The debate on the future of inheritance tax is a typical Irish pre-budget exercise, where a single issue is isolated and the subject of lobbying and political promises. Little consideration is given to the wider picture. Politicians try to gain advantage by being early out of the traps to call for relief. Most likely something happens on budget day.
In his early weeks in the role, Minister for Finance Jack Chambers has made the right indications about keeping the public finances under control, but he will face significant pressure on a range of fronts. On inheritance tax, senior figures – including the Taoiseach and Tánaiste– are are already hinting at changes on budget day.
A concession may not be hugely costly, but in a system where wealth and assets are lightly taxed it is not the right thing to do, either from the viewpoint of fairness or the long-term stability of the public finances.
The Irish tax system depends heavily on income tax and, more recently corporation tax. These two revenue sources are inherently volatile, clearly vulnerable to recession or, in the case of corporation tax, the fortunes and decisions of a small number of big companies. For the future, the tax burden needs to be spread more widely, not narrowed. And, as the excellent report of the Commission on Tax and Welfare pointed out, some more of the burden needs to go on wealth and property, both taxed lightly by international standards. Part of this, it says, should be via increases in Capital Acquisitions Tax, which includes tax on gifts and inheritances and capital gains tax.
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Part of its argument is that, in many respects, assets and inheritances are treated well for tax purposes. And that taxes on property here - and wealth in general - are low and should be increased, as a stable basis for tax revenue in the longer term.
This does not mean that the current system of inheritance tax needs to be set in stone for ever. If there are obvious anomalies or areas of unfairness they should be addressed. But it does mean that once-off reductions are not appropriate.
The wider context here is important if rarely discussed. At the moment the budget is in strong surplus each year, with taxes exceeding revenue. But in the years ahead this is likely to change as the costs of paying for an ageing population and the climate transition increase sharply and some tax revenues – such as those related to motor fuels – fall sharply. The requirement, as the commission pointed out, will be to look at ways to increase taxes in future, rather than reduce them.
This is not a scenario likely to be considered by Irish politicians in the run up to the next general election, but sooner rather than later it will have to be faced. With spending now surging ahead, a difficult readjustment will then be needed.