The agony of the ISF: it will only survive in Spain, Switzerland and Norway

Spain is one of three countries that will maintain the Wealth Tax (IP) after it is phased out in the rest of the developed economies. Following the decision of the French Government to abolish this tax and replace it with a specific tax on real estate, only Norway, Switzerland and Spain maintain this figure in their tax legislation. Colombia is currently exploiting an IP, but it is temporary and expires this year.

Wealth tax has disappeared from most countries due to its poor performance. The rest of the states eliminated him after his collection failure. “Wealth taxes have generally represented a very small share of tax revenue,” the OECD points out in one of its latest reports.

In fact, in Spain the tax barely collects 0.5% of the total income, or 0.2% of GDP. In 2016, tax revenue for this figure peaked at 3.7% in Switzerland. “It has always stood out as an exception, with tax revenues from wealth taxes consistently higher than in other countries,” the report explains.

The number of OECD countries that collected wealth tax revenue rose from eight in 1965 to a peak of 12 in 1996. Today there are only five countries that apply this tax. France and Colombia, however, eliminated it de facto. Although they remain on the official OECD list, the French government has largely removed the tax and it now only applies to real estate. At their peak in 2014, French intellectual property receipts accounted for only 0.55% of French tax receipts. For its part, that of Colombia is temporary. The government currently applies a 1% IP on equity, but only for the financial years 2019 to 2021.

The OECD recognizes the difficulty of collecting through this figure

Moreover, Spain does not exist in all the Autonomous Communities. Some autonomies discount this tax. This is the case of the Community of Madrid, which maintains a 100% reduction on this tax for residents of the region.

The OECD recognizes the difficulty of collecting through this figure. “With this tax, the behavior of tax evasion and evasion has become widespread in all countries”, he underlines in his report The role and design of net wealth taxes in the OECD. “Globally, country experiences confirm the difficulties of recurrent taxation of wealth. In countries that still have net worth taxes, there has been a trend to raise tax exemption thresholds and subdivide tax rates,” he adds.

“Countries over the years have repealed their net worth taxes for a variety of reasons, but the economic impact is included in those reasons,” said Daniel Bunn, vice president of global projects at the Tax Foundation.

Rainer Zitelmann: “It only drives the rich out of the country”

German writer and economic analyst Ranier Zitelmann points out the Economist that “inheritance tax and inheritance tax are grossly unfair because they tax money that has already been taxed”. The specialist reject these taxes and affirms that “these taxes only allow one thing: that the rich leave the country”.

Precisely, Zitelmann has just published his latest book The wealthy of public opinion, edited by Unión Editorial, in which he analyzes society’s perception of the rich and reflects on capitalism. “It’s a lesson that Sweden has learned. Taxes on the rich were punitively high in the 1970s. Many of Sweden’s wealthiest citizens left the country around this time, including Ikea founder Ingwar Kamprad, who moved to Switzerland,” he explains. “A similar thing is also happening in Germany, where many billionaires have moved to Switzerland. A friend of mine, billionaire Theo Müller, who made his fortune in dairy products, left for Switzerland in 2003 because of inheritance tax (he has nine children),” he adds.

In his opinion, “The Swedes were smart enough only to realize that their tax system was doing the country more harm than good, so they completely abolished their wealth, inheritance and gift taxes. In Germany, wealth tax was abolished in 1996, but inheritance tax still exists.

Zitelmann’s new work includes surveys in Germany, France, Italy, the United States, Britain and Sweden.

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