For several years, the European debate about wealth taxation appeared to be moving in one direction. Away from it. France abolished its broad wealth tax in 2017 and replaced it with a tax focused on real estate. Sweden had abolished its wealth tax years earlier. Other European countries had reduced or abandoned forms of annual taxation on net wealth.
The assumption was relatively straightforward.
Wealth is mobile.
If governments tax it too aggressively, wealthy people can move. Capital can move even faster.
But the wealth tax debate is back and this time it is returning in a very different fiscal and political environment.
The Fiscal Problem
European governments have a problem.
Public spending has increased.
Debt has increased.
Interest costs have increased.
At the same time, governments are under pressure to finance healthcare, pensions, defence, infrastructure and the transition to a lower-carbon economy.
The obvious political question is:
Who should pay?
The wealthy are an obvious target.
In France, the debate became particularly visible in 2024 as the new government looked for ways to address the country’s deteriorating public finances.
The government indicated that additional taxation would be concentrated on the wealthiest households rather than being imposed broadly across the population.
That is politically understandable.
But taxation of wealth is not the same as taxation of income.
And that distinction matters.
Wealth Is Not Cash
A wealthy individual may own €100 million.
That does not mean they have €100 million sitting in a bank account.
The wealth may consist of:
- shares in a private company;
- listed securities;
- commercial property;
- residential property;
- private equity investments;
- venture capital;
- art;
- businesses;
- family holdings; or
- interests in investment structures.
A tax on wealth therefore creates a different economic question from a tax on income.
If the tax bill is calculated annually against the value of assets, the investor may have to generate liquidity to pay it.
That liquidity has to come from somewhere.
Dividends.
Asset sales.
Borrowing.
Or moving assets into structures where the tax treatment is different.
This is where wealth taxation begins to influence investment behaviour.
France Is the Interesting Case
France provides perhaps the clearest European example.
France does have a wealth tax.
But it is principally a tax on real estate wealth rather than a general annual tax on financial wealth.
The Impôt sur la Fortune Immobilière, or IFI, applies where net taxable real estate wealth exceeds €1.3 million. It can include real estate held indirectly through companies.
That distinction was deliberate.
The policy objective was to reduce the tax burden on financial and productive capital while continuing to tax substantial property wealth.
But the political debate has not disappeared.
If anything, it has returned in a broader form.
Italy Is Moving Too
Italy provides a different example.
In August 2024, Italy doubled its annual lump-sum tax on qualifying foreign income for new residents under its special regime from €100,000 to €200,000.
That is not a conventional wealth tax.
But it demonstrates something important.
Even countries that have actively competed for wealthy foreign residents are reconsidering the price at which they are prepared to do so.
Italy is effectively saying that the fiscal value of the wealthy resident has increased.
That changes the economics of tax residence.
The question for an HNWI is no longer simply:
Where can I obtain the lowest tax rate?
It is:
What am I receiving in exchange for the tax I am paying?
Spain Has Taken Another Route
Spain has also moved further toward taxing substantial wealth.
Its temporary Solidarity Tax on Large Fortunes sits alongside existing regional wealth taxes and is designed to target individuals with significant net wealth.
The model is important because it demonstrates that governments do not necessarily need to rely on a single national wealth tax.
They can build layers.
Income tax.
Capital gains tax.
Property tax.
Inheritance tax.
Wealth tax.
Solidarity taxes.
And special taxes on particular assets or structures.
For an internationally mobile investor, the combined burden matters much more than any single headline rate.
The Wealth Tax Is Really a Location Tax
This is the part policymakers sometimes overlook.
For a normal employee, income tax is largely unavoidable because the employee works where they live.
For an internationally mobile entrepreneur or investor, the decision is different.
They can potentially choose:
- where they live;
- where they become tax resident;
- where they hold investments;
- where they establish companies;
- where they purchase property;
- where their family is based; and
- where they eventually transfer their wealth.
Tax therefore becomes part of the location decision.
This does not mean every wealthy person will leave because of a tax increase.
Most will not.
But the marginal investor may.
And the marginal investor can be economically important.
The €10 Million Investor Is Different From the €100 Million Investor
This is another reason wealth-tax policy is complicated.
A person with €10 million may own a business, a home and a portfolio of investments.
A person with €100 million may have a family office, private equity investments, international property, holding companies and investments across several jurisdictions.
At €1 billion, the structure becomes even more complex.
The larger the fortune, the greater the ability to change the structure around it.
This does not necessarily mean avoiding tax.
It means that the investor has more choices.
And choices create tax competition.
Governments Are Competing for More Than Tax Revenue
There is an uncomfortable reality for governments.
A wealthy resident does not only pay tax.
They may employ people.
Buy property.
Invest in companies.
Create businesses.
Use professional services.
Employ lawyers, accountants and wealth managers.
Spend money locally.
Support schools, restaurants, hotels and other businesses.
A family office can generate an entire economic ecosystem.
That means the fiscal calculation cannot simply be:
How much tax can we extract?
It has to be:
What is the total economic contribution of this person or family?
That is a much more complicated calculation.
Monaco Remains the Obvious Counterexample
Monaco demonstrates the other side of the argument.
It has built an economic model around being attractive to internationally mobile wealth.
The proposition is not simply taxation.
It is security.
Infrastructure.
Location.
Lifestyle.
Banking.
Professional services.
Political stability.
And proximity to major European economies.
For wealthy individuals, particularly those with substantial investment portfolios, the value of a jurisdiction is therefore broader than its tax rate.
This is why tax competition does not simply disappear when governments increase taxes.
It becomes more sophisticated.
The Real Competition Is Between Systems
The future competition between European jurisdictions is unlikely to be a simple contest between:
high tax versus low tax.
It will increasingly be:
high tax plus high value
versus
low tax plus low value.
A wealthy investor may happily pay more tax in a jurisdiction if the additional cost buys something valuable.
Security.
Education.
Infrastructure.
Political stability.
Access to capital.
Healthcare.
Business opportunities.
A strong legal system.
A functioning financial centre.
The problem arises when the investor believes that the tax burden is increasing while the value of the jurisdiction is declining.
That is when relocation becomes more attractive.
The Wealth Tax Paradox
This creates what I would call the wealth tax paradox.
A government can increase the tax rate on wealth.
That can increase revenue.
But if the tax changes the behaviour of investors, the long-term revenue effect may be different.
The investor may sell an asset.
Change the structure.
Move investment.
Change residence.
Or move the family office.
The tax authority sees the immediate tax receipt.
The economy experiences the longer-term consequences.
This does not mean that wealth taxes never work.
It means that their effectiveness depends heavily on design.
The Asset Matters
There is also a major difference between taxing productive and non-productive wealth.
A €20 million portfolio invested in operating businesses is economically different from a €20 million collection of empty residential properties.
A family-owned manufacturing company is different from a portfolio of speculative land.
A venture capital investment is different from a second home.
Tax policy that treats all wealth identically may therefore produce unintended consequences.
Governments increasingly need to ask not only:
How much wealth does this person have?
but:
What form does that wealth take?
This Matters for Investment Migration
This is where the wealth-tax debate intersects with investment migration.
For years, investment migration was largely marketed around a simple proposition:
Invest.
Obtain residence.
Enjoy the benefits.
But sophisticated investors increasingly look at the entire tax and investment environment.
If one country offers residence but imposes a substantial annual tax on a particular asset base, while another offers residence with a materially different treatment of investment wealth, the difference can be enormous over ten or twenty years.
Residence is therefore becoming an investment decision.
The Family Office Changes the Equation
This is particularly true for family offices.
A family office can coordinate:
- investment management;
- tax planning;
- succession;
- philanthropy;
- property;
- private equity;
- venture capital;
- banking;
- insurance; and
- residence planning.
Once wealth reaches this level, moving a family is not necessarily the difficult part.
The difficult part is determining where the family should ultimately be based.
That decision is increasingly made by comparing entire jurisdictions.
Not tax rates.
Jurisdictions.
The Return of the Debate Does Not Mean the Return of the Old Wealth Tax
This is an important distinction.
The political debate may return.
But the old European wealth-tax model does not necessarily return with it.
Governments have learned that capital is mobile.
They have also learned that financial assets are much easier to move than real estate.
As a result, future wealth taxation may take different forms.
Property taxes.
Minimum effective taxation.
Targeted taxes on very high net worth.
Exit taxes.
Inheritance taxes.
Special taxes on holding structures.
Or taxation based on deemed income from assets.
The policy toolbox is becoming broader.
Investors Should Watch the Direction, Not Just the Rate
For wealthy investors, the most important issue is not necessarily the tax rate today.
It is the direction of travel.
A jurisdiction with a 2% wealth tax today may be more attractive than one with no wealth tax today if the latter is moving rapidly toward higher taxation.
Likewise, a jurisdiction with a higher headline tax rate may become more attractive if it provides long-term stability.
Predictability has value.
Tax certainty has value.
Political stability has value.
Europe Is Entering a New Tax Competition
The irony is that the return of the wealth-tax debate may actually intensify competition between European jurisdictions.
As some countries increase taxation, others have an opportunity to differentiate themselves.
This is already visible across Europe.
Italy has its special regime.
Greece has positioned itself as an investment migration and tax-residence destination.
Portugal has historically used tax incentives to attract foreign residents, although its regime has also been changing.
Switzerland continues to offer a distinctive wealth-management proposition.
Monaco remains an extreme example of the low-tax wealth model.
Cyprus and Malta compete through different combinations of tax, residence, investment and financial infrastructure.
The map is becoming more complicated.
The Wealthy Are Not Choosing Tax Rates
This is perhaps the most important point.
A sophisticated investor is rarely comparing:
Country A: 20%.
Country B: 25%.
Country C: 30%.
They are comparing the entire system.
Tax.
Residence.
Inheritance.
Capital gains.
Property.
Investment opportunities.
Banking.
Regulation.
Political stability.
Family considerations.
And the ability to move capital.
The tax rate is one variable.
It is not the whole decision.
The Next Stage of Tax Competition
The European wealth-tax debate is therefore unlikely to disappear.
Governments need revenue.
Political pressure to tax wealth is increasing.
At the same time, wealthy individuals remain internationally mobile.
That creates a permanent tension.
Governments want to tax wealth.
Jurisdictions want to attract wealth.
Investors want predictability.
And capital wants flexibility.
The countries that understand this tension will probably design better tax systems.
The countries that ignore it may discover that the tax base is more mobile than they expected.
The return of the wealth tax debate is therefore not simply about whether wealthy people should pay more.
It is about where they will choose to live, where they will invest, how they will structure their assets and ultimately which jurisdictions will benefit from their presence.
The real competition for wealth is not over the tax rate.
It is over the investor.