Alexander Krenek, Margit Schratzenstaller
Sustainability-oriented EU Taxes. A European Net Wealth Tax
in: Barbara Caracciolo, Charline Cheuvart, Catalin Dragomirescu-Gaina, Vassilis Ntousas, Progressive Lab for Sustainable Development. From Vision to Action
Book chapters, contributions to collected volumes, Brussels, June 2017
Editors: Foundation For European Progressive Studies
The increase in wealth inequality in many EU countries has spurred renewed interest in wealth taxation. While taxes on wealth for a long time have played only a marginal role in public finance and taxation literature, in the more recent literature a variety of arguments have been put forward in favour of (higher) wealth taxation in general and in Europe in particular. Most of these arguments directly or indirectly refer to the potential of wealth taxes to contribute to various dimensions of sustainability, in particular to economic, social, and/or institutional/cultural sustainability. Tax competition has led to an almost complete disappearance of pure net wealth taxes in Europe. EU-wide implementation of a net wealth tax based on harmonised tax provisions may serve as a first step in a longer-term move to a stepwise expansion of net wealth taxes on a global scale in the form of concentric circles. By dealing with non- and underreporting in the Household and Consumption Survey (HFCS) data set provided by the European Central Bank, we are able to estimate wealth distribution within 20 EU countries. Applying a progressive tax schedule with a tax rate of 1 percent for net wealth above 1 million € and 1.5 percent for net wealth above 5 million € on these adjusted wealth distributions yields potential tax revenues of 155 billion €, taking into account the behavioural responses of individuals triggered by net wealth taxation. Given the positive sustainability properties of a wealth tax with regard to economic efficiency and social inclusion, a European wealth tax offers itself as an interesting candidate for sustainability-oriented tax-based own resources to finance the EU budget.
JEL-Codes:F55, H24, H87
Keywords:TP_Nachhaltigkeit_Nachhaltigkeit Net wealth tax, wealth taxa tion, wealth distribution, HFCS, top wealth holders
Research group:Macroeconomics and Public Finance