Finance Guide

A wealth tax is a tax which is levied on the existing stock of assets an individual has. This is relatively unusual as most taxes are levied on the basis of income streams, such as income tax or corporation tax. Wealth taxes are fairly rare. They are by no means as widespread as other forms of taxation such as sales taxes or income taxes. Most developed countries do not have wealth taxes, although they may have a variant in the form of capitals gains taxes, which apply taxes to increases in the value of assets a person has rather than their static values.

In countries which do have wealth taxes, they tend not to raise a very high proportion of government revenue, leading many observers to conclude that they have been imposed for political rather than economic reasons, and are no more than expressions of egalitarian or even class warfare sentiment.

In countries which operate a wealth tax, individuals must report their own stock of assets and liabilities to the government, paying tax on the difference between the two, more commonly known as their net worth. Usually, there is a base threshold value for net worth, below which the wealth tax need not be paid, ensuring that it only affects people who are fairly well-off.

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