Offshore trusts inheritance tax
Increasing the take from wealth, property and inheritance taxes is set to be recommended by the State’s commission on tax and welfare in a shake-up of the taxation system, The Irish Times has learned.
The commission report, which has been submitted to the Department of Finance, recommends that the take from wealth and capital taxes should “increase materially” as a proportion of tax revenues.
Sources say the report notes property, land, capital gains and capital acquisitions — which taxes inheritance — as areas where the yield can be increased.
If adopted, the policies could represent a significant reorientation of the system towards taxing wealth rather than focusing more on income. Wealth taxes are also likely to include income from shares and money on deposit.
The Irish Times has previously reported that higher and more extensive property taxes, which would be a typical tax on wealth, were recommended by the commission. This would include a site value tax aimed at capturing the value in land assets that are held predominantly by the wealthiest 10 per cent of households in the State. The report identifies that Government should aim to increase significantly revenues from taxing property and land.
The report is understood to stop short of advocating for a full-scale wealth tax, which is generally levied on net household wealth, instead proposing targeted taxes on certain income streams which contribute to individual wealth.
Sinn Féin has advocated for a wealth tax of 1 per cent on “net wealth held above €1 million”, which it said in its alternative budget for 2022 would raise some €129 million.
Proponents of taxes on wealth argue they facilitate the transfer of wealth, often intergenerationally, and target embedded wealth inequality rather than income inequality, which is addressed more directly by the income tax system.
The report of the commission on tax and welfare is set to be published before the end of the year, potentially in the immediate aftermath of the budget. But no date has been set yet. It was established last year to “review how best the taxation and welfare system can support economic activity and income redistribution” while promoting employment and prosperity in a “resilient, inclusive and sustainable way”.
A meeting of the commission in January of this year discussed a paper on “taxes on wealth”, published minutes show. Members discussed the distribution of wealth in the Republic and “options for a wealth tax” including whether it would be recurrent or once-off in structure, and “whether such a new tax on wealth should be considered in the context of existing taxes on returns to, or transfers of, wealth”.
A meeting earlier that month discussed taxation of share-based remuneration and also the “overall balance of taxation between earned income, consumption and wealth”. In October of last year, it discussed intergenerational equity in the housing market and changes to the taxation of property wealth.
The report is also understood to warn Government that it will need to raise billions of euros in additional revenue, primarily through increased taxes, to fund age-related spending.
Elsewhere, State fiscal watchdog the Irish Fiscal Advisory Council (Ifac) has said increasing welfare and pension payments to keep pace with inflation, combined with the costs of public pay and capital investment, would mean expenditure increasing by almost €7.5 billion in Budget 2023. Ifac said in its pre-budget submission that this would grow the budget well in excess of rules which limit expenditure growth to 5 per cent — and which have already been paused by the Coalition, which intends to grow core spending by 6.5 per cent in 2023.
Offshore trusts inheritance tax Jack Horgan-Jones
Jack Horgan-Jones is a political reporter with The Irish Times
Offshore trusts inheritance tax Ian Curran
Ian Curran is a Business reporter with The Irish Times
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