Over the past three decades, private wealth in the EU has substantially increased, becoming more concentrated among families at the top of the wealth distribution. This trend has significantly impacted European citizens as a whole. For instance, in 1995, the poorest half of the EU population controlled a mere 4% of the total wealth, a figure that dropped to 3% by 2023. Conversely, the richest 10% saw their share of wealth increase from 57% to 60% during the same period.

The report, titled Wealth Taxation, Including Net Wealth, Capital and Exit Taxes, was published in March by the Directorate-General for Taxation and Customs Union of the European Commission. It was prepared by a consortium of economic research centers and consultancies, including the Barcelona Institute of Economics (IEB) at the University of Barcelona (UB). This document is the first of two volumes on taxation in the EU and is intended to guide future fiscal policies in Brussels.

The director of the IEB and one of the UB researchers who collaborated on the study, noted that wealth concentration has evolved from millionaires to ultra-millionaires. The IEB researchers focused particularly on the wealth tax in Spain, the only EU state that still maintains it, although Norway and Switzerland also have it outside the community bloc.

This tax has been controversial and has been abolished in several countries for technical reasons, as it was considered inefficient and generated little revenue. However, it has recently reappeared in technical and political debates, driven by economists specializing in inequality. The main difficulty of this tax lies in the need to annually assess the exact value of taxpayers' assets, a complex task for real estate or shares in unlisted companies.

The Brussels document suggests that wealth taxes could play a more significant role in tackling growing wealth inequality in the EU. Given the scale and concentration of private wealth, inheritance transfers, and the heavy reliance on labor taxation, there is a case for re-examining and, if appropriate, strengthening the contribution of wealth taxes to finance European welfare states.

The study questions arguments used in recent years against taxing large fortunes, such as the idea that increased tax pressure on the wealthy reduces business investment and hiring. While it acknowledges that taxes on wealth, inheritance, or capital income can, in principle, affect savings, investment, and entrepreneurship, empirical evidence suggests that these negative effects are generally modest. Well-designed taxes can even support a more productive use of assets.

The design of taxes is crucial for achieving collection and redistribution objectives. The study highlights that the benefits of wealth taxes largely depend on their interaction with other elements of the tax system. As a general rule, generalized taxation of capital returns through well-functioning taxes on capital gains and income, combined with a robust inheritance and gift tax, could form the backbone of wealth taxation.

Finally, the document calls for any move to strengthen wealth taxation to be accompanied by transparent communication about who will be affected, how the revenues will be used, and what measures are included in a broader strategy for tax justice.