Net worth tax

Net Worth Tax is a type of wealth tax applied in several countries, particularly in Europe, to ensure fair distribution of wealth. It is levied on an individual’s or entity’s net worth, which is the total value of assets minus liabilities.

Formula:

Net Worth=Total Assets−Liabilities\text{Net Worth} = \text{Total Assets} - \text{Liabilities}Net Worth=Total Assets−LiabilitiesAssets Included:

1. Immovable property (land, houses)
2. Financial assets (bank deposits, shares, bonds)
3. Valuable personal property (art, jewelry, vehicles)
4. Ownership in businesses or companies

Liabilities Deducted:

1. Loans, mortgages, and other debts

Deductions and Exemptions:

1. Certain assets may be exempt
2. Thresholds may apply before the tax is levied
3. Deductions may be allowed for debts or socially relevant expenses

Purpose:

1. Ensures wealth, not just income, is fairly taxed
2. Encourages redistribution and reduces concentration of assets
3. Generates revenue from high-net-worth individuals

Example:

A resident taxpayer has:

1. Total assets: €1,00,00,000
2. Liabilities: €20,00,000

Net Worth=1,00,00,000−20,00,000=80,00,000\text{Net Worth} = 1,00,00,000 - 20,00,000 = 80,00,000Net Worth=1,00,00,000−20,00,000=80,00,000The net worth tax is applied to €80,00,000, after considering any exemptions or deductions.