If we update the Bank of Ireland Asset Management Report on the ‘Wealth of the Nation’ (2006), we can get a pretty accurate picture of how much wealth there still is in the country. That report stated that there were 33,000 millionaires in Ireland in 2006.
Firstly, the report estimated that there were 330 individuals whose wealth well exceeded €30 million Euros. If we take a very conservative estimate of each holding 40 million, then the collective wealth of these 330 individuals was €13.2 billion.
The report also stated that there were 3,000 millionaires whose wealth ranged from 5 to 30 million. Taking the midpoint value of 18 million, this means that these 3,000 individuals held €54 billion in wealth.
The remaining 29,670 millionaires held between 1 and five million each. If we take the midpoint here of 3 million, then these 29,670 millionaires were worth €89 billion in total.
So, the total wealth of these 33,000 millionaires in 2006 was €156.21 billion. This wealth does not include the value of their principal residences. Also, these figures are based on ‘net worth’, which means that this wealth is what is left, having allowed for borrowings.
Now, people will say that the property market has hit this group badly and has wiped out much of their wealth. They might add that these wealthy people have also taken a hit in the stock market. Consequently, it might be thought that a large proportion of this wealth has been lost.
Fortunately, we can update the 2006 figures to check this out: the original report tells us that these millionaires held 71% of their wealth in property; 3% in bonds; 10% in cash and 16% in equities. The breakdown of the original €156 billion is thus: 112.4 billion in property; 15.5 billion in cash; 4.7 billion in bonds and 23.4 billion in equities.
O.K, but the property market and stock exchange have fallen. The ESRI and other expert commentaries estimate that the property market fell by 33% from its peak. So, the value of the property held by the 33,000 millionaires has now dropped to 77.4 billion.
Also, using FT100 indices, I have calculated the fall in the stock market to date as being 6%. Consequently, the millionaires now have lost nearly 1.5 billion on the stock market, bringing their current holding to €22 billion.
In regard to the cash, it would have been quite easy to secure a minimum of 1.5% AER on their cash deposits from 2006 to date. This is a very conservative estimate but shows that the millionaires have now increased their cash holdings by a billion to 16.5 billion.
Finally, given the indebtedness of European governments, the rate of return on bonds would easily have delivered 10% over the period. Now the 33,000 millionaires will have increased their bond wealth by a half a billion to €5.14 billion.
Adding the total, we find that the 33,000 Irish millionaires still hold €121 billion and this has fallen from a high of €156 billion in 2006. We also find that in terms of hard cash they have a whopping 16.5 billion in the bank.
These 33,000 millionaires have been the main beneficiaries of about €20 billion in tax expenditures by the state since 2005 through various means: tax relief on pensions, which at one point was over a million; a myriad of property tax reliefs; reliefs on private nursing homes and hospitals; capital allowances; the PRSI ceiling; and a whole raft of others.
In fact Dr Michael Collins, a Trinity based Economist and member of the Commission on Taxation, reiterated the view on October 17th this year that there are still 110 of these so called ‘loop holes’ in place, costing the exchequer €11 billion per annum.
Given that the Minister for Finance has asked Irish people to be ‘patriotic’ about accepting cutbacks, why not start with those at the top: the 33,000 multi millionaires who can most afford it and who also have taken 20 billion in tax breaks from the state since 2005?
On the basis of the above figures, even if this group paid just a 1% wealth tax, the Irish government could take in 1.2 billion in 2011 and every year thereafter. Taxes as high as these already exist in France, Norway and Switzerland and are set to be introduced in several other EU countries in the near future.
Ordinary working people in France at the moment are now rejecting the squeezing of ordinary people’s wages and pensions, where the drive for savings are hitting those who can least afford them. In this context, taxing wealth is but one illustration of what a fair budget proposal would look like.
Already, hundreds of voluntary and community groups are holding a massive conference in the RDS, Dublin on October 30th in order to ‘Claim our Future’ in the light of savage cutbacks to communities. They, like the French protestors will be campaigning for a fairer and better way and all are looking to unlock countries of the European Union from the stranglehold of brutally unfair and unjust economic solutions being imposed on Irish, French and other governments by the likes of the IMF.
It seems that the battle lines are only now starting to be drawn.
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