Most countries that had a wealth tax repealed it or partially repealed it because it was too complicated.
Namely, how do you value private assets? How much is a paining worth? Or your private company?
Houses are easy to do because there is a ton of data and comparables (and even then wealthy people contest those assessments). Now imagine the government getting into the business of valuing private companies.
> The value of private companies is determined each year by the cantonal tax authorities based
on an inter-cantonal administrative guideline agreed upon by the cantonal tax departments.
Taxpayers may challenge the application of this guideline in court but appeals are rarely
successful (cf. an example in section 0, below). In case the fair-market value of operational
companies cannot easily be assessed (e.g. because of lack of recent sales between independent
third parties), their value is determined according to the formulaic method, called the
practitioner's method. A company's value is determined by calculating the weighted average of
its ‘earnings value’ and its net asset value (i.e. fair market value of assets minus liabilities),
thereby counting the earnings value twice. The earnings value is determined by capitalising the
adjusted average net profit of the last two or three years with a capitalisation rate (of currently
7%), which applies uniformly to all industries. Holding companies or real-estate companies are
valued based on the net asset value of the underlying assets.
It won't be perfect, but it's predictably imperfect.
The way they do it just kicks the the can down the road. The company is "net asset value", but how do you value of the software they have, or the data they hold, or the paintings the company holds, or all their other assets?
When a company is sold the value of the assets is negotiated for sometimes years. And is different for every acquirer. How is the government going to do that for everyone every year?
> The way they do it just kicks the the can down the road.
No, it accepts that some wealth may require estimates, eventual corrections, and occasionally court resolution. (The doc cites an example of a $2M painting hung in a kitchen being deemed non-household goods.)
The "there's an edge case, therefore it can't work" argument is hard to sustain when there are countries making it work. The Swiss handle paintings, private companies, and presumably IP (I can't find specific details in here) in their system.
I'm not saying it can't work because of an edge case. I'm saying the system has fundamental flaws and here are some examples.
And I can turn the same logic around on you: Why do you think this will work when just one country is claiming to do it successfully? Especially after other countries tried it and then repealed or at least partially repealed their wealth taxes to exclude hard to value items?
Namely, how do you value private assets? How much is a paining worth? Or your private company?
Houses are easy to do because there is a ton of data and comparables (and even then wealthy people contest those assessments). Now imagine the government getting into the business of valuing private companies.