A Harmonized Net Wealth Tax in the European Union

Krenek Alexander and Margit Schratzenstaller
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Krenek Alexander: Vienna University of Economics and Business, Vienna, Austria

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2022, vol. 242, issue 5-6, 629-668

Abstract: While taxes on wealth for a long time played only a marginal role in the public finance and taxation literature, the increase of wealth inequality and concentration in many EU countries has spurred new interest in wealth taxation. At the same time, recurrent net wealth taxes have almost completely disappeared in Europe, inter alia due to fears of asset and taxpayer migration. The paper provides estimates of the revenue that could be raised from an EU-wide net wealth tax enabling the containment of migration responses, using data from the Household, Finance and Consumption Survey (HFCS). To account for differential non-response, we augment the HFCS with data from the Forbes rich list as well as national rich lists and replace the top tail of the wealth distribution according to the HFCS by an estimated Pareto distributed top tail. To account for under-reporting we scale aggregate financial assets in the HFCS to match their counterparts outlined in the National Accounts. We estimate that a moderately progressive net wealth tax levied at a rate of 1% on net wealth between € 1 and € 5 million, and 1.5% on wealth above € 5 million, could raise between € 165 and € 177 billion after accounting for avoidance and evasion responses. Such an EU harmonized net wealth tax would affect only a small fraction of households, ranging between 0.41% in Latvia and 8.65% in Belgium.

Keywords: net wealth tax; wealth taxation; rich lists; HFCS; top wealth holders (search for similar items in EconPapers)
JEL-codes: D31 F55 H24 H26 H87 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:242:y:2022:i:5-6:p:629-668:n:2

DOI: 10.1515/jbnst-2021-0045

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