Ms Sarah Perret:

I thank the Deputy for his question. Wealth taxes are indeed not a new concept. As I said, we released a report on the topic in 2018. To give the Deputy an idea, in 1990, 12 OECD countries had wealth taxes in place, while only three still have them today. Those countries are Norway, Spain and Switzerland. The taxes were repealed for a variety of reasons but there were some common elements across countries. One big reason is that they were relatively burdensome from an administrative perspective and, at the same time, they generated relatively limited revenue. Generally, in the countries in which wealth taxes were levied, they accounted for less than 1% of total tax revenues.

An exception to this was in Switzerland, where the cantonal wealth taxes that are still levied raise approximately 4% of total tax revenues. That is still low but it is much higher than experienced in other OECD countries. The fact Switzerland collected significantly higher revenues is explained by a number of the feature of its wealth tax. There is a much lower tax exemption threshold, which means the tax applies to part of the middle class. The base is relatively broad and applies to a wide range of assets. The relatively higher revenue is also linked to the fact there are a lot of wealthy individuals in Switzerland.

I have referred to the administrative burden associated with wealth taxes as one factor in their repeal, as well as the fact they raised limited revenue. Another reason for their removal is that wealth taxes were often less progressive than they were supposed to be. They often weighed more on part of the upper middle class, let us say, or on households that counted among the wealthiest but the wealth of which was predominantly in the form of real estate. The reason for this is that a lot of wealth taxes, mainly in OECD and European countries, were levied on relatively low levels of wealth. The level of net wealth people needed to become taxable under the wealth tax was relatively low, which meant it applied not only to the very rich but also, in a number of countries, to a part of the middle class.

At the same time, the taxes were quite easy to avoid or evade for those at the very top of the wealth distribution, either because they could have their wealth in assets that were exempt under the wealth tax or they could evade taxes by hiding their assets offshore. Another factor is that there was some anecdotal evidence of people leaving countries with wealth taxes, although the migration effects of such taxes is something on which we are still missing solid evidence. There were some high-profile cases of people leaving countries with wealth taxes.

These are some of the elements that explain why wealth taxes were repealed in many countries. They are factors that would need to be taken into consideration if countries want to implement such taxes.