Tax wealth - Village Magazine

46 — village July - August 2012

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INEAD Pentony has done us all some serv-

ice. In the last Village, she highlighted the

fact that Ireland’s overall tax-to-GDP ratio

is third lowest in the EU at 28 per cent.

The burden of adjustment since the recession

began has been carried by spending cuts, rather

than changes to our tax system. There is ever-in-

creasing acceptance that we will need to enter into

a new funding programme when the IMF-EU deal

runs out. This is further evidence of a giant policy-

failure.

Those who advocate the policy of “cut ﬁrst,

grow later” must now make themselves account-

able. Will they admit that their austerity policy

has failed, and that if it hasn’t worked so far, it

is unlikely to somehow miraculously

start delivering now?

Recent CSO and ESRI ﬁgures have

shown that low- and middle-income

earners have borne the brunt of ﬁs-

cal adjustments and that Ireland is

becoming a radically more unfair

society as austerity deepens.

The ﬁrst step in a major eﬀort to

tilt the balance would be the intro-

duction to Ireland of a wealth tax. A

wealth tax is a tax which is levied on

the wealth held by a person or entity.

The tax rate is typically a percent-

age of the taxpayer’s calculated net

worth, and varies in proportion to

that worth.

The Fine Gael-Labour coalition

government introduced a wealth tax

in 1975. We taxed annually at a rate of one per

cent the net market value of the taxable wealth

of individuals, discretionary trusts and non-pri-

vate trading. When Fine Gael and Labour lost

oﬃce in 1977 Fianna Fáil abolished this tax. It

was a tax that Labour had pushed hard to intro-

duce, and wealth taxes would have been once been

part of mainstream social-democratic thinking

in Europe.

In many countries, wealth taxes have been

another casualty of the neo-liberal consensus

and euro-wide decline of social-democratic poli-

tics. However, France, Norway and Switzerland

continue to levy wealth taxes, while Luxembourg

applies a form of wealth tax on companies.

In France, the tax is worth €4.4 billion a

year. In tiny Luxembourg it is worth €8 billion.

According to the Minister for Finance, a wealth tax

applied along the French model would raise €500

million a year. Over a ﬁve-year period it could be

worth up to €2.5 billion, which would remove the

need for many cutbacks. It should also be noted

that there would be beneﬁts in other tax areas. It

would provide the Revenue Commissioners with

a new audit-base to ensure compliance in areas

like income tax and capital taxes.

I recently submitted a series of questions to

the Minister for Finance on wealth-tax propos-

als. In a written response to me, he wrote: The

Government does not propose at

this time to introduce a wealth tax.

There is a clamour now calling for

growth measures. The new man-

tra is “not just cuts, but growth too”.

The problem is the cuts are killing the

opportunities for growth. The cuts

in the capital budget alone in budget

2012 cost 10,000 jobs, according

to the Department of Finance. The

increasing volume of research relat-

ing to inequality in Ireland shows

that such cuts generate structural

inequality and will damage our eco-

nomic growth in the long run.

Unless we respond to the con-

tinuing crisis with measures on the

revenue side which can help drive

investment in the economy, we will

be ignoring opportunities to confront the crisis.

In the absence of political will, it may very well

be left up to citizens to demand a wealth tax that

is both economically prudent and socially fair.

This campaign in Ireland would be following in

the footsteps of the tax-justice movement else-

where. Groups such as Community Platform and

Reclaiming our Future have led the charge on this

issue. They need now to be joined by other forces,

including public representatives, to build a move-

ment which will have to be listened to.

Patrick Nulty is Labour TD for Dublin West and

former secretary of the Poor Can’t Pay campaign

Tax wealth

Campaigners should unite to demand fairness

in the tax system

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The Fine

Gael-Labour

coalition

government

introduced a

wealth tax in

1975 at a rate

of one per cent