The introduction of a wealth tax in Ireland could cause an exodus of capital, or a shift from capital assets to other forms of wealth, the government’s tax strategy group (TSG) has warned.
A French-style wealth tax — once thought capable of bringing in up to €500m a year in Ireland — could yield as little as €22m, depending on the model used and the number of households brought into the net, the TSG said.
While other wealth-tax models, like the version paid in the Swiss canton of St Gallen, could raise up to €1.23bn a year, it would affect 52% of Irish households, the group said in an analysis of the merits of introducing such a measure in the budget for 2018.
The TSG points out that Ireland already taxes wealth “in a variety of ways,” including capital gains tax (CGT), capital acquisitions tax (CAT), deposit interest retention tax (Dirt), local property tax (LPT) and the domicile levy. In 2014, just 12 individuals paid the domicile levy, yielding about €2m to the exchequer, while stamp duty on the transfer of shares yielded €424m in 2015.
Opposition parties, trade unions and civil society groups have proposed various styles of wealth tax. Sinn Fein believes its model could raise up to €800m a year. The Irish Congress of Trade Unions has said a wealth tax focused on households with net assets in excess of €1m could generate €300m in net additional revenue per year.
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Last week a Sinn Fein spokesman said the French model differed “significantly from what we have been proposing”.
The TSG also warned: “Even in those scenarios with a narrow base [such as excluding the main residence, farms and business assets] and a high threshold, some low-income households would be affected.”