IMF How To Notes

How to Tax Wealth

Author/Editor:

Shafik Hebous ; Alexander D Klemm ; Geerten Michielse ; Carolina Osorio Buitron

Publication Date:

March 8, 2024

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

Tackling income and wealth inequality is at the top of the policy agenda in many countries. This note discusses three approaches of wealth taxation, based on (1) returns with a capital income tax, (2) stocks with a wealth tax, and (3) transfers of wealth through an inheritance (or estate) tax. Taxing actual returns is generally less distortive and more equitable than a wealth tax. Hence, rather than introducing wealth taxes, reform priorities should focus on strengthening the design of capital income taxes (notably capital gains) and closing existing loopholes, while harnessing technological advances in tax administration—including cross-border information sharing—to foster tax compliance. The inheritance tax is important to address the buildup of dynastic wealth.

Series:

How-To Note No 2024/001

Subject:

Capital income Capital income tax Economic sectors Financial crises Income Income and capital gains taxes National accounts Tax policy Taxes Wealth tax

Frequency:

occasional