- 6 min read
- Published: 1st September 2022
Addressing Inequality and Cost of Living at Home and Abroad Must Be the Focus of Budget 2023
It seems strange to say, in these worrying times, that the subject of tax can be inspiring.
But it can - and should be - as Billy Bragg’s 1986 album Talking with the Taxman About Poetry showed - a reference that may be lost on many of the younger Oxfam activists.
In the closing discussion of the Irish Commission on Taxation and Welfare’s public meeting earlier this year, Professor Niamh Moloney (the Commission’s chairperson) and Gavin Kelly (chair of the UK’s Resolution Foundation) referenced the setting up of the Beveridge Commission in Britain, that seminal moment when a welfare state and national health service which became the envy of the world was created.
‘The thing about the Beveridge report,’ they said (I’m paraphrasing here) ‘is that they didn’t ask what it cost. They just realised this was what needed to be done – and they found a way to pay for it.’
A more refreshing, inspirational moment in policy-making is hard to imagine – ‘this is what we need to do, now let’s use our collective powers to do it’. - poetry, as Billy Bragg said.
Budget 2023 presents use with an opportunity to create a similar seminal moment.
Oxfam has led the world in calling for urgent measures to tackle the crisis of inequality. At the start of this year, before Russia invaded Ukraine, we showed that billionaire wealth globally had grown to the greatest levels since records began, that it accelerated alarmingly during the COVID-19 pandemic, and that it has approached levels not seen since the Gilded Age – much more Edith Wharton than Billy Bragg.
Extreme wealth in Ireland has increased in a similar fashion –Irish billionaires have seen their wealth increase by over 50% since the start of the pandemic. Surely, we’re not going back a century?
Wealth Tax
As a result, Oxfam Ireland called for a national conversation about a wealth tax in Ireland and we proposed a moderate tax schedule: 1.5% above net-wealth thresholds of €5 million and 2% above net-wealth thresholds of €50 million, in current prices. Oxfam Ireland proposes, as a nation, we should consider the model of wealth tax put forward in our submission to the Commission on Taxation and Welfare here.
Our view is that now is the right time to introduce these taxes in Ireland to build new, greener and more effective social contracts to face a global hunger crisis, spiralling levels of inequality, the cost-of-living crisis and an environmental emergency.
This tax would be complementary to other capital taxes and could yield at least €5 billion per year at low rates - 1.5% and 2% - above net-wealth thresholds of €5 million and €50 million respectively.
As an example of what our wealth tax could fund every year, €5 billion would cover the entirety of the contributions proposed by Social Justice Ireland in Budget 2023 for Housing (€1,442.3m), Health, Disability and Carers (€1,436m), Pensions and Older People (€1,025.7m) and Children and Families, incl. Direct Provision (€749.7m) along with our proposed €233 million contribution to Official Development Aid (ODA) for Budget 2023 on a path to reach the target of 0.7% GNI over the course of the next seven years, while leaving a further EUR113 million that could be allocated to (additional) international climate finance.
Technically and politically, there has never been a better time to introduce wealth taxes, through leveraging modern information technology - and we would not be going it alone but as part of a growing international movement throughout Europe and America.
Windfall Tax
In addition to a wealth tax, Oxfam Ireland proposes a windfall tax on the excess profits of large companies in sectors of the economy that are benefiting from fortunate circumstances resulting from the pandemic and rising prices. We are witnessing record profits across multiple sectors, not just in the energy sector- shipping and logistics, arms producers, pharmaceuticals, IT and food producers and many others are benefitting from the multiple crises that we find ourselves in. These companies have also benefited from public policy measures such as quantitative easing during the COVID-pandemic that helped maintain and bolster profits. The IMF has recommended a broad-based windfall tax to help build social solidarity.
The recent remarks of the UN Secretary General highlighted that the largest global oil and gas companies made close to $100bn in combined profits in the first three months of 2022. In August Bord Gáis’s operating profits increased by 74% in the first half of this year to nearly €40 million over the same period in 2021. While our analysis from May of five of the best-known Irish energy companies showed they had a combined rise of 50% rise in profits or €280 million in total even before the Russian invasion of Ukraine.
But it is not just the energy sector that is making excess profits. Corporations and the billionaire dynasties who control so much of our food system are seeing their profits soar. Billionaires involved in the food and agribusiness sector globally have seen their collective wealth increase by $382bn (45%) over the past two years. There have been 62 food billionaires created in the last two years. In Ireland, five of the biggest Irish food companies have had a total profit rise of €174 million in just one year - in the last year of recorded profits. Similar levels of excess profits are being made in other sectors. As a result Spain has recently imposed a windfall tax on banks as well as utilities.
We propose that the windfall tax would be levied on excess profits well above average company profits for the year’s 2017-2020, the accounting years before the pandemic began. Regulators should be tasked with imposing fines or other relevant measures to prevent windfall taxes being passed on to consumers, as is the case with the Spanish and Italian model of windfall taxes.
We call for a more effective and comprehensive form of windfall tax than that under consideration by the Irish Government, according to Minister for Finance, Paschal Donohue, speaking in the Dáil in April. Minister Donohue said that a 10% tax on the taxable profits of all energy companies in Ireland could yield in the region of €60 million per annum. However, this estimate was based on taxable profit levels in 2020 - which are likely to be much lower than current levels.
Global Asset Registry
Oxfam Ireland fully endorses the Independent Commission for the Reform of International Corporate Taxation (ICRIT)’s public campaign in 2022 for a Global Asset Registry (GAR). A Global Asset Registry (GAR) has been endorsed by ICRIT’s commissioners in an open letter to G20 finance ministers and has been described as:
“an international network of asset registries that listed all different forms of wealth: from assets including property, yachts, jets and jewellery; to bank accounts, cryptocurrency assets and safe deposit boxes; as well as trusts and other legal arrangements; and even intangible assets such as intellectual property and trademarks.”
This would give an opportunity for Irish-based corporations, Irish high net-wealth individuals and the Irish state to definitively and publicly disassociate themselves from and repudiate the wealth of oligarchs and illicit financial flows. Budget 2023 needs to include a commitment to support the formation of the Global Asset Registry (GAR) as part of its oversight of this area.
Introduce a Wealth Tax and a Windfall Tax to fund measures to help address inequality and poverty in Ireland and globally.
Support the creation of a Global Asset Registry, a publicly accessible registry of wealth holdings around the world.
For more details of how Budget 2023 can contribute to addressing inequality, ending poverty and creating a more sustainable world please see our pre-budget submission.
