Thérèse Bastin (ULB) – When Wealth Taxes Don’t Bite: Behavioural Responses to the Belgian Financial Wealth Tax

Room : P02

This paper examines taxpayers’ behavioural responses to a specific wealth tax. Leveraging an unprecedented tax on the financially wealthiest individuals and a unique individual banking data, this paper provides the first scientific evidence on the answers to specific financial wealth tax. We find that the specific wealth tax is efficient, as it does not induce statistically significant behavioural responses from taxpayers. This result is robust across three complementary bunching approaches. In addition, a difference-in-differences strategy shows that, while tax payers did not reduce their overall holdings of taxable securities, they did adjust the composition of their portfolios within the taxable base, reallocating toward higher return assets. Taken together, these findings suggest that wealth taxes targeting fully measurable assets and relying on third-party reporting may generate fewer behavioural responses, even when the taxable base is relatively narrow and highly liquid. These insights offer valuable guidance for policymakers seeking to design efficient wealth taxes.