Wealth Tax May No Longer Be Distant

Wealth Tax refers to taxation based on an individual's assets, which is different from the familiar Income Tax that is based on an individual's income. Only a very small number of countries in the world levy wealth tax, and the vast majority of countries still implement income tax. China currently has no one proposing to levy wealth tax. Therefore, when talking to China's rich about wealth tax, it would be more relevant to discuss estate tax and gift tax (collectively referred to as inheritance tax) as the "fear" being sold is less.

However, KC Global believes that it is very difficult to levy inheritance tax in China, mainly because it does not fit with China's traditional family values. After all, if parents need to pay a large amount of tax when passing on family property to their children, it is easy to imagine the huge backlash it would cause in Chinese society. Comparatively, the difficulty in levying wealth tax is relatively low, and it is also more in line with the values of socialism, as it can relatively achieve fairness: the rich pay more taxes, regardless of how the money is earned.

The biggest difficulty in levying wealth tax is how to identify all the assets (especially overseas assets) held by taxpayers and price these assets. As the world becomes more transparent, information becomes more abundant, and information processing technology becomes more advanced, there are more and more solutions to these two problems, and the quality of the solutions is getting higher and higher. Therefore, we believe that the speed at which wealth tax comes to China will be much faster than expected.

Many people still believe that wealth tax will not come to China. After all, once wealth tax is levied, the rich will tend to immigrate to countries and regions without wealth tax. After all, when the rich immigrate, they not only take away their wealth, but also take away technology and even entire industries. However, if wealth tax is levied at the global level, this impact can be effectively eliminated.

Therefore, in order to avoid global rich people avoiding estate tax through immigration, international institutions and organizations have been proposing in recent years that wealth tax should be levied at the global level. Fans who have not kept up with global tax developments may think that global wealth tax is impossible, after all, it is difficult to coordinate so many countries to levy taxes. However, the global minimum tax on multinational companies has already been implemented in a few European countries in 2024, and more countries and regions (such as Hong Kong, China) will implement it in 2025, so it has become possible to coordinate the collection of a tax type globally.

Moreover, compared to the global minimum tax, the tax rules for global wealth tax will be much simpler, and the technical difficulties are actually not great. The main difficulty of global wealth tax comes from the political aspect, after all, the rich will definitely use various means to obstruct the direct taxation of their wealth.

However, the global fiscal gap is getting bigger and bigger, and the pressure on countries to levy wealth tax will also increase. On August 19, 2024, the Tax Justice Network organization based in the UK released a research report: "Taxing Extreme Wealth: What Countries Around the World Could Gain from Progressive Wealth Taxes" (hereinafter referred to as the "Report"), which suggests that all countries in the world should be based on the Spanish wealth tax and levy taxes on the top 0.1% of the richest people in the world, then the global tax revenue will increase by 7%, amounting to $2 trillion (about 14 trillion RMB).

The report studied 172 countries and regions around the world (including China), which will have some inspiration for readers. This article will interpret this Report.