Taxing sums for Leprechauns

Fintan O’Toole reckons there is a pot of gold, waiting just over the rainbow for us to reclaim from the tax avoiding leprechauns in whose possession it currently lies. He is advocating a wealth tax on the Celtic Tiger’s super-rich in today’s Irish Times, which he reckons is as a viable alternative to spending cuts in bridging the fiscal deficit. While it may make us feel better to decimate their holdings, it’s unlikely to make much of a difference to the deficit.

Fintan informs us that the richest 5% own 40% of the wealth, which equated to around €200bn in 2006 in monetary terms (likely substantially less today). If we were to tax this at a reasonably high rate of 33% (the French wealth tax is just over 1%), we would net around €66bn in a once off windfall (If we’re to make the 33% wealth tax an annual tax, we’d have no wealth very, very quickly). The annual budget deficit currently stands at around €22bn p.a., and if the recession were to continue into next year, that would grow. So even a swingeing once off wealth tax could only fund the gap in exchequer finances for less than 3 years!Incidentally, it’s unlikely our super-rich have that money lying around in cash, they’d probably have to sell assets – possibly including their businesses, resulting in a further loss of wealth in the economy. e.g. I suspect that Ireland’s richest man Sean Quinn holds most of his wealth in his company, and under such a scheme he would have to sell 1/3 of it to fund his tax liability.

I’m not sure what effect a very low wealth tax would have. Could even lower wealth taxes discourage the super-rich from staying and investing here? If so, what effect would that have on economic growth and employment in the long term?

  • Itwas SammyMcNally whatdoneit

    Well Finners has to write something to keep the wolf from his own door – but the idea of a wealth tax is good one as it lets the Plain People of the Southern Territories of Ireland reflect, that as they are choking on their own horrible economic medicine, at least there is a fighting chance that the mad-bad-feckers that made them unwell in the first place are also choking on theirs.

  • Dave

    At least wee Fintan is no longer hiding his thirdwayism, arguing for a confiscation of the private assets of citizens by the state rather than taxing earned incoome.

    Shame the poor dunce doesn’t seem to realise that the reason the banks are being recapitalised by the state is because they are undercapitalised; and the reason they are undercapitalised is because there are no ‘pots of gold’ sitting in their cob-webbed vaults awaiting confiscation by the state.

    As it happens, the state has already confiscated their bad debts and passed them onto the taxpayer (in order to ensure that banks within the eurosystem get their money back) with 1500 citizens dumping an average of 60 million each worth of dodgy debt on the state. That is also thirdwayism in action.

  • Gerry Mander

    Isn’t Fintan a great man? Able to spew about everything from the arts to economics. Maybe what Ireland needs is a Duce, Benito de Tool.
    Childish I know but hey so is he.

  • Drumlins Rock

    any relation to us?

    hope not seems to be a right tit, is this how low the situation has got down south?

  • thereyouarenow

    Something must be done.

    Rule out no possibility no matter how outlandish.

    Of course Anarchy must be controlled.

  • Haven’t we realised by now that there are virtually no rich people in Ireland? Yes, there are people who live a “rich” lifestyle but as the dominos start falling it turns out these folks were just doing it like everyone else – on credit.

  • Jud

    What is the marginal tax rate in Ireland these days? I wonder what kind of annual revenues would be generated by taxing the income of the top dogs at >50%(and somehow closing the offshore loophole nonsense)

  • Mack

    Jud –

    Top marginal tax rate is around 53% kicking in on €36,000. At the other end of the scale almost 50% of workers pay not tax at all..

    http://geckkosworld.blogspot.com/2009/10/talking-taxes.html

  • aquifer

    A wealth tax is a good idea, even at a low rate.

    Tax dodging has been so endemic that making people declare wealth could trigger a lot of productive tax and criminal assets’ investigations.

    And to cut the risk of people understating the value of stuff, allow the state the option to purchase a quarter or more of the property for the initial declared value plus 66%. If the property achieves an average 33% more than the declared value at auction, the state does not pay the 66%, the property is sold and the tax on all the property is hiked by the percentage excess over the declared value. If less than 33%, the punter keeps the property and 66% of its value.

    Where it proves impossible to prove ownership, the state should also dispose of assets and keep the proceeds until an owner should show up.

    excessive?, unfair? better than a socialist junta

  • Scaramoosh

    “Vingince, bejasus!”…

  • John East Belfast

    Very short termist in my opinion

    Any liberal democratic society needs to respect property rights – individuals have “earned” this money and one assumes paid taxes already on it.

    The ROI shouldnt give out signals that the State can help itself to your post tax property.

    Bads idea

  • Jud

    John East Belfast,

    Absolutely agree – retrospective taxation of any sort is undemocratic.
    I do see a strong case for jacking up income tax in a higher bracket. 53% at 36k goes right to the top I assume.

    Raising that to 75% over 1 million would not hurt the standard of living for the elites, but would raise quite a bit of cash for investment.

    What the govt does with that is a whole other question but makes for interesting political debate. Roads, hospitals, research, and general infrastructure would be good investments for a healthy future economy.

  • Mack

    Jud –

    “Raising that to 75% over 1 million would not hurt the standard of living for the elites, but would raise quite a bit of cash for investment.”

    I would imagine that a large portion of money earnt over the 1 million mark is invested. Question is who will get a better return the state or the private sector? And how to ensure that money is invested in Ireland.

    For lots of reasons (not least because of the way vested interests monopolise public sector investment in Ireland & there is the public sector pay premium – public sector workers with the same level of qualifications etc are paid more, never mind productivity differences – which means they are worse value for money..) – I suspect that investment in the private economy would create more jobs and wealth in the long term.

  • Jud

    Mack

    “I would imagine that a large portion of money earnt over the 1 million mark is invested. Question is who will get a better return the state or the private sector? And how to ensure that money is invested in Ireland”

    I would have thought net income invested in this manner would be substantially tax deductible already – the incentive will still be there to do that.

    The goal would be to earmark this extra tax revenue for initiatives that make for a strong economy but are not attractive to regular business investment – like I said general infrastructure type stuff.

    Public sector do not make good business bets – I agree with that. I would not like to see them trying to guess the next big thing. That is what the private sector and market forces are for.

    However, some things are generic. Good R&D facilities, well funded technical education programs, cheap and plentiful energy, next generation telecoms etc.

    The challenge of course would be making sure the revenues actually go there – not to line the pockets of the political elite. That would require legislation and is another interesting political debate.

  • Mack

    Jud –

    I would have thought net income invested in this manner would be substantially tax deductible already – the incentive will still be there to do that.

    True. They are closing (some) these off now, and a lot of the Irish focused ones were property related. Schemes like the BES (business expansion scheme) could be expanded to compensate, I guess.

    However, some things are generic. Good R&D facilities, well funded technical education programs, cheap and plentiful energy, next generation telecoms etc.

    That’s true too. These could be funded out of borrowings (if they are likely to give a return) or out of increased exchequer returns in a growing economy. I’m sceptical of throwing money at problems in areas such as education – not unless it can be ring fenced 100% for infrastructure. The nearest primary school to my house consists entirely of prefabs (rented annually for a high sum), meanwhile teachers starting salaries are around €39k (for those lucky enough to get a full-time position – with 2000 retired teachers collecting their generous state pensions and working), that’s small fry though to university lecturers earning huge amounts (in one case over €400k), and HSE staff on the sick but collecting north of €200k in salary p.a.