## Game-Changers and Whistle-Blowers: Taxing Wealth

_IMF Blog, February 13, 2018_

## Source details

**Canonical URL:** [Game-Changers and Whistle-Blowers: Taxing Wealth](https://www.imf.org/en/blogs/articles/2018/02/13/game-changers-and-whistle-blowers-taxing-wealth)

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- [Markdown version](/en/blogs/articles/2018/02/13/game-changers-and-whistle-blowers-taxing-wealth/index.md)
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## Bibliographic details
- Authors: James Brumby, Michael Keen
- Published: February 13, 2018

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### Overview
- Publication: February 13, 2018
- Authors: James Brumby, Michael Keen
- Central concern: High and rising income inequality; wealth is distributed even more unequally than income.
- Reference policy proposal mentioned: Thomas Piketty’s coordinated global wealth tax of the wealthiest at two percent.
- Noted policy change: India removed its wealth tax in its last budget.

### Distribution and scale of offshore wealth
- Estimates by Alstadsæter, Johannesen and Zucman:
  - roughly eight percent of all household financial wealth —about 10 percent of global GDP—is held offshore in low-tax jurisdictions.
  - roughly three-quarters of this goes unreported.
- Regional estimates:
  - Some 22 percent of all Latin American financial wealth is estimated to be held overseas.
  - For Africa, the number rises to a whopping 30 percent.

### Historical trend in wealth taxation
- Between 1985 and 2007, the number of OECD countries with an active wealth tax fell from twelve to just four.
- Very few developing countries have a wealth tax on the books.
- Many existing wealth taxes have been of limited effectiveness.

### Findings from practice and recent experience
- Risk-based approaches targeted at high net wealth individuals can yield dividends.
  - Example: Over the past three years, the effective income tax rate for high net wealth individuals in Chile increased from about 9 to 10.5 percent.
- Property taxes can serve as a valuable if imperfect form of wealth taxation, though they are likely less effective at reaching the super-rich.
- Badly designed wealth taxes that are open to avoidance—through excessive exemptions, for instance, or weak taxation of gifts and bequests—can cause large distortions yet raise little revenue.

### Policy recommendations and strategies
- Go after the big money
  - Use a risk-based approach to high net wealth individuals.
  - Establish units within the tax administration dedicated to the taxation of high net wealth individuals.
  - Apply a graduated response using communication and enforcement tools.
- Tax system design matters
  - Focus on taxation of capital income generated by wealth and its transfer between generations as alternatives to an annual wealth tax.
  - Consider taxing different types of wealth in different ways.
  - Avoid excessive exemptions and strengthen taxation of gifts and bequests to reduce avoidance and distortion.
- Go after the hearts and minds to get to the pockets
  - Foster social responsibility among the wealthy by drawing on evidence of development impact from targeted spending (for instance in educational attainment).
  - Build trust in efficient government and secure property rights to increase willingness to pay and reduce concealment of assets.
- Bring in coalitions for support
  - Leverage civil society, investigative journalism, and public scrutiny to build support against aggressive tax avoidance by multinational companies.
- Think about the wealth managers
  - Recognize intermediaries care about their reputations; they can be co-opted to help reform the system and sometimes act as whistleblowers.
  - Note: in some cases, whistleblowers have received very substantial financial rewards.
- More transparency can help increase scrutiny
  - Expand exchange of tax information between countries to address unreported income and wealth.
  - Ensure tax authorities in developing countries reap benefits of information sharing.
  - International organizations can assist in improving the fit of standards for developing countries and support movement towards greater public information on beneficial ownership and aggregate offshore wealth.

### Institutional and international initiatives
- The topic was discussed at the regular IMF-World Bank session on taxation and at the first conference organized by the Platform for the Collaboration on Tax at the United Nations in New York.
- G20-led initiatives on exchange of tax information are characterized as a remarkable and perhaps ultimately game-changing approach to the taxation of the wealthy across borders.

### Conclusion
- Immediate breakthroughs for more effective taxation of wealth in low-income countries are hard to see.
- However, there is reason to be less pessimistic than a few years ago about prospects for progress.

*Source: IMF blog post "Game-Changers and Whistle-Blowers: Taxing Wealth", February 13, 2018.*

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## Content in this bundle

- **AJZ2017b — Offshore Wealth and Capital Flight**
  - [AJZ2017b — Offshore Wealth and Capital Flight (Markdown version)](/files/AJZ2017b.pdf.md){rel="alternate" type="text/markdown"}
  - [AJZ2017b — Offshore Wealth and Capital Flight (PDF)](/files/AJZ2017b.pdf){rel="external" type="application/pdf"}
- **Taxing across Borders: Tracking Personal Wealth and Corporate Profits**
  - [Taxing across Borders: Tracking Personal Wealth and Corporate Profits (Markdown version)](/files/Zucman2014JEP.pdf.md){rel="alternate" type="text/markdown"}
  - [Taxing across Borders: Tracking Personal Wealth and Corporate Profits (PDF)](/files/Zucman2014JEP.pdf){rel="external" type="application/pdf"}

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## References

- [Fiscal Monitor](https://www.imf.org/en/Publications/FM/Issues/2017/10/05/fiscal-monitor-october-2017%201)
- [https://www.imf.org/wp-content/uploads/2018/02/Chart4_SharingTheWealth_v3.gif](https://www.imf.org/wp-content/uploads/2018/02/Chart4_SharingTheWealth_v3.gif)

_Source: https://www.imf.org/en/blogs/articles/2018/02/13/game-changers-and-whistle-blowers-taxing-wealth_