Planning Bureau: “Introduction of tax on large assets is not without risks” | Money

The analysis shows, among other things, that determining net worth in Belgium is not easy. “It is relatively easy to define net worth qualitatively, but a quantitative estimate is much more difficult because there is no wealth register in Belgium,” it said. A number of components of net worth are known to the FPS Finance through existing taxes, but others are not, with the greatest difficulty being the valuation of shares in unlisted companies.

The Planning Bureau also points out the importance of the modalities of such a net wealth tax. “Empirical studies agree that – depending on the definition – tax avoidance or evasion can occur, especially in the short and medium term. In the longer term, other potential effects are likely to materialize, including effects on savings, labor supply and migration.”

In addition, the introduction of a rich tax could also entail significant administrative costs and the risk of double or even triple taxation of household wealth. In the case of Belgium, there is a third risk related to the fragmentation of the policy levels responsible for wealth taxes.

The study therefore concludes that an inevitable trade-off must be made between fairness and efficiency of a wealth tax. “To reach the target group of large wealth, it is necessary to introduce a high tax threshold. However, because their wealth consists more of assets that are difficult to quantify, this generates opportunities for tax evasion and avoidance,” it said.

“Conversely, a broader tax base would reduce the scope for tax construction and increase revenues from the tax, but this could affect part of the middle class, which was not necessarily the original target group in the proposals to introduce such a tax.”