► In Germany, a combination of several taxes
In Germany, income tax, generally deducted at source, is progressive and calculated not on the basis of the family quotient but on the basis of tax scales, depending on whether the taxpayer is single, in a couple, employed or nope. Starting at 14%, the tax rate increases gradually to reach 42% for the category known as “Spitzensteuersatz” (higher income).
This rate applies to any single person earning more than €58,597 (in 2022) and to any married couple earning more than €116,000. It crosses the 45% mark from €277,826 of income for a single taxpayer.
Added to this is a 25% tax on capital income (dividends, interest, etc.); a so-called solidarity tax equivalent to 5% of income tax; as well as a religious tax for members of the Catholic and Protestant Churches (8 to 9% of income tax). Deemed unconstitutional, the wealth tax (ISF) however disappeared in 1996.
→ ANALYSIS. More and more German Catholics and Protestants are leaving their Church
In the September 2021 parliamentary elections, the Social Democratic Party (SPD) and environmentalists argued for raising the tax rate on top incomes from 42% to 45%. However, these ideas did not find a place in the coalition agreement signed in December by these two formations. Their third partner, the liberal FDP, has vetoed any tax increase.
► In Spain, an ISF managed by the regions
Spain remains one of the few countries in Europe to still have a wealth tax. He had however been suspended in 2008, under the socialist government of José Luis Zapatero. But under the pressure of the financial crisis that was strangling Spain, it was reactivated in 2011. With one difference: the tax threshold was raised, from €700,000 (excluding main residence up to €300,000).
This is a progressive tax, from 0.2% to 3.75%, managed by each region. So there are big differences. The Madrid region, very liberal, does not charge the ISF in practice, through an exemption system. Many large fortunes settled in the capital to benefit from it. Of the 701 taxpayers declaring a fortune greater than 30 million euros in 2019, only 34% of them paid the ISF.
« It is a tax that yields little, in its best year, no more than 2 billion euros. It is mainly used to control large fortunes – this is the main objective –, to determine if there is tax evasion by comparing it with their income tax”, explains the economist José Ignacio Conde Ruiz, of the Fedea foundation.
The radical left party Podemos, a member of the government coalition, has recently called for the creation of a real ISF at national and no longer regional level, precisely to avoid exemptions.
► In Italy, a flat-rate system for income abroad
In Italy, wealth tax was abolished in 1992. Annual income above €50,000 is taxed at 43%.
But a flat-rate system was introduced in 2017, in order to attract “superconsumers”, investors, entrepreneurs or entertainment and sports stars, Italian and foreign. It is a question of competing with countries like Portugal in this area.
According to this system, a very wealthy person benefits from an annual flat tax of €100,000 on their income received abroad if they transfer their tax domicile to Italy and if they have previously resided for at least nine years outside of this country. . The taxpayer members of the family of this great fortune can also request their tax residence in Italy, for €25,000 per year. In both cases, any gain received in Italy is subject to income tax.
→ EXPLANATION. All you need to know about real estate wealth tax (IFI)
According to the latest data, 420 billionaires or millionaires have opted to transfer their residence to the beautiful country and brought in 94.4 million euros to the tax authorities in 2020. The “flat tax” for large fortunes is not in question. But a decree increasing tax controls, from June 2022, has just been adopted to better combat evasion estimated at 100 billion euros per year.
► In the United Kingdom, lower income tax for the rich
After a tax rate on labor income of 99.25% (on the marginal bracket) during the Second World War, then around 90%, this rate rose to 75% in 1971 then to 83% in 1974 A surcharge of 15 points was imposed on other income (inheritance in particular).
In 1979, Margaret Thatcher reduced this rate for the richest to 60% and then to 40%. After the financial crisis of 2007-2008, Labor Party Gordon Brown reintroduced a 10 point surcharge for incomes above 150,000 pounds (€178,000). His Conservative successor then reduced the maximum rate to 45%. Financial assets are taxed at a maximum of 20%. They may not even be subject to tax if the shares were received professionally and held for seven years.
The inheritance tax rate is 40%, above the general allowance of 325,000 pounds (€386,000). If the deceased person bequeathed a house to their children or grandchildren, the allowance increases to 500,000 pounds (595,000 €), if the value of the property is less than 2 million pounds. But no tax is paid if the succession was realized seven years before the death of the person.
Finally, foreigners residing in the United Kingdom can be exempted from taxation on their foreign income if they declare themselves not domiciled in the country, in exchange for a contribution ranging from 30,000 to 60,000 pounds. This provision has caused a lot of talk recently: the wife of Finance Minister Rishi Sunak, whose fortune is estimated at 500 million pounds, benefits from this device.
► In Sweden, neither ISF nor inheritance tax
In 2013, at the age of 87, Ingvar Kamprad, founder of Ikea, announced that he was leaving Switzerland to return to Sweden – where he died in 2018. However, in 1973, when he was the richest man in the country, he had left it with loss and noise, denouncing a tax system that was too severe for large fortunes.
In the meantime, Sweden has become one of the most flexible countries in Europe in terms of wealth taxation. In 2007, the ruling center-right coalition put an end to the local ISF, which affected 3% of the population after, in 2005, the ruling Social Democrats had already abolished inheritance and gift taxes.
→ REREAD. For the first time in 40 years, the founder of Ikea pays his taxes in Sweden
At first glance, the bet is successful. According to the Swedish tax office, between 2010 and 2017, more than 12,000 people rectified their situation by declaring assets abroad. The agency even noted a peak, once the limitation period has passed, clearly indicating the link with the abolition of the ISF, although this is not the only one. Indeed, it is also one of the consequences of the fight against tax evasion – Sweden having signed several bilateral tax agreements during the same period.
On the other hand, such a model is paid for in terms of income inequality. According to the OECD, they increased by nearly 10% between 1990 and 2016, while Sweden was a model country in the 1970s. In 2019, the organization analyzed this increase by pointing out the role of the “favorable tax system to heritage”.
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IGF, ISF, IFI: the main dates for the taxation of large fortunes in France
1976. René Monory, centrist minister, elaborates the first modern project of taxation of large fortunes. Faced with the refusal of the Prime Minister, Raymond Barre, the project is buried.
1982. One after the election of François Mitterrand as French president, the Mauroy government introduces the tax on large fortunes (IGF), which affects all assets over 3 million francs.
1986. Taking advantage of the cohabitation, the right quickly suppressed the IGF.
1989. Back in power for a year, the left is reviving the IGF in the form of the ISF (solidarity tax on wealth). In return, a capping mechanism assures taxpayers that their tax cannot exceed 60% of their income.
2011. Nicolas Sarkozy voted a reform reducing the ISF. The tax threshold goes from 800,000 to 1.3 million euros, halving the number of taxpayers. Four tax brackets are eliminated and the rates are all reduced.
2012. François Hollande restores the old scale and the old rates, and establishes an exceptional contribution on wealth to compensate for the loss of resources. On the other hand, the socialist never returned to the tax threshold imposed by his predecessor.
2017. As soon as he was elected, Emmanuel Macron had the ISF replaced by the real estate wealth tax (IFI).
2018. Entry into force of the IFI.