ABSTRACT
Recent proposals for a global wealth tax have revitalized long-standing debates about how to design such taxes. The discussion is particularly difficult because these are taxes that have been abandoned by most of our neighboring countries with high taxation systems (OECD members, EU countries). This means that there are not many useful examples today. In addition, a striking aspect of the proposals is that the element of legal design is often absent. Consequently, the central aspect of any wealth tax, which is defining wealth for legal purposes and measuring its amount, does not appear among the core elements of the proposals.
This chapter examines some of the issues that arise when trying to design a comprehensive wealth tax which may be applied to different legal structures. A key element lies in the different conceptions of property that are evident in specific legal structures, such as trusts and similar arrangements, and the challenge that this poses for this type of taxes. In particular, the focus will be on Trust structures, which are notably difficult to compare across countries, or even within one jurisdiction, as they often respond to very different logics and interests.
The chapter will first (II) tackle the current debate on wealth taxation and assess some of the main proposals. The proposals are very different, and it does not help that wealth taxes have become a rare breed, which in turn encourages creativity, not always helpful for the sake of comparisons, in the different proposed taxes. It will then (III) examine the challenges of subjecting trust structures to a net wealth tax. Trusts, often used as vehicles for managing and ‘protecting’ family wealth, present unique difficulties in determining ownership and tax liability, as well as international recognition issues. In practice, the various and varying purposes of trusts, from charitable to discretionary inter alia, will often complicate their treatment under a wealth tax regime. Finally, (IV) the chapter explores examples of existing wealth taxes in different jurisdictions and discuss the constitutional and practical challenges that have arisen.
Although this chapter does not focus on any specific country, particular attention will be paid to the Spanish case, as it does remain one of the few jurisdictions that has managed to not fully eliminate a net wealth tax, which has undergone a particular reform in recent times. This makes it a test bed, not necessarily a positive one, for the kind of problems posed by these taxes and by ownership unbundling structures such as trusts.
Ruiz Almendral, Violeta, Trusts and Taxes on Wealth (January 1, 2025) in Taxation of Trusts, Foundations and Similar Arrangements in a Global Setting (Andrés Báez Moreno, Mario Tenore, Vikram Chand and Svetislav V Kostic eds, Kluwer, 2025).
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