I. Overseas Experience
26.3. Fourteen countries are known to have a wealth tax at the present time. Nine of these are in Europe (Sweden, Norway, West Germany, Austria, Finland, the Netherlands, Denmark, Switzerland and Luxembourg), and the remaining five in Asia and South America (India, Pakistan, Sri Lanka, Colombia and Uruguay). Japan, which introduced a wealth tax in 1950, abolished it three years later. A wealth tax has not been imposed in Canada, the United Kingdom, New Zealand or the United States. In Canada, the Carter Commission considered the tax but rejected its introduction because of the major problems inherent in it. A recent Green Paper has proposed a wealth tax for the United Kingdom. One has been proposed too in Ireland but is meeting with opposition. In the meanwhile, however, the European experience may serve as a background although the tax in its application is by no means uniform in the various countries.
26.4. The aggregate net wealth of the husband and wife (and sometimes of dependent children too), rather than that of the individual, is adopted by all European countries as the basis of the tax, which is imposed on both residents and non-residents. Residents are generally taxed on all their property whether at home or abroad; non-residents are subject to tax only on property situated in the taxing country. In addition, West Germany, Switzerland, Austria, Norway and Luxembourg impose a tax on all corporations, while Sweden and Finland impose one confined to non-resident companies.
26.5. A comprehensive net wealth tax would in principle be imposed on all wealth irrespective of whether it consisted of savings from taxed income or obtained from any other sources. It would be assessed on assets net of liabilities. Taxable assets would include all real property such as land and buildings, and all personal property such as jewellery, motor vehicles, annuities, bonds, shares, cash, bank deposits, mortgages, goodwill, etc. Common exclusions in practice, however, are household effects, life insurance policies and/or pension rights, and works of art, while a number of other exemptions are provided in each of the individual countries, mainly for administrative reasons.
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26.6. Apart from these specific exemptions from the tax base, a general statutory exemption of wealth frees from tax those persons or businesses below a certain total property value. Except in the case of Denmark, additional personal concessions are also allowed for dependants and/or elderly persons and invalids.
26.7. Rates of tax are low, typically in the 0.5–2.0 per cent range. In five countries the tax is proportional, in the other four progressive. There are special provisions in nearly all countries designed to ensure that the combined burden of income tax and wealth tax does not exceed a certain ceiling of income. These vary greatly. For instance, the total of the two taxes is subject to a ceiling of 70 per cent in Denmark, 80 per cent in the Netheralands and Norway, and 85 per cent in Sweden. In West Germany, the wealth tax has been allowed as a deduction from taxable income, so that the total tax cannot exceed the income from capital unless the taxable yield of capital is itself less than the rate of wealth tax. Denmark applies a reduction in the percentage if income from wealth is low. Switzerland uses a similar but more complicated sliding scale.
26.8. With the exception of Luxembourg and Switzerland, which raise considerable sums from the wealth tax on companies, revenue from wealth tax represents a very small proportion of total tax collections, ranging from 0.5 per cent in Finland and Denmark to 1.7 per cent in West Germany. The yields in Luxembourg (3.1 per cent) and Switzerland (5.4 per cent) are somewhat higher, but still rather modest as a contribution to overall revenue.
26.9. The extent of reliance on other capital taxes varies considerably, but it is significant that in Norway and Sweden no capital gains tax is imposed on assets held for more than five years; similarly, West Germany has no long-term capital gains tax.