20 February 2015
card debt etc) to give the most inform-
ative picture of households’ wealth.
On average the results imply that Irish
households have a net wealth of almost
€225,000 each. However, averages are
very misleading for wealth data, as they
are skewed upwards by high wealth
households. Looking closer at the data,
the CSO show that the bottom 50% of
households have a net wealth of less than
€105,000.
While there is much analytical work
yet to be undertaken on this new data,
the initial results offer some details on
the distribution of wealth across soci-
ety. Firstly, there is some wealth present
across most of the population – 95% of
households have some ‘real assets’ such
as houses, land, business wealth, vehi-
cles and valuables and 90% have some
‘financial assets’ such as savings, invest-
ments and private pensions. Of course,
the scale of wealth that households pos-
sess in these assets differs. Comparing
net wealth across the income distribu-
tion, the HFCS results show that those in
the top 20% of the income distribution
possess 39.7% of all the wealth – this is
the same sum as those in the bottom 60%
of the income distribution (see chart).
Net wealth also has an unsurprising
relationship with age – it is lowest for
younger households and increases to a
peak between the ages of 55-64 before
declining in retirement. Across the
various household types that the CSO
examined, those with the lowest wealth
were single parents, the unemployed and
those under 35 years.
The data also offer an insight into
the composition of households’ wealth
across Ireland. 36% of households own
their home outright (no mortgage), and
34% own their home with a mortgage.
11% of households own land, many of
these are farmers whose land carries a
high value, though for the most part the
income return from this land is relatively
low. More than 88% of households have
some savings and 82% possess a vehicle.
61% of households have some valuables
and 20% have wealth in the form of a
business which they own and work in.
Unfortunately, the new data are less
than comprehensive on pension wealth
– capturing only those with private vol-
untary pensions (10% of households) and
do not record those with entitlements to
pensions which will flow from a collec-
tive pension pool or other source which
is not explicitly owned by any member
of the household. As such the data miss
D
ESPITE its prominence in vari-
ous public policy discussions
over recent years, detailed
information on wealth in
Ireland has been sparse. For
the most part discussion on the distri-
bution of wealth, and concepts such as a
wealth tax, were based on hunches and
guesstimates or assumptions that the
wealth distribution must have in some
way resembled the income distribu-
tion (at least as unequal and probably
worse).
Finally, that has changed with the pub-
lication in late January of the results of a
new survey from the Central Statistics
Office (CSO) – The Household Finance
and Consumption Survey (HFCS). The
HFCS is part of a European initiative
to improve countries’ knowledge of the
socio-economic and financial situations
of households across the EU. For the
first time, its results offer robust infor-
mation on the types and levels of wealth
that households in Ireland possess. The
data was collected for 2013.
Overall, the level of household net
wealth in Ireland amounts to €378
billion. The CSO’s net wealth measure
includes the value of all assets (housing,
land, investments, valuables, savings
and private pensions) and removes any
borrowings (mortgages, loans, credit
Only realistic to tax €78bn of €378bn
household wealth. By Micheál Collins
New data show
wealth tax good
for €200m a year
NEWS WEALTH TAX
A reformed
CAT combined
with a
property tax,
an appropriate
taxation
of capital
gains and a
progressive
income tax
system are
necessary
ingredients
in any further
broadening of
the tax base
“
February 2015 21
the value of pension wealth for those
with defined benefit entitlements and
the pension entitlements of most of those
working in the public sector.
Knowing all of this about the levels and
composition of wealth in Ireland brings
new light to the recurring discussion
about the broadening of the tax base
and the potential for a wealth tax - a
topic that is bound to reappear in vari-
ous debates and discussions this side of
Election 2016.
Using the indicative data contained in
the CSO report (there are more detailed
data to come in the months ahead), it is
possible to consider the shape of a poten-
tial net wealth tax and the quantum of
revenue it could raise. A wealth tax which
excluded people’s homes, farmland, vehi-
cles and pension savings would exclude
between €260bn and €300bn of the
overall net wealth of households. The
remaining €78bn would be the tax base
and were wealth taxed at a rate of 0.5%
it could raise approximately €400m per
annum for the exchequer.
Such a tax would fall on wealth in the
form of investments in property, shares
and bonds alongside business assets and
savings. Further exclusions of assets, or
the (realistic) introduction of wealth
thresholds below which a liability would
not arise, would reduce this potential rev-
enue f ur ther. Over al l, it is ha rd to i mag ine
an annual recurring revenue flow from a
0.5% wealth tax of more than €200m –
a not insignificant amount of money, but
not the silver bullet that would close the
gap between current levels of taxation
revenue and those required to sustaina-
bly fund the demographic demands and
public service improvements needed in
the years ahead.
It is clear from the new wealth data,
that most household wealth in Ireland
comprises family homes, farm land, the
ownership of businesses, investment
property and to a lesser degree valua-
bles (jewellery, antiques and paintings)
and savings. In terms of any reforms to
current taxation policy, there seems to
be merit in revisiting the structures of
inheritance taxes (Capital Acquisitions
Taxes) and in particular the generous
thresholds and exemptions that facili-
tate tax-free inter-generational transfer
of large amounts of wealth. A reformed
CAT combined with a property tax, an
appropriate taxation of capital gains
and a progressive income tax system
are necessary ingredients in any further
broadening of the tax base.
As the new CSO data show, there is a
lot of wealth and wealth inequality in
Ireland. Now that we finally (after many
years of waiting) know how much of
each there is, the time is right for a more
informed policy discussion on how we
think about wealth, its accumulation and
its transfer in Irish society. Without solid
data, that was not possible up to now.
That has changed. •
Dr Micheál Collins is Senior Research
Officer at the Nevin Economic Research
Institute (NERI)
A wealth
tax which
excluded
people’s
homes,
farmland,
vehicles
and pension
savings would
exclude
between
€260bn and
€300bn of
household
wealth. The
remaining
€78bn, taxed
at 0.5%, could
raise €400m
per annum
“
50%
40%
30%
20%
10%
0%
11.4%
Bottom
20-39% 40-59% 60-79% Top
Quintile of Gross Household Income
% of all net wealth
12.5%
15.8%
20.7%
39.7%
Chart 1: Distribution of net wealth, Ireland, 2013

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