ISSN 2443-8022 (online) Taxing Wealth: Past, Present, Future Workshop Proceedings Edited by Caterina Astarita DISCUSSION PAPER 003 | JULY 2015 EUROPEAN ECONOMY Economic and EUROPEAN Financial Affairs ECONOMY European Economy Discussion Papers are written by the staff of the European Commission’s Directorate-General for Economic and Financial Affairs, or by experts working in association with them, to inform discussion on economic policy and to stimulate debate. The views expressed in this document are solely those of the author(s) and do not necessarily represent the official views of the European Commission. Authorised for publication by Lucio Pench, Director for Fiscal Policy. LEGAL NOTICE Neither the European Commission nor any person acting on its behalf may be held responsible for the use which may be made of the information contained in this publication, or for any errors which, despite careful preparation and checking, may appear. 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European Commission Directorate-General for Economic and Financial Affairs Taxing Wealth: Past, Present, Future Proceedings of the workshop organised by the Directorate General for Economic and Financial Affairs held in Brussels on 13 November 2014 Edited by Caterina Astarita Abstract In times of fiscal consolidation and strong macroeconomic adjustment needs in some EU Member States, the debate on wealth taxation gained momentum, both in the academic and in the policy debate. In this context, the aim of the workshop, held by DG ECFIN on 13 November 2014, was to discuss theoretical and policy issues associated with wealth taxation, including the broad principles and the concrete design challenges of an optimal wealth tax. Different types of wealth taxation have been scrutinised including transmission taxes, housing taxes and the taxation of financial assets. The challenges they may raise have been discussed also with respect to recent experience in particular Member States. The workshop was organised in two sessions: "Taxation of wealth: state of play and rationale" and "Taxing wealth: specific instruments and challenges". The proceedings offer a detailed summary of the most recent research related to various aspects of wealth taxation and carried out by academics and international organisations' representatives. JEL Classification: F38, H2, H26, H300, H310, H320, H71, H87. Keywords: wealth taxation, property taxation, inheritance taxation, wealth transfers, tax migration, international exchange of information, tax evasion, tax avoidance. Contact: Caterina Astarita, European Commission, Directorate General for Economic and Financial Affairs, [email protected]. EUROPEAN ECONOMY Discussion Paper 003 European Economy – Economic Paper 003 Taxing Wealth: Past, Present, Future - Workshop Proceedings CONTENTS Acknowledgements .............................................................................................................................. 7 1. SUMMARY OF THE WORKSHOP ....................................................................................... 8 First session on taxation of wealth, state of play and rationale .............................................. 8 Second Session on specific instruments and challenges in taxing wealth ........................... 10 Concluding policy panel...................................................................................................... 11 2. KEYNOTE ADDRESS ......................................................................................................... 12 2.1. LESSONS FROM THE 2014 REPORT "TAX REFORMS IN EU MEMBER STATES" .......................... 12 by Florian Wöhlbier 2.1.1. Introduction and general issues .............................................................................................. 12 2.1.2. Income inequality and tax and benefit systems ................................................................. 13 2.1.3. Wealth-related taxes – renewed debate ............................................................................. 13 2.1.4. Wealth-related taxes – situation in EU Member States and importance for tax revenues ......................................................................................................................................... 14 2.1.5. References .................................................................................................................................. 15 3. SESSION I - TAXATION OF WEALTH: STATE OF PLAY AND RATIONALE ...................... 16 3.1 SOME NOTES ON TAXING WEALTH ......................................................................................... 16 by Michael Keen 3.1.1. Introduction................................................................................................................................. 16 3.1.2. Taxing wealth vs. taxing capital income .............................................................................. 17 3.1.3. Differentiating across assets? .................................................................................................. 18 3.1.4. Tax competition and information exchange ....................................................................... 19 3.1.5. References .................................................................................................................................. 20 3.2 RETHINKING WEALTH TAXATION ............................................................................................. 21 by Gabriel Zucman and Thomas Piketty 3.2.1. Introduction................................................................................................................................. 21 3.2.2. Capital is back ........................................................................................................................... 21 3.2.3. Rethinking wealth taxation ...................................................................................................... 22 3 3.2.4. Taxation trends in taxation in modern democracies .......................................................... 23 3.2.5. References .................................................................................................................................. 25 3.3 DISCUSSION OF PRESENTATIONS BY MICHAEL KEEN, GABRIEL ZUCMAN AND THOMAS PIKETTY – WEALTH POLICY CHALLENGES AND RECENT DEBATE ........................... 26 by David Bradbury 3.3.1. Background – the rise in global inequality ............................................................................ 26 3.3.2. The changing tax mix ................................................................................................................ 26 3.3.3. The wealth tax – challenges and issues ................................................................................ 28 3.3.4. International tax evasion and automatic exchange of information .............................. 29 3.3.5. Conclusions ................................................................................................................................. 30 3.3.6. References .................................................................................................................................. 30 3.4 MUCH TO DO ABOUT NOTHING: THE SOLIDARITY TAX ON WEALTH (ISF) IN FRANCE ........ 32 by Alain Trannoy 3.4.1. Introduction................................................................................................................................. 32 3.4.2. Tax base, schedule and revenues ......................................................................................... 32 3.4.3. Evidence on tax migration....................................................................................................... 34 3.4.4. Overall assessment: the "ISF" as a rich repellent .................................................................. 37 3.4.5. References .................................................................................................................................. 37 3.5 THE DEBATE ON WEALTH TAXATION IN GERMANY ................................................................ 38 by Stefan Bach 3.5.1. Introduction................................................................................................................................. 38 3.5.2. Property and wealth-related taxes in Germany ................................................................. 38 3.5.3. Proposals on personal wealth taxes in Germany ................................................................ 40 3.5.4. Reform of inheritance taxation in Germany ........................................................................ 43 3.5.5. Conclusions ................................................................................................................................. 45 3.4.6. References .................................................................................................................................