ULA Proposal to Tax the Assets and Incomes of the Super-Rich
As the Richer get Richer 17 Billion Must be Taken from Super-Rich to Avoid Austerity!
A statement from the Central Statistics Office on Wednesday last showed that the wealthiest top 20% had 5.5 times more income than the poorest 20% in 2010 and this has grown from 4.3 times in 2009. Net Financial Assets(shares etc) which are mainly the preserve of the rich have increase by 45 billion since 2008 and are now above pre-crash (2007) levels. These are facts issued by the state. The rich are,in fact,getting richer as the poor get poorer! ULA is demanding that, in the Budget, 10 billion be taken from the Assets of the top 5% of wealth holders, 5 billion be taken from the incomes of the top 5% of income earners and that measures be introduced to take 2 billion off tax exiles.
This will avoid further cuts and extra taxes on low and middle income people and can be used to reverse the imposition of the Universal Social Charge and cuts in social welfare, health and education and to allow for an ambitious state job creation programme
Explanatory Document on Taxation
10 Billion in Wealth Tax on the Top 5% of Wealth Holders, 5 Billion in Income Tax from Top 5% of Incomes, 2 Billion from Tax Exiles
Personal Assets Tax
There is currently no annually recurring tax on wealth or assets in Ireland. Such a tax was imposed by Minister for Finance Ritchie Ryan during the 1973-1977 Fine Gael-Labour Coalition Government. It was subsequently abolished by the succeeding Fianna Fail Government. Assets taxes still exist in a number of countries including France, Norway, Switzerland and in a number of states of the USA. Many were abolished in other countries under the influence of neo-liberal Thatcher-Reagan economic ideology which has brought the world to the current economic crisis.
Recent statistics from the CSO show that in 2010 the financial assets of Irish people (not businesses) were as follows:
CSO Nov 2011 Personal Financial Assets (millions)
(Financial wealth below is made up of cash, shares, pension and insurance funds (net equity) and business assets/liabilities of self-employed/sole traders. Land, housing and non-financial personal property (e.g. yachts, art, etc.) are not included. Gross financial wealth refers to total financial assets; Net financial wealth refers to gross financial wealth minus liabilities -almost all liabilities refer to loans-CSO). (loans include mortgage loans and credit card debt-PH)
Total Financial Assets Total Financial liabilities Net Financial Assets
2007 310,711 199,036 111,675
2008 281,650 209,774 71,876
2009 304,885 206,620 98,264
2010 311,372 194,219 117,153
These figures show that net personal financial assets of have increased by 45 billion since the low point of 2008. Total and net financial assets are now above 2007 level, that is before the crash. The rich are Getting Richer while the Poor are Getting Poorer http://www.cso.ie/en/media/csoie/releasespublications/documents/economy/2010/isanonfinfin2010.pdf
The net figure underestimates the assets of the wealthy as a far higher proportion of the liabilities including mortgage and credit card debt are held by those with no asset other than the principal private residence which is not included in the gross figure.
Recently (Nov 2011) Credit Suisse, the Swiss finance house, has published an analysis of wealth distribution in Ireland.
It shows that the top 1% of the Irish population hold 28.1% of all wealth and the top 5% hold 46.85 of all wealth.
Credit Suisse estimates that financial assets make up 47 percent of total assets (Table 2-4 on page 71 in Credit Suisse Global Assets Report). This means that there is €311 billion in financial assets and €351 billion in non-financial assets for a total of €662 billion (using latest CSO data). After financial liabilities of €194 billion, total net wealth is €468 billion.
As 28.1% of net wealth is held by the top 1%, they hold 131.5 billion of total net wealth.
As 46.85% of net wealth is held by the top 5%, they hold 219.3 billion of total net wealth
These are a significant underestimations as total liabilities of households which have been deducted lean proportionally most heavily on the less wealthy households.
The Revenue Commissioners have no data on the assets of specific individuals as assets tax was abolished over 30 years ago. Such a register should be established by law immediately so that there is complete transparency in relation to the ownership of wealth. The overall data above was deduced by the Central Statistics Office from other data.
ULA has set a target of collecting 10 billion per year in assets tax from the top 5% until the fiscal deficit is removed and 5 billion annually thereafter.
As these assets are not contingent on receipt of income or income changes, ULA proposes that the deadline for payment be March 1, 2012. This would facilitate early implementation of our job creation programme
The 10 billion in revenue from assets tax is available for purposes such as job creation, elimination of USC, restoration of cuts in welfare etc
It is a matter for government which has Department of Finance , Revenue Commissioners, Central Statistics Office etc at its disposal to devise legislation to reach the target revenue of 10 billion from the top 5 % and that, in particular that the homes , farms and pension funds of those outside the top 5% be exempt.
The measure proposed is a tax on personal assets only not on the assets of businesses
If the target revenue of 10 Billion is not reached by March 1, further measures should be introduced.
There was an increase in income inequality between 2009 and 2010 as shown by the quintile share ratio. The ratio showed that the average income of those in the highest income quintile was 5.5 times that of those in the lowest income quintile. The ratio was 4.3 one year earlier. CSO Press Release Nov 30,2011
There can be little doubt that the imposition of an assets tax would increase the yield from income tax. The contrast between large assets and low declared incomes in the non-PAYE sector would become clear.
The most recently published official statistics are for 2009
The top 5% of earners had a total income of 18 billion Euro in 2009 (22.6% of all income) and paid only 4.9 billion in income tax. If tax reliefs and capital allowances claimed are taken into account, their Gross Income, which is their actual income, is 19.8 billion. (Revenue Commissioners, Statistical Report, Table ISD1)
Deductions from that table, show the top 5% of units have 24% of all income and pay 46% of all income tax. Notwithstanding right wing propaganda, this is to be expected as they have a totally disproportionate share of discretionary income. The imposition of the USC and increased taxation of the lower paid will have significantly reduced the 46% figure in 2010. They only paid 25% of their own total income in tax in 2009
Tax reliefs which proportionally favour the rich are very high in Ireland at 20.2% of total tax revenue as against 8.5% in Germany, 5.1% in the Netherlands (OECD, Commission on Taxation)
Official figures show that those individuals as opposed to couples in receipt of incomes over 100,000 Euro only paid 31.4% of all income tax in 2008 (Irish Times Com Keena 20/3/2009). Figures for 2009 indicate little change in this regard.
Due to heavy impositions on those in receipt of low incomes in more recent budgets this percentage has probably decreased and 10,677 units (0.5% of earners) earned 6.01billion in 2009 or 7.33%% of all income. They paid c (Revenue Commissioners Statistical Report 2010) These very rich earned on average 563,000 Euro each. There is no significant change expected to these figures expected in 2010. It can reasonably be assumed that such people avail of considerable tax breaks and have the advice of tax experts. This 0.5% of earners paid 1.783 billion in income tax in 2009 leaving them with an “after-tax” income of 4.27 billion or 400,000Euro each.
ULA proposes that the minimum effective tax rate on this group be adjusted to yield an additional 2.5 billion to the exchequer leaving them with after-tax income of 1.77 billion or 166,000 Euro each.
The next 0.5% of income recipients(9,933) just below the top group had a gross income of c. 2.3 billion and paid c. 608 million in tax. ULA proposes to take a further 0.5 billion off this group leaving them with 1.2 billion Euro or 121,000Euro each in after tax income
The ULA target is to generate 3 billion Euro from the top 1% of income earners.
Because of massive tax reliefs enjoyed by high earners the use of minimum effective tax rates is a sure means of extracting additional tax from high earners.
This would require a scale of minimum effective tax rates on all income ramping upwards from the current level of 30% as incomes exceed thresholds of 100,000, 150,000, 200,000,250,000 etc. The minimum effective rates may have to be as high as respectively 35%, 40%, 45% , 50% and 60% for those earning above 300,000. The current minimum effective tax rate only applies to those with income of over 125,000 Euro claiming tax relief in excess of 80,000 Euro! This restriction should be abolished.
There must be no increase in the effective tax rates of those with gross incomes below 100,000 Euro
The total increase in revenue due to the preceding measures is 13 billion
Increased Taxation of Very High Incomes
High incomes are very lightly taxed in Ireland and the burden of income taxation on low and middle incomes was hugely increased by the imposition of the Universal Social Charge and by reduction of personal tax credits and thresholds.
There are approximately 88,500 income recipients (4.1% of taxpayers) with incomes between 100,000 and 200,00 euro and these are outside the top 1% of income recipients discussed above. They have a total income of 11.6 billion and paid 2.57 billion in tax in 2009. ULA proposes to increase the income tax yield from this group by 2 billion, through a combination of minimum effective tax rates on all income and higher marginal tax rates on income above 100,000Euro, leaving them with 7 Billion Euro, an average 79,600 Euro each in after tax income . While retaining this revenue target, adjustments of taxation will be necessary within this group in order not to penalise tax payers with an adult dependent or couples who are jointly assessed for tax.
The deployment of minimum effective tax rates is designed to combat the loss of revenue due to tax reliefs enjoyed by the rich. Relief on pension contributions to provide pensions capped at 50,000 per annum per adult should be continued.
The cumulative revenue total raised by the above measures is now 15 billion Euro
The Domicile Levy introduced in Budget 2011 to address the problem of tax exiles has generated a paltry 1.5 million in revenue and is clearly totally inadequate.
It is reasonable to expect that citizens of Ireland who have income generated in Ireland and/or assets held in Ireland should pay tax to the Irish state. The United States expects its citizens resident abroad to pay US income tax when their earnings abroad exceed a certain threshold. Failure to do so attracts public disapproval. Irish tax exiles, on the other hand, are fawned on by politicians. Denis O’Brien was invited by Eamonn Gilmore to the Farmleigh conference at the behest of Fine Gael. Michael Smurfit was appointed honorary consul to Monaco by Charles Haughey and furnished with a diplomatic passport. The Labour Party leader is continuing Mr Smurfit in office.
The ULA proposes that the principles underlying US practice be applied to wealthy individuals living abroad.
We call on the Government to introduce measures in Budget 2012 to require by Law that Irish citizens resident abroad for tax purposes pay to the Irish exchequer annual amounts of tax as follows:
1 Assets Tax: An assets tax of 10% on net global personal assets in excess of 2 million Euro less the assets tax paid to the state in which the Irish citizen is resident.
2 Income Tax: A minimum effective income tax rate of 50% on annual global income in excess of 200,000 Euro, less the income tax paid to the state in which the Irish citizen is resident.
3Current Domicile Levy of €200,000 introduced in Budget 2010 to be increased to 500,000Euro per year. This levy should apply to all Irish-domiciled individuals who are Irish citizens to ensure that wealthy Irish domiciled individuals make a contribution to the State during these times of economic and fiscal difficulty. The Levy will apply to wealthy Irish-domiciled individuals with Irish located capital greater than €2 million, worldwide income in excess of €1million and an Irish income tax liability less than €500,000. Persons liable to the Levy will have to pay it regardless of where they live or where they are tax resident.
It is impossible to predict the revenue which would be generated by the above measures. However the deadline for paying the assets tax, domicile levy and preliminary income tax should be set at March 1, 2011. If the income generated falls below a projected 2 billion for the year as a whole, further changes should be made to remedy the short fall
Other measures are also open to the Minister in his budget such as drastically reducing the number of days the “exile” can stay in Ireland while retaining residence abroad for tax purposes.
ULA has set a minimum initial target of 2 billion Euro in revenue from the above 3 measures