Taxing wealth

High and rising income inequality is a serious concern in many countries, as highlighted in the IMF’s recent Fiscal Monitor.

Wealth, however, is distributed even more unequally than income, as in the picture below. Although Piketty has famously proposed a coordinated global wealth tax of the wealthiest at two percent, there are now very few effective explicit wealth taxes in either developing or advanced economies. Indeed between 1985 and 2007, the number of OECD countries with an active wealth tax fell from twelve to just four.

And many of those were, and are, of limited effectiveness. Very few developing countries have a wealth tax on the books—and India removed its wealth tax in its last budget.

The design of wealth taxes is notoriously prone to lobbying and the granting of exemptions that the wealthiest can exploit. Furthermore, the rich have proved adept avoiding or evading taxes by placing their wealth abroad in low tax jurisdictions.  —