Tax and Legal News - April 2025

The series “Taxing the Rich”

Exactly a year ago, I tried to outline the pilot of a groundbreaking tax on the rich in this space. A certain Professor Zucman spoke at the G20 meeting at the time and said, in simple terms, that the rich could pay a tax of 2% of their wealth (including that in various corporate structures) every year.

The idea didn't seem to catch on. But now, a year later, the second part of the series, Resources for a Secure and Resilient Europe[1], is coming from the same professor and his colleagues. This episode is based on the assumption that Europe will need €250 billion each year for its security, in addition to a number of other necessary expenditures and investments.

The authors look to the war years for inspiration. During the Second World War, Britain and France financed war expenditures through extraordinary taxation of wealthy individuals, simply put by progressive taxation of the wealthiest.

The authors argue that the idea of taxing the rich is a popular one in Europe. According to surveys, 67% of Europeans support it. This is perhaps not surprising. A slightly more compelling argument would be the real data presented on effective taxation as a function of wealth. 99% of the population in the major European economies pay taxes at a broadly stable average rate of somewhere above 40% (let's be happy with our tax rates, by the way). The wealthiest 99%-99.999% of the population, according to the presented data, steadily drop to 20% with their tax rate. And the lowest rate supposedly goes to the richest thousandth of a percent of the population, who are already starting to fall into the billionaire dollar club.

The data indicate that billionaires are effectively taxed much less than the rest of the population, and the authors believe this needs to be straightened out, to achieve greater fairness. The general public supports this. The authors propose a 2% or 3% annual tax on wealth. Liquidity will not be a problem for those affected, even though their wealth is invested in some way. Statistically, their wealth is said to generate an annual return of over 7% (after inflation), i.e. paying 2%-3% in taxes will be easy according to the authors (the authors probably arrive at these figures by applying approx. 25% tax rate to the 7%-10% assumed return). Taxes paid on income are supposed to be creditable against this wealth tax, meaning no double taxation.

The authors have already identified the billionaires concerned on a country-by-country basis. They are serious. In the Czech Republic there are reportedly 11. France tops the list with 147, but we are still about eighth in Europe.

But the authors go even further and propose to tax euro centi-millionaires, i.e. people with assets over 100 million euros. In this case, a 3% tax would raise €121 billion in the EU.

In the Czech Republic alone, according to the authors, the additional tax collection from 11 billionaires (at a 3% rate) would be €1.7 billion (40 billion crowns), or €3.1 billion (72 billion crowns) after including the centi-millionaires. For comparison, the total personal income tax for the whole country is about 150 to 200 billion crowns annually.

We'll see if there's another episode of the series and how quickly it comes out. Defense spending is sure to be a big topic, and it will be tempting to collect roughly half of what we collect from the rest of the population.

[1] Resources for a Safe and Resilient Europe: The Case for Minimum Taxation of Ultra-High-Net-Worth Individuals in the EU - Eutax