A study has found that limiting a wealth tax to the very richest in society would only capture 1.5% of households, according to a paper by the Economic and Social Research Institute and the Department of Finance.
The study is a hypothetical exercise carried out on the basis of 1% wealth tax.
While Sinn Féin has consistently advocated for a wealth tax, the current coalition of Fianna Fáil, Fine Gael and Independents have not included proposals for the levy in the Programme for Government.
The study, funded by the Department of Finance, found the largest tax take would be achieved by “extending liability beyond the wealthiest households and into a much broader proportion of the household population.”
The study said revenue from the tax would decline if the main residence was exempted, because the liability for a wealth tax becomes concentrated among households with more diversified holdings.
If the tax was applied to broader assets the report warned “this would require the inclusion of assets that may be harder to value, less liquid or politically sensitive such as business wealth, farms and the household main residence.”
It found excluding main residence, wealth tied up in firms or farms would generate a much smaller tax take.
The study also examines the difficulties faced by households which have high levels of assets but low levels of income to pay any wealth tax.
It said restricting the tax to a small proportion of the richest households would not eliminate payment difficulties.
The analysis found constraints arise not only in scenarios affecting a broader share of households, “but also among some very wealthy households whose taxable wealth is high relative to their current income, particularly where this wealth is tied up in less liquid assets.”
