A study conducted by the Tax Justice Network says an EU wealth tax modeled on the Spanish version could raise €213.3 billion annually. Antiabuse measures would bring in an estimated €60 billion more.
A tax on the richest would be legitimate “because the ultrarich are major contributors to climate change,” Alison Schultz, one of the coauthors of the study, said September 20 during an event organized by the European Parliament's Greens/European Free Alliance, which commissioned the study. A November 2022 Oxfam study found that the investments of the world’s 125 “richest billionaires lead to carbon emissions of 3 million tons per year," Schultz said. "This is as much as [what] 10 percent of all European citizens emit in a year.”
“The proposed tax would seek a reasonable contribution from the top 0.5 percent [of the] wealthiest individuals in the EU, who currently possess almost 20 percent of European wealth,” according to the Tax Justice Network study, which was released September 20. The tax would follow the design of Spain's wealth tax, which was introduced as a temporary annual levy.
The EU tax, like the Spanish one, would apply to individual assets net of individual liabilities above a specific threshold. Because wealth levels vary from one member state to another, the study proposes applying the tax “to the top 0.5 percent of the wealth distribution and solely to the portion of their wealth that exceeds what someone in the top 1 percent owns.” The rate would be progressive: 1.7 percent on wealth above the top 0.5 percent threshold, 2.1 percent on wealth above the top 0.1 percent threshold, and 3.5 percent on wealth above the top 0.05 percent threshold.
While the Spanish wealth tax “incorporates generous exemptions, including provisions for wealth above the threshold” — for example, jewelry, boats, and private aircraft can be exempted, as well as artwork under certain conditions — the tax proposed by the Tax Justice Network would forgo exemptions to prevent loopholes, the study says. “This means that any net wealth held by taxpayers that falls below the top 0.5 percent threshold — be it properties, businesses, artworks, or funds in bank accounts — would not be subject to wealth taxation,” it says. “A little less than 1.8 million people would be affected in Europe,” Schultz said.
The study says that flanking the wealth tax with antiabuse measures would prevent taxpayers from shifting their assets to other countries. “While anecdotal evidence exists on [the] migration of ultrarich individuals after the implementation of a wealth tax, often because of the public outcry, academic papers find negligible migration effects of new taxes applying to the wealthiest individuals,” it adds.
“To prepare for the worst case, we therefore provide alternative estimates in which we assume that 3.2 percent of taxable persons leave the country after the implementation of a wealth tax,” Schultz and her coauthors explained. Even assuming that migration level, “the total revenue among European Member States still amounts to over €208 billion,” they said. The most efficient way to avoid an intra-EU migration response is collective implementation, the study adds.
Asked about the legal basis for introducing a wealth tax at the EU level, Miroslav Palanský, a coauthor of the report, acknowledged that it would be difficult to implement the tax because it has never been done before. “I don't currently see scope for [an EU-wide wealth tax] in the legislative procedures," he said, explaining that this is, in part, why the study presents its findings at the country level. Malta could expect the lowest revenue from an EU wealth tax, at about €42 million. The highest wealth tax revenue would be in Germany and France, with estimates of about €65 billion and €46 billion, respectively.
Another EU-wide measure that would help combat abuse is the creation of an asset register, the study says, adding that a global asset register would be even better. “That is a big challenge, but we can do that in Europe and lead the way,” Palanský said. He acknowledged that the creation of an EU-only asset register might result in wealth leaving the EU, but he reiterated that academic evidence “did not find such a big [behavioral] response from the vast majority of the ultra-rich.”
The study says that “the total tax revenue loss resulting from offshore wealth-related tax abuse by the citizens of EU Member States amounts to €59.5 billion per year.” This means that antiabuse measures, combined with the introduction of a wealth tax, would potentially raise €272.8 billion per year.
Negotiations on the EU anti-money-laundering package could result in linking among member states of beneficial ownership registers with bank account and safe-deposit box registers. Under member states' negotiating mandate, real estate registers would not be interconnected. However, in their negotiating mandate, members of the EP have requested that authorities have access to information about the acquisition and beneficial ownership of motor vehicles, aircraft, and watercraft valued in excess of €200,000. MEPs also want to grant authorities access to information about the beneficial owners of “any tangible movable goods stored, traded, or transiting in a free zone or customs warehouse.” Those registers, as well as land and real estate registers, should be interconnected between member states, the MEPs' mandate says.
An EU wealth tax is also the subject of a European citizens' initiative. The organizers have six months from the initiative's registration date to gather 1 million signatures from at least seven member states in support of the tax. The initiative says in its legal arguments that the European Commission could invoke article 115 of the Treaty on the Functioning of the European Union, which provides for the possibility to issue directives for “the approximation of such laws, regulations, or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market.” This is the legal basis on which the pillar 2 global minimum corporate taxation deal was transposed in the EU.