Ireland’s richest are seldom mentioned when it comes time to balance the books

One Christmas many moons ago, the panto taught us children a lesson about the trickery of an optical illusion. That year, a motorcar was wheeled on to the stage at the Cork Opera House and there followed a high-speed cross-country chase. The car hurtled along twisting roads, bouncing around hairpin bends and dodging trees crouching in its path. We children shrieked in thrilled fright. Afterwards, in the car going home, our mother explained that it was all an illusion. The roadway had been projected on to a big screen, she said. The car never moved.

Optical illusions are not just for Christmas. A particularly artful one flashes into sight around budget time every autumn, when some Opposition TD asks the Minister for Finance for the latest payment data concerning the domicile levy. Unlike the car on the stage that never moved, revenue from the levy never stops moving. It keeps going down, down, down. This is curious, because the wealth of the extravagantly rich keeps going up, up, up.

The tax is supposed to be paid by individuals domiciled in Ireland who have assets here worth more than €5 million. It applies whether one is or is not tax-resident in this country if the person has worldwide annual income exceeding €1 million and an Irish tax liability below €200,000. The levy was devised by the Fine Gael-Labour government in 2010 after the Celtic Tiger imploded, to assuage public fury at having to rescue bankers and developers from the ashes of their own avarice.

The domicile levy was heralded as a fishing net to catch the super-wealthy, often epitomised by rich-as-Croesus tax exiles registered to pay their income duties in distant tax havens. Right from the start, it smelled very fishy indeed. That pong has proved portentous, with the Commission on Taxation and Welfare describing the levy’s revenue as “negligible”.

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In the approach to budget day every year, the national conversation turns to talk of the poorest among us... Bizarrely, the richest are seldom mentioned when it comes time to balance the books for another 12 months

In the first year of its operation, 25 people filed returns for the domicile levy. The most recent returns, for 2021, show the number has dwindled to 13, roughly half the original number. Soon there will be more characters in the word contemptuous than in the tax paid. At the last count, this baker’s dozen contributed €1.6 million to the exchequer by way of the levy. That was down from €2.4 million paid by 15 individuals the previous year.

In the approach to budget Day every year, the national conversation turns to talk of the poorest among us – the hard-pressed, the squeezed middle and the working poor. Bizarrely, the richest are seldom mentioned when it comes time to balance the books for another 12 months. The optical illusion that is the domicile levy gets brushed aside with vague promises of reviews, but nothing changes. For it would be the foolish government that would willingly rock the super yacht and all who sail upon it.

There is immense private wealth in Ireland. You only need to drive along certain roads a-glow with detached mansions and landed estates to get a flavour of it. Unconvinced? Then, check the Revenue Commissioners’ data.

Revenue figures reported in the Business Post show that 1,600 vehicles costing more than €100,000 each were bought in the first six months of this year. They included a €200,000-plus Jaguar F-type, two Tesla S models priced at over €112,990, and five Porsche Boxsters priced at more than €105,000 each.

Patek Philippe

According to the data website Statista, the Irish market for luxury watches and jewellery is set to grow by 4.8 per cent in the next five years, reaching €75.3 million. The pricey watch business is booming as people with the wherewithal collect them as avidly as others collect loyalty points in discount supermarkets. Search on Google for “Patek Philippe for sale in Ireland” and up will pop a Cork jeweller’s website offering one such timepiece for €718,000.

It is unlikely that all this wealth is owned by tax exiles, but some of it is. It is no secret that there are individuals registered to pay their income tax abroad who spend considerable time in Ireland, where their families continue to live, availing of public infrastructure and services. We know that tax exiles enjoy recourse to Ireland’s law courts and planning bodies, use its roads, its airports – for their private jets, in some cases – and its amenities while paying disproportionately low, if any, income tax towards their upkeep. This needs to be pointed out, not because of sour grapes, but because it’s not fair.

It makes no ethical or financial sense that somebody buying a basic kitchen table pays the same percentage of the price in tax as someone buying a ludicrously expensive watch

The inherent flaw in the domicile levy is that not everybody who is non-tax-resident can be categorised as super rich. Some people are required to move abroad temporarily for their jobs and have every intention of returning home as tax-residents. This makes the domicile levy a blunt instrument with so much grey in its make-up it can be dodged with some nimble accounting.

[ Sinn Féin would tax banks and high earners to fund housing and cost-of-living supports ]

[ Oxfam Ireland says taxing Ireland’s super-rich could net exchequer €8bn a year ]

Left-of-centre political parties are forever harping on about introducing a proper wealth tax, mainly by hiking inheritance and capital gains rates. They ignore the screamingly obvious option of creating a new VAT band for ultra-expensive commodities. It makes no ethical or financial sense that somebody buying a basic kitchen table pays the same percentage of the price in tax as someone buying a ludicrously expensive watch. Surely anyone splashing out €500,000 on an item of jewellery wouldn’t quibble over an extra 3 per cent or 4per cent tax on it.

If tax fairness does not float your boat, think of the planet. Rapacious consumerism is a plague upon it. Many of the dearest things you can buy – sorry, that some people can buy – do the most damage, such as big or fuel-guzzling cars, frequent air travel and non-recycled designer clothes for every new season. By imposing a super-VAT rate, the government would spread the message that the Celtic Tiger-style rampant consumerism which is becoming visible again is no longer socially acceptable. It would provide a distinct “welcome home” for tax exiles popping back were it applied to the fuel for and the handling of private jets at Ireland’s airports.

But, hey, Mister Moneybags, hold on to your hat. It won’t happen. We will hear nothing of this on Budget Day. It will be a few extra quid for the pensioners, a minimal tax break for the working poor and small utilities subsidies for the hard-pressed. The super-spenders’ role in the annual drama, like the car on the stage in the Opera House, will continue to be an optical illusion.