Wealth taxation in Scotland: a literature review

2. How is wealth taxed domestically and abroad?

In this chapter, we review international examples of net wealth taxes, examining how they have been implemented, challenges associated with them and their relative success. Then, we outline the wider fiscal context in which these taxes have operated to examine whether net wealth taxes can complement or substitute for other forms of wealth taxation which are currently levied in Scotland and the UK.

Methodology

Scope and search terms

To ensure the literature search was systematic and transparent, we first defined the scope of the review and then developed search terms to identify relevant studies for each theme. The review focuses on wealth taxation, with the aim of informing debate on the potential introduction of a net wealth tax in Scotland. To structure the search and keep it both comprehensive and targeted, we classified wealth taxes into three categories based on the aspect of wealth they tax: taxes on stocks of wealth (including net wealth taxes and recurrent taxes on property or land), taxes on transfers of wealth (including inheritance and gift taxes), and taxes on returns to wealth (including taxes on capital gains and dividend income). Organising the review in this way ensured breadth of coverage while maintaining sufficiently focused searches within each category. The search terms used for each category were as follows:

• Taxes on stocks of wealth
  • ‘allintitle: ("net wealth") ("tax" OR "levy")’
  • ‘allintitle: "land value tax" OR "property tax" OR "council tax"’
• Taxes on transfers of wealth
  • ‘allintitle: "inheritance tax" OR "estate tax" OR "gift tax" OR "stamp duty" OR "property transfer tax" OR "stamp duty reserve tax"’
• Taxes on returns from wealth
  • ‘allintitle: "capital gains tax" OR "capital income tax" OR "dividend tax" OR "interest income tax" OR "returns to capital"’

Given the policy-focused nature of the topic, relevant evidence is frequently published outside academic journals. Searches were therefore conducted using both Google Scholar and targeted web searches, allowing the inclusion of government publications, institutional research, and policy reports as well as academic studies.

Sifting and synthesis

Search results were screened for relevance based on title and abstract (or a brief review of content for non-academic sources), and subsequently assessed at full text where appropriate. The review was designed as a structured narrative evidence review rather than a formal systematic review. To avoid an overly restrictive reliance on predefined search strings, citation tracking was also undertaken to identify additional influential studies referenced within the literature.

Relevant sources were recorded in a structured spreadsheet, noting their thematic relevance and key findings. Evidence was then synthesised narratively across the predefined categories of wealth taxation, drawing together findings from academic and policy sources to identify common results, areas of agreement, and points of divergence.

Framing international evidence: a cautionary note

International experience provides important evidence on the behavioural and fiscal effects of net wealth taxes. However, these effects are highly dependent on institutional context. Wealth taxes operate as part of a wider tax system rather than in isolation, meaning observed outcomes reflect the interaction between tax design, other capital taxes, and the composition of the tax base. Consequently, evidence from other countries cannot be directly extrapolated to Scotland without considering differences in tax structure.

In particular, three features constrain external validity. First, many historical and current wealth taxes employ extensive exemptions, valuation discounts, or caps on overall tax liability, whereas several recent UK (outlined by Neidle (2025)) and Scottish proposals instead assume broad bases with limited reliefs. Second, countries that currently levy net wealth taxes typically have different systems of capital income and inheritance taxation, altering both effective tax burdens and behavioural incentives. Third, the composition and mobility of high-wealth taxpayers differ across countries, affecting the relevance of migration and avoidance evidence.

The following sections, therefore, review international evidence not as direct predictions of Scottish outcomes, but as evidence on behavioural mechanisms operating within specific institutional arrangements. In doing so, we synthesise lessons from international case studies alongside the practical challenges of implementation and the wider fiscal context in which wealth taxes operate.

International examples of net wealth taxes

Existing net wealth taxes

In 1990, individual wealth taxes were present in twelve European countries; they now remain in only three - Spain, Norway and Switzerland (Neidle, 2025). We begin by examining these existing examples of wealth taxes.

Spain operates two related but distinct taxes on net wealth. The long-standing wealth tax is structured within a national framework but administered at a regional level. It applies a progressive national rate schedule - ranging from 0.2% to 3.5% - although regions may modify rates, allowances and reliefs, and may grant partial or full rebates (Ramallo, 2020). The tax applies to residents on their worldwide net wealth and to non-residents on Spanish-located assets, based on year-end market values. It includes a €700,000 personal allowance and a partial exemption of up to €300,000 for a main residence (not available to non-residents), as well as exemptions for certain business assets. A cap limits the combined liability from wealth tax and personal income tax to 60% of taxable income, mitigating effective tax burdens (Ramallo, 2020). In 2022, the Spanish Government introduced the ‘Temporary Solidarity Tax on Large Fortunes’, designed in part to offset extensive regional rebates, particularly in Madrid. This national-level tax applies at higher marginal rates - 2.1% on net wealth above €3 million, 2.7% above €5 million, and 3.5% above €10 million - with liability calculated after deducting any regional wealth tax paid (Neidle, 2025). Although presented as temporary, the tax has since been extended. Unlike the regional wealth tax, the Solidarity Tax is administered centrally and reduces the scope for regional variation in effective rates.

The Norwegian wealth tax is much broader than the Spanish example, applied at 1% on assets above NOK 1.7 million (around £140k), with an additional 0.1% above NOK 20 million (around £1.6m) (Neidle, 2025). The Norwegian example can be thought of as an annual global net wealth tax on individuals, in that it applies to the market value (on 1^st January in the assessment year) less debt on worldwide assets, not just Norwegian ones (Banoun, 2020). This wealth tax employs discounts in the valuation of certain asset classes, such as primary residential properties, reducing their contribution to the calculation of wealth (Sterk Law Firm, 2025). As a consequence, research has shown this system to be regressive, in that it under-taxes the wealthiest 1% of taxpayers relative to other taxpayers lower in the wealth distribution (Bjerksund, Hopland and Schjelderup, 2024).

The Swiss wealth tax is also broad-based, as opposed to applying only to the extremely wealthy, and rates and reliefs differ considerably across cantons (Eckert and Aebi, 2020). Rates in some cantons fall as low as 0.1%; meanwhile, Geneva poses the highest rate at approximately 1%. Swiss residents are taxed on worldwide net wealth, whereas non-residents are only taxed on Swiss-located assets, with taxes based on end-of-year values. The Swiss tax operates with fewer exemptions than the Spanish and Norwegian systems; each canton grants a personal allowance between CHF 70,000 (around £67,000) and CHF 200,000 (around £192,000) while excluding pension funds, retirement savings and basic household goods, but taxing most other assets (Eckert and Aebi, 2020). Research by Marti, Martinez and Scheuer (2023) has proved that it is not a progressive tax, with some describing it as a form of minimal taxation on the wealthy; Neidle (2025) highlights that the wealthiest 1% pay around 60% of the tax.

The three surviving European wealth taxes differ primarily in the breadth of their tax base and the role of exemptions and reliefs. Spain operates a high-threshold, high-rate tax targeted at the very wealthy, substantially narrowing the base through generous personal allowances, primary residence relief and near-complete exemptions for private company holdings. Norway, instead, applies a national annual tax with much lower thresholds and a broader coverage of wealth, but relies on valuation discounts and asset-specific reliefs that alter effective burdens across forms of capital. Switzerland represents the broadest base: a low-rate, cantonal tax with comparatively few economic exemptions, taxing most net assets and spreading liability across a wider share of households.

Of the three - and indeed among both current and historical wealth taxes - the Swiss tax raises by far the most revenue, exceeding 1% of GDP (Neidle, 2025). By comparison, the Spanish and Norwegian taxes raise approximately 0.04% and 0.4% of GDP, respectively. The institutional and fiscal factors underlying this discrepancy are examined in a later section.

Past net wealth taxes

Wealth taxes have been implemented and subsequently abolished or majorly reformed in many other countries. The first two examples we examine in this section still exist in some form, but no longer represent taxes on individual net wealth; these are the French and Luxembourgish wealth taxes.

The French wealth tax has existed in many different forms, but perhaps the most similar to a modern net wealth tax system was the Solidarity Wealth Tax, or Impôt de solidarité sur la fortune (ISF), introduced in 1989. This was a broad-based net wealth tax on worldwide assets, which, in 2017 (the final iteration of the tax before it was abolished), employed progressive tax rates, ranging from 0.5% for households with net wealth between €800k (around £921,000 in 2026) and €1.3m (around £1.5m in 2026) to 1.5% for those with net wealth greater than €10m (Dupas, 2020). In addition, the tax carried a series of discounts and exemptions, including a 30% discount on primary residence, exemptions on business assets (conditional on family-ownership or the taxpayer working for the company of which they hold shares), exemptions on pensions and retirement wealth, and, famously, exemptions on art and antiques. The ISF, which, according to The TaxPayers' Alliance (2024), raised around 0.2% of French GDP, was abolished in 2017, and in 2018, a new, narrower Real Estate Wealth Tax, Impôt sur la fortune immobilière (IFI) was introduced. The reasons underpinning the abolition of the ISF are discussed in a later section.

Until 2006, Luxembourg employed a flat 0.5% tax on individuals’ net wealth, with few exemptions and no cap on effective rates. This was a very broad wealth tax, operating with a tax-exempt amount of €2,500 (around £3,385 in 2026) for adults and €2,500 per child, and, in its final year, raised around 0.55% of GDP (Krenek and Schratzenstaller, 2018). Like the French wealth tax, this wealth tax no longer applies to individuals; instead, it is now levied on corporations.

Among the other major European countries to have implemented a historical wealth tax is Germany. Germany implemented an annual net wealth tax until the end of 1996. The German wealth tax was set at 1%, with a tax-exempt amount of DM 120,000, or €60,000, (around £97,000 in 2026) per individual in a household (Rehr, 2020). Prior to its abolition in 1997, it achieved revenues of around 0.1% of German GDP (Krenek and Schratzenstaller, 2018).

Further, the Swedish wealth tax was levied at a flat rate of 1.5% with a tax-exempt amount of SEK 1.5 million (around £120,000 in 2026) for individuals, raising around 0.19% of Swedish GDP before being abolished in 2007 (Krenek and Schratzenstaller, 2018). By international standards, this was a high-rate wealth tax, but it operated with a series of exemptions for business assets, meaning it largely taxed passive wealth as opposed to productive capital in a similar fashion to the French tax (Silfverberg, 2003). Moreover, it was seen to favour particular asset classes, valuing real estate differently from listed shares, and it also employed a cap should income tax and the wealth tax exceed 60% of income (Silfverberg, 2003).

Beyond the cases discussed above, a number of other European countries have operated net wealth taxes, including Ireland, Austria, Denmark, the Netherlands, Finland and Iceland (see Table 2). While institutional details differed, these systems shared several common characteristics. Statutory rates were typically modest by modern political standards - often between 0.5% and 1.5%, with Denmark representing a notably higher-rate exception - and most operated with relatively low exemption thresholds. In many cases, exemptions were structured per household member, and some systems applied differential treatment to particular asset classes. Revenue yields were generally limited, frequently below 0.2% of GDP, and in several cases closer to 0.1%. A recurring pattern can be seen of repeated revisions over time, and most European net wealth taxes have now been abolished, highlighting the extent of the difficulties faced by countries levying such taxes.

For a fuller summary of past and present European net wealth taxes and their impacts, see Tables 1 and 2.

Practical challenges of taxing net wealth

The literature identifies a range of challenges faced by countries implementing net wealth taxes, spanning the identification and valuation of assets as well as behavioural responses by taxpayers. These factors can have important implications for revenues, economic growth, and inward investment. Among them, behavioural responses of the tax base are frequently highlighted as one of the most significant constraints on the effectiveness of a wealth tax.

Commonly cited responses include migration, shifting assets into tax-exempt categories, reallocation of wealth across individuals or legal entities, and under-reporting of wealth. Such behaviour may not reduce aggregate saving, but instead alters the composition of wealth holdings, shrinking the measured tax base rather than total private wealth. The extent to which these responses occur depends on tax design and enforcement, as well as broader institutional features such as information reporting and mobility constraints.

The overall magnitude of these effects is described by the elasticity of taxable wealth - the percentage change in reported taxable wealth in response to a change in the net-of-tax rate. For a summary of wealth elasticities calculated in existing studies, see Table 3. This metric captures adjustments across multiple margins (avoidance, evasion, portfolio reallocation, and migration), many of which materialise gradually rather than immediately. Advani and Tarrant (2021) analyse empirical evidence on wealth elasticities to produce a plausible estimate for the UK. Combining international evidence while accounting for policy design and enforcement, they conclude that a well-designed 1% wealth tax would imply an elasticity of around 7–17% after 4–8 years, corresponding to a reduction in the reported tax base of that magnitude rather than an equivalent fall in total private wealth. In comparison, measurements of the elasticity of taxable income are often below 1%, meaning an increase in the income tax rate leads to a very small change in reported taxable income. For reference, a 2021 HMRC study of Scottish Income Tax^[10]found that taxpayers earning more than £150,000 have a taxable income elasticity of 0.52%-0.77%.

Durán-Cabré, Esteller-Moré and Mas-Montserrat (2019) found that Spain had an elasticity of taxable wealth of 0.64 - equivalent to a 3.24% reduction in taxable wealth following a 0.1 percentage point increase in the tax rate over four years - without reducing overall wealth accumulation. The resulting behavioural responses substantially eroded revenues, generating an estimated cumulative revenue loss of 2.6 times the first year’s tax yield, illustrating how specific design features can materially weaken both the fiscal and redistributive effects of a wealth tax. Similar levels of elasticity have been found for Switzerland. After accounting for cantonal differences, Brülhart et al. (2022) found that a 0.1 percentage point decrease in a canton’s wealth tax rate produces a 4.3% increase in declared wealth after 5 years.

Variation in behavioural responses reflects both tax design and economic context. Elasticities tend to be higher where opportunities for under-reporting exist, for example, in the absence of third-party reporting of asset values. Exemptions increase responses by encouraging portfolio shifting, while decentralised systems with regional rate variation generate mobility and tax competition that erode the base. Enforcement practices, the treatment of households, and migration rules further shape which avoidance margins are used (Advani and Tarrant, 2021).

Authors have found empirical evidence of taxpayers under-reporting assets in several countries operating net wealth taxes. Durán-Cabré and Esteller-Moré (2007) found that Spanish taxpayers routinely undervalue equity shares compared to the stock exchange value. Durán-Cabré et al. (2019) also examined the tax gap, the difference between revenue collected and total revenue that should have been collected with full tax compliance, of the Spanish wealth tax and found evidence of taxpayers underreporting assets held abroad. Analysing data from Switzerland, Brülhart et al. (2022) conducted a comparison of the Bern and Lucerne cantons. After Lucerne significantly decreased the wealth tax rate, the region saw a 33.7 percentage point increase in reported wealth, compared to Bern. The authors attributed 50% of this difference in reported wealth to changes in taxable financial assets, most likely due to individuals reporting previously undisclosed financial assets.

In contrast to these findings, a study by Ring (2025) found minimal evidence of under-reporting in Norway between 2010 and 2015. Unlike Spain and Switzerland, Norway uses third parties to value assets. The Norwegian tax authority assesses the value of financial wealth based on market value information on asset ownership and debt reported by banks and employers. The value of real estate is assessed based on the market value of properties. Ring (2025) examined the extent to which households were “bunching”^[12] below the wealth tax threshold, which would indicate an avoidance response, and found a lack of meaningful bunching. A further study by Iacono and Smedsvik (2024) using a bunching approach similarly found minimal evidence of behavioural responses to the wealth tax in Norway from 2015 to 2022. The lack of a clear avoidance response was attributed to Norway’s system of assessing the value of assets through third parties, rather than relying on self-reported values, as Switzerland and Spain do.

Another avoidance response is shifting assets to take advantage of exemptions. Empirical evidence from Spain has measured the extent of this avoidance response. The Spanish wealth tax introduced an exemption for business assets of closely held businesses in 1994. A study by Alvaredo and Saez (2009) found that after the exemption was introduced, the percentage of assets that qualified for the exemption rose from 21% to 70%. Similarly, a study by Jakurti and Süssmuth (2023) found that since the reintroduction of the wealth tax in 2011, the value of exempt assets increased dramatically. Between 2011 and 2017, the value of listed shares increased 164.1%, the value of unlisted shares increased by 322.5%, and the value of art treasures increased by 349.5%.

Among the more pronounced behavioural responses to net wealth taxes is the relocation, or migration, of high-wealth individuals. Agrawal, Foremny and Martínez-Toledano (2020) found that the 100% net wealth tax exemption in Madrid encouraged internal migration to the region. However, other Spanish regions with smaller net wealth tax differentials did not see significant migration incentives. As previously mentioned, a study by Brülhart et al. (2022) examined the change in reported wealth in Lucerne and attributed 50% of the documented increase to reporting previously undisclosed assets. The authors attributed 24% of the difference in reported wealth to a migration response, of which 7% was international migration. Iacono and Smedsvik (2024) examined the reduction in the municipal wealth tax rate from 0.85% to 0.35% in the Norwegian municipality of Bø in 2021. The authors found that a 0.1 percentage point decrease in net wealth tax rate corresponded to a 6% increase in average taxable wealth, primarily driven by regional migration. It is important to note from the Spanish, Swiss, and Norwegian examples that while internal mobility and regional migration were notable, international migration was not. Jakobsen et al. (2024) conducted a study of international out-migration in response to wealth taxation in Sweden and Denmark. The authors found that a 1 percentage point increase in the top wealth tax rate decreases the total stock of wealthy taxpayers by around 2%. This is substantially smaller than internal mobility estimates. Additionally, the authors calculated the economic impact of out-migration and found a modest overall effect. The migration response reduced aggregate employment by 0.02%, investments by 0.07%, and value-added by 0.10%.

Some have raised concerns that, in addition to avoidance responses, net wealth taxes may have a real impact on taxpayers’ savings behaviour. In principle, a wealth tax reduces an individual’s return on their savings, which may discourage high-wealth taxpayers from saving and investing. However, since a wealth tax reduces future after-tax incomes, it could encourage households to increase their savings to maintain the same level of savings they had planned. There is limited empirical evidence indicating which of these effects is stronger in practice due to the difficulties separating changes in savings behaviour from avoidance responses. However, Ring (2025) examined the effect of Norwegian net wealth taxes on stocks of third-party reported taxable wealth. Focusing on assets reported by third parties allowed the author to examine the savings effect when households had limited ability to evade the tax. They found no evidence of decreased savings in response to the increased wealth tax in Norway. Rather, households increased their savings and labour supply.

As Neidle (2025) notes, taxpayers may respond not only to the statutory wealth tax rate but to the overall effective tax burden once wealth taxes are combined with existing income and capital taxes. Some systems, such as Spain’s, incorporate caps on total tax liability to limit these effects, while others do not, potentially strengthening incentives for avoidance or relocation. In Norway, successive reforms substantially increased the marginal effective tax rate faced by the very wealthy, which was associated with increased capital flight and tax planning responses (Neidle, 2025).

A related concern is the potential impact of a wealth tax on foreign direct investment and cross-border capital allocation. Where a wealth tax applies to foreign investors holding domestic assets - as is often necessary to prevent residents from migrating while retaining domestic assets - it may alter the relative attractiveness of investing in that country. Neidle (2025) illustrates this with a stylised comparison between the UK (with a 2% annual wealth tax) and Germany: a 2% annual levy on a €100 million UK investment would either require a 2-percentage point higher return to remain competitive, or - capitalised at an 8% discount rate - would reduce the asset’s effective value to around €75 million. An equivalent investment in a country without a wealth tax would not face this burden. In principle, this creates an incentive for internationally mobile capital to flow toward jurisdictions without wealth taxation, particularly in highly mobile sectors.

An additional consideration is that out-migration in response to a wealth tax may have knock-on effects on other tax bases. For example, the relocation of wealthy individuals to other jurisdictions could reduce not only the wealth tax base but also the income tax base. However, empirical evidence on this channel remains limited. Most existing studies focus on domestic behavioural responses (migration, avoidance, portfolio shifting) rather than cross-border investment flows. As such, concerns regarding foreign investment effects are largely theoretical, though they highlight the importance of considering wealth taxes within an open-economy framework, particularly for smaller or highly integrated economies.

Evidence on the macroeconomic impact of behavioural responses remains contested. For example, claims surrounding the French wealth tax vary widely. When the tax was abolished in 2017, the French Prime Minister stated that 10,000 taxpayers with €35 billion in assets had left the country over 15 years, although no source was provided. Earlier estimates by Pichet (2008) suggested capital flight of €200 billion and annual fiscal losses exceeding revenue, but these findings have been heavily disputed, and post-abolition evidence points toward more limited aggregate economic effects. More broadly, the French experience illustrates that historically narrow tax bases and extensive avoidance opportunities make it difficult to infer reliable macroeconomic impacts from observed behavioural responses, especially if modern proposals include fewer or no exemptions (Neidle, 2025).

Contextual factors also matter. Responses may be larger in economies with concentrated wealth distributions or where assets are more mobile and harder to observe, such as financial wealth rather than housing. Expectations about the permanence of the tax also influence behaviour: temporary taxes generate smaller responses than permanent ones, and larger rate changes provoke stronger reactions due to fixed costs of avoidance. Behaviour may also differ between cases where a tax is newly introduced and where an existing tax is adjusted, reflecting higher salience. Overall, behavioural responses depend not only on tax rates but on institutional credibility, asset composition, and mobility opportunities, making cross-country elasticity estimates difficult to apply directly to new policy settings. Wolstenholme-Britt (2024) summarises the key mechanisms driving wealth elasticities and evasion decisions, shown in Figure 1.

This figure illustrates the effects of net wealth tax design on tax evasion. If it is self-reported, then underreporting is likely, leading to high wealth elasticity and high levels of tax evasion. If it's not self-reported, underreporting will be limited, leading to low wealth elasticity and low levels of tax evasion. If there are asset exemptions or caps, then asset shifting is likely, leading to a high elasticity and higher evasion. No exemptions or caps mitigate this, and are associated with lower elasticities and lower evasion. Large regional rate differences are more likely to lead to migration, which is associated with high wealth elasticity and therefore higher evasion. If the rates are not that different, this limits tax migration, leading to lower wealth elasticity and lower evasion.

Finally, a frequently cited challenge in implementing a wealth tax concerns the administrative burden associated with valuation and enforcement. An OECD report (2018) notes that repeals of net wealth taxes have often been justified by efficiency concerns relative to the revenue they generate. For example, Rehr (2020) reports estimates that reintroducing a wealth tax in Germany could require between 5,000 and 12,500 additional civil servants to undertake immovable property valuation alone.

Legal disputes may further increase administrative costs. Several authors argue that taxpayers have incentives to litigate valuation decisions, including on constitutional grounds, imposing additional burdens on both tax authorities and taxpayers (Fleischer, 2016; Neidle, 2025; Rehr, 2020). However, international experience suggests this outcome is not inevitable. In Switzerland, private business valuations are determined by cantonal tax authorities according to harmonised administrative guidelines, and successful appeals are rare (Eckert and Aebi, 2020). This indicates that clearly defined and transparent valuation rules can substantially limit litigation and administrative complexity.

Wider taxation context

In addition to taxes on net wealth, other forms of wealth taxation often exist, such as taxes on property/ land, taxes on transfers of wealth (including inheritance and estate taxes) and taxes on returns from wealth, such as capital gains tax. Examining the presence of these alternative forms of wealth taxation alongside taxes on net wealth in other countries may provide a key insight as to the complementarity of the different forms, as well as the extent to which having multiple forms of wealth taxation distorts the behaviour of the taxpayers on which the potential revenues rely.

However, as Neidle (2025) highlights, institutional differences between tax systems constrain the external validity of international wealth tax evidence for the UK and Scotland. In particular, the interaction between wealth taxes and other forms of capital taxation differs markedly across countries. Norway does not levy an inheritance tax, and while Switzerland and Spain do, these operate within distinct regional frameworks and often provide substantial reliefs. Scotland, by contrast, would introduce a wealth tax alongside an existing UK-wide inheritance tax regime. The combined effect of layering these taxes could alter effective tax burdens and behavioural incentives relative to the international cases discussed above.

The total tax levied on a given asset is known as the marginal effective tax rate (METR), which could include taxes such as net wealth taxes, capital income taxes, property taxes, and transfer taxes. A study by the OECD (2018) examined the METRs in countries with net wealth taxes in 2016. The study found that METRs in France and Spain reached over 100% for some assets, meaning the entire real return was taxed away. In both countries, net wealth taxes were levied in addition to taxes on capital transfers and capital gains. However, in Switzerland and Norway, which levy net wealth taxes in the absence of other significant taxes on wealth, the METRs were much lower.

In Norway, capital gains are considered taxable income and are taxed at a flat rate of 22%. Each municipality also has the option to levy a property tax ranging from 1%-4% for personal and vacation homes. However, the Norwegian inheritance tax was abolished in 2014, and the tax on imputed rental income was abolished in 2005 (Thoresen, 2022).

Switzerland does not currently levy a capital gains tax on moveable, non-business assets, meaning wealthy individuals can convert income to capital and pay no tax on returns to investments. However, there is a cantonal-level capital gains tax on the sale of real estate (Eckert and Aebi, 2020). Cantons may also choose to levy property taxes on real estate, with rates varying by canton. Currently, taxpayers may also pay a 3.5% to 4.25% imputed rental value tax on 60%-70% of market rent. However, the tax was voted to be repealed in 2025 and is expected to be eliminated by 2028 (Stephens and Wartburg, 2025). Switzerland levies inheritance taxes at the cantonal level, but spouses are exempt from taxation in all cantons and children are only taxed in three cantons (Eckert and Aebi, 2020). Therefore, overall, Switzerland has no significant inheritance taxes or capital gains taxes. As a result, the Swiss wealth tax has been described as a form of minimum taxation for the wealthy.

In comparison to Norway and Switzerland, Spain has several more taxes on capital, although they often include various exemptions. In Spain, a progressive inheritance tax is levied with rates up to 34%. However, several regions provide 99% exemptions for spouses and children. Capital income is taxed progressively under the Spanish Personal Income Tax, with rates ranging from 19% to 28% (Ramallo, 2020). Spain also levies a municipal capital gains tax on the increase in property value in urban areas when a property is transferred, with rates ranging between 20% to 30% depending on the municipality. Spain has an annual property tax based on the property’s cadastral value, with rates ranging between 0.4% and 1.3% by municipality (PWC, 2025). Spain also has an imputed income tax for homes that are not the main residence, with a 24% tax rate on 1.1% or 2% of the property’s cadastral value. As noted earlier, Spain’s net wealth tax has a main residence exemption of up to 300,000 Euros. Spain also has a cap on the tax burden, which limits a taxpayer’s total tax liability to 60% of taxable income (Ramallo, 2020).

France also levied several additional taxes on wealth at the same time as the Solidarity Wealth tax, which ended in 2017. These taxes included a capital gains tax on the sale of real estate and moveable property, in addition to two local property taxes – a residence tax and an ownership tax (PWC). France also levies inheritance and gift taxes, which have undergone several changes to increase revenues. In 2011, inheritance tax rates on direct inheritances were increased; in 2012, the allowance for children of the deceased was decreased, and in 2012, the period for taxing gifts increased from 10 to 15 years (Cour des comptes, 2024). The combination of these taxes led to very high METRs.

The combined METR also has implications for the overall progressivity of a country’s tax system, potentially influencing perceptions of fairness and acceptability. A study by Rothig (2026) examined the overall effective tax rates, including wealth and capital income taxes in France from 1995 to 2014, finding that the progressivity of overall effective tax rates was driven by capital income taxes, while wealth taxes fell disproportionately on middle-wealth households. Middle-wealth households’ portfolios comprised mostly immobile housing, while wealthier households’ portfolios were dominated by financial assets. Since financial assets benefited from lighter taxes and extensive exemptions, the wealth tax was regressive in practice. The author also acknowledges that the progressivity of wealth taxes is likely overestimated because hidden assets among the richest households are not captured.

In contrast, a study by Thoresen et al. (2022) of the distribution of the wealth tax burden in Norway found that 93% of wealth taxes were paid by households in the top wealth decile in 2018. Meanwhile, 60% of wealth taxes were paid by households in the top income decile in 2018. Under these measures, the wealth tax was seen as increasing the progressivity of the combined income and wealth taxation system, particularly given that Norway levies a flat rate capital gains tax. Thoresen et al. found that if Norway were to replace the wealth tax with an increase in the existing capital income tax, the tax burden would shift from the top income decile to taxpayers in deciles 2-9.

Another important contextual factor in assessing behavioural responses to a wealth tax is the composition of the tax base. As Neidle (2025) notes, there are significant differences between the profiles of very wealthy individuals in Norway and in the UK. Norway’s richest individuals are predominantly Norwegian-born and accumulated their wealth domestically, often in specific sectors such as aquaculture and energy. By contrast, the UK’s wealthiest population is more internationally diverse, with a larger share having generated their wealth abroad before relocating to the UK. These differences matter when evaluating behavioural risk. A wealth tax applied within a relatively domestically rooted wealthy population may generate different migration and avoidance dynamics than one imposed in a jurisdiction where a greater proportion of wealthy residents are internationally mobile. An understanding of the composition and origins of Scotland’s highest-wealth households is therefore important when assessing the potential feasibility of a wealth tax. This may differ from both the UK as a whole and from countries such as Norway, Switzerland and Spain, and would also interact with Scotland’s institutional position within the wider UK tax system. The implications of this institutional framework are considered further in Chapter 3.

The Swiss case further illustrates the central role of fiscal context. Switzerland may be viewed as the ‘golden standard’ of a functioning wealth tax system: it has levied a wealth tax for decades, raises non-trivial revenue from it, and has not experienced the same pattern of abolition observed elsewhere. However, this durability reflects the broader structure of Swiss capital taxation rather than the wealth tax in isolation. Capital gains on movable private assets are generally untaxed, inheritance taxes are levied only in some cantons, and are often minimal or absent for spouses and direct descendants, and dividend taxation can be relatively light. In this environment, the wealth tax operates partly as a form of minimum taxation on accumulated capital. Absent the wealth tax, very wealthy individuals could, in some circumstances, face comparatively low effective tax rates on their investment returns. The Swiss experience, therefore, suggests that the apparent success of a wealth tax cannot be divorced from the fiscal architecture in which it is embedded; its role depends on whether it substitutes for, rather than supplements, other forms of capital taxation.

This interaction between wealth taxes and the wider system of capital taxation is central to the conclusions of the OECD (2018). The OECD finds limited efficiency and equity arguments for introducing a net wealth tax on top of broad-based personal capital income taxes and well-designed inheritance and gift taxes. However, the case is stronger where other taxes on capital are narrow, lightly enforced, or politically constrained. In such contexts, a wealth tax may serve as an imperfect but potentially effective substitute, ensuring a minimum level of taxation on accumulated wealth. The broader fiscal architecture, therefore, shapes not only marginal effective tax rates but also the rationale for adopting - or refraining from adopting - a net wealth tax. International evidence suggests that the feasibility and impact of wealth taxation depend fundamentally on this wider context, rather than on the wealth tax considered in isolation.

Evolution of international models and lessons learned

The decline in net wealth taxes across OECD countries illustrates the practical pressures these taxes have faced in operation. As shown in Tables 1 and 2, wealth taxes have rarely remained static; instead, they have undergone repeated reform in response to administrative challenges, behavioural responses, fiscal constraints and political pressures. In many cases, abolition followed concerns that revenues were modest relative to compliance and enforcement costs, or that the tax generated distortions through avoidance, capital mobility or reduced investment.

At the same time, a small number of countries have retained net wealth taxes, albeit in a modified form. Examining how these systems have evolved over time is therefore instructive. Spain, Norway and Switzerland each provide examples of wealth taxes that have been redesigned in response to fiscal and behavioural pressures, with varying degrees of success. Their experience suggests that survival has depended not only on headline tax rates but also on institutional design, administrative capacity and integration with the wider tax system.

One common feature of reform has been the adjustment of the tax base rather than the headline rate. In several countries, exemptions and preferential treatment were introduced to mitigate concerns about liquidity, competitiveness or the taxation of business assets. However, such measures often generated unintended consequences. Exemptions for various types of business assets, agricultural property or certain financial assets created incentives for portfolio reallocation rather than genuine reductions in wealth accumulation. Over time, these design features narrowed the effective base and increased opportunities for avoidance, weakening revenue performance relative to the administrative effort required to sustain the tax. In some cases, liability caps linking wealth tax payments to income were introduced to address concerns about excessive effective tax burdens, but these too altered behavioural incentives and complicated enforcement.

Spain provides a clear illustration of this dynamic. The reintroduction of the wealth tax in 2011, alongside regional rate variation and a liability cap, was accompanied by significant portfolio adjustments among taxpayers. Evidence suggests that responses occurred primarily through the reclassification of assets and restructuring of income rather than through reductions in overall saving. While the tax continued to raise revenue, these behavioural margins limited its redistributive impact and required ongoing policy modification. Indeed, Neidle (2025) raises the possibility that, with the tax raising so little revenue (0.04% of GDP), taxpayer responses could mean that, overall, the tax may have lost money. The subsequent introduction of the national “solidarity” wealth tax further illustrates the instability of the Spanish model. Although initially presented as a temporary measure, the tax has been extended several times, effectively transforming what was intended as a short-term intervention into a recurring feature of the system. This pattern of temporary measures becoming semi-permanent suggests ongoing fiscal and institutional dysfunction, with policymakers relying on ad hoc extensions rather than establishing a stable and coherent long-term framework for taxing wealth.

Norway’s experience highlights a different evolutionary pathway. Rather than narrowing the base through extensive exemptions, Norway has relied heavily on third-party reporting and integration with the income tax system to support compliance. This administrative infrastructure has allowed the tax to persist despite political debate. However, reforms implemented in 2022 substantially increased the effective tax burden on the very wealthy, more than doubling effective rates for some taxpayers (Norsk Industri, 2022). It has since been reported that, following these changes, a large proportion of the country’s wealthiest 400 families relocated across 2022 and 2023, such that over 40% of these families’ total wealth was now held outside of Norway (Kapital, 2023). Therefore, even in a system with relatively strong enforcement capacity, shifts in effective rates have been associated with heightened concerns about outward mobility and tax planning. This suggests that administrative robustness can reduce, but not eliminate, behavioural responses.

Switzerland represents a further variant, where wealth taxation is embedded within a long-standing cantonal fiscal framework. Rates are comparatively low, valuation rules are guided by established administrative practice, and the tax forms part of a broader, decentralised revenue system. Although inter-cantonal tax competition exists, the stability of the Swiss model appears linked to its institutional integration and relatively broad base. Rather than relying on high marginal rates applied to a narrow group of taxpayers, the Swiss approach distributes the tax more widely at comparatively low rates, potentially reducing both avoidance incentives and political salience. Crucially, the wealth tax operates within a fiscal context in which capital income and inheritance taxation are relatively limited by international standards. In the absence of the wealth tax, very high-wealth individuals would face comparatively low overall taxation on accumulated wealth. This broader tax structure affects effective tax burdens and may reduce the marginal incentive to engage in avoidance or relocation relative to systems where a wealth tax is layered on top of already substantial capital taxation. The durability of the Swiss model, therefore, reflects not only its design but the wider fiscal environment in which it is embedded.

Across these cases, several patterns emerge. First, wealth taxes have tended to generate ongoing cycles of reform as policymakers respond to behavioural adjustment and revenue volatility. Second, exemptions and differential treatment of asset classes - often introduced to secure political support - have frequently contributed to base erosion over time. Third, systems supported by strong information reporting and administrative clarity appear more durable than those reliant primarily on self-assessment and complex valuation disputes. Finally, the sustainability of a wealth tax depends not only on its statutory design but on how it interacts with existing capital income, inheritance and property taxes within the broader fiscal framework.

Taken together, the evolution of international wealth taxes suggests that their long-term viability depends less on the nominal rate applied and more on the coherence of design. Where the tax base is broad, valuation procedures are transparent, and enforcement is embedded within an integrated tax system, wealth taxes have shown greater resilience. Where design complexity, narrow bases or high effective burdens amplify avoidance and political resistance and undermine revenues, abandonment has been more common. These lessons do not provide definitive answers for new policy proposals, but they clarify the institutional conditions under which wealth taxes have historically adapted, persisted or been abandoned.