A once-off wealth tax could be used to raise revenue to fund vital public services and pay for Covid, a senior Irish economist has said.
As the Government considers various ways to expand the tax base here, Barra Roantree of the Economic and Social Research Institute (ESRI) said taxing “those with lots of wealth or inheritance” was one possible option.
He told an event hosted by the Nevin Economic Research Institute (Neri), however, that there was an important distinction to be made between a once-off wealth tax and a permanent or recurring tax on wealth.
Critics of wealth taxes claim rich people use loopholes, valuation schemes, trusts and other structures to lower their liability or avoid the tax altogether, negating the value of such measures.
“To the extent that it is credibly once-off, that’s not likely to change people’s behaviour,” Dr Roantree said.
However to generate significant revenue, he said, it would either have to have few exemptions – some wealth taxes exempt primary residence and pension wealth or are set at very high rate, both of which are problematic.
Given the majority of wealth in Ireland is tied up in property, Dr Roantree said the Government might be better off looking at adjustments to the current Local Property Tax (LPT) regime.
The Commission on Taxation and Welfare, the body set up to look at various ways the State can fund itself into the future in the context of growing demands for higher spending on public services, particularly in healthcare, is understood to be looking at various measures, including a wealth tax.
The commission is also due to consider the merits of replacing the LPT with a broader site value tax. The current LPT regime only applies to residential property but a site-value tax, drawing in non-residential and business premises, potentially instead of rates, has big revenue-raising potential.
Dr Roantree indicated the Government may need to consider abolishing certain tax reliefs linked to pensions and capital gains tax (CGT) as a means of raising additional revenue, some of which he said were poorly targeted.
He also noted that payees of capital acquisitions tax (CAT), which covers gifts or inheritances, in 2019 had an average liability of €90,000, according to Revenue figures. In order to have this liability payees would need to have received gifts or inheritance exceeding €600,000, which he described as significant.
Dr Roantree noted increases in income tax, VAT or the local property tax were perhaps the easiest way for Government to raise revenue.