise motorists in the market for a new car to make ‘greener choices’. The changes to the rates table increases Vehicle Registration Tax rates progressively from band 9 so that high emission vehicles pay more. This reflects the environmental rationale of the tax and underpins Government commitments to decarbonise road transport.

In recognition of the environmental health costs caused by pollutants emitted in particularly high quantities by diesel vehicles, Budget 2019 saw an introduction of a 1% surcharge on all diesel vehicles. Budget 2020 replaced the 1% surcharge with a surcharge tied to nitrogen oxide emissions levels based on the “polluter-pays” principle, where the greater the level of nitrogen oxide a car emits, the higher the surcharge. Budget 2021 saw an adjustment to the surcharge structure so as to underpin its environmental rationale and incentivise the uptake of cleaner cars.

The policy of changing the profile of vehicles registering in this country is working. Following the changes introduced in recent years, significant increases in EV registrations have been mirrored by decreases in the number of high emission vehicles. The middle emissions bands (where most of the volume lies) have also experienced a shift towards lower emission vehicles. The average emissions figure for all vehicles (new and used) in 2020 was 135.6 gCO2/km (band 14). This has fallen to 103.4 gCO2/km (band 7) for 2023 so far. This is clear evidence that vehicle taxation reform is leading to lower emission cars on our roads.

That said, the Budget 2024 Tax strategy Group paper made reference to future exploratory work around adding a weight component to VRT. This scoping work is looking at the possibility of taxation based on weight both in light of an additional way of discouraging larger and heavy vehicles (as the Deputy is referring to), and protecting the tax base as electrification of cars continues. In this regard work is ongoing as part of the TSG process and will be advanced within this policy assessment framework. Therefore I do not believe there is a need for a report.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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90. To ask the Minister for Finance his views and recommendations with regard to introducing a wealth tax;; and if he will make a statement on the matter. [51575/23]

Michael McGrath (Cork South Central, Fianna Fail)
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As the Deputy should be well aware, wealth can be taxed in a variety of ways, many of which are already levied here 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 of an asset or the acquisition of an asset through gift or inheritance.

There is also Deposit Interest Retention Tax, which is currently charged at 33%, with limited exemptions, on interest earned on deposit accounts.

We should also not forget Local Property Tax, which is a tax based on the market value of residential properties.

Yet another is certain forms of Stamp Duty, which is charged in a number of ways, including on the acquisition of shares, stocks and marketable securities of Irish registered companies, and on the acquisition of property both residential and non-residential.

In total, the net receipts from these forms of tax came to approximately €4.32 billion in 2022, representing 5.2 per cent of the total net receipts.

It follows that any revenue raised from a wealth tax, no matter what form it takes, may not therefore be additional to the existing forms of wealth taxation, as revenues from those taxes could be affected by the introduction of a wealth tax.

Also, in examining the topic of a wealth tax, the Commission on Taxation & Welfare, which reported in 2022, identified challenges that would impede the implementation of such a tax. They 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 primary existing forms of wealth tax, CGT and CAT. These are 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.

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.

In 2024 it is projected that the top one per cent of taxpayer units, who are those with annual income in excess of €290,000, will pay just over 24 per cent of total Income Tax and USC. This is a very large proportion of the total Income Tax and USC take from such a small cohort of taxpayers. In comparison, 80 per cent of taxpayer units, which is the cohort of income earners with annual income of less than €69,500 and account for about 2.74 million taxpayer units, will pay 21 per cent of total Income Tax and USC.

In conclusion, I can assure the Deputy 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.