Alexis Tsipras has chosen the taxation of large fortunes as one of the clearest dividing lines in his new economic agenda.
The political logic is straightforward: wealthier households should shoulder a larger share of the cost of social policies and tax relief for lower- and middle-income earners.
The difficulty begins where the slogan ends and implementation starts.
A tax on net wealth is not simply another tax rate. It requires answers to far more complicated questions: which assets are included, how privately held companies are valued, how liabilities are deducted, how foreign holdings are identified and how double taxation is avoided.
Without those answers, a politically powerful proposal risks colliding with one of the most difficult areas of modern tax policy.
The Problem Is Not the 1% Rate — It Is What Exactly Gets Taxed
At first sight, a 1% wealth levy appears simple.
A taxpayer owns €10 million in net assets; the state applies the corresponding tax.
In practice, major fortunes rarely sit entirely in bank accounts. They can be distributed across:
- listed and privately held shares,
- corporate holdings,
- real estate,
- bonds and investment vehicles,
- privately owned businesses,
- funds,
- foreign assets,
- multi-layered corporate structures.
The very definition of “net wealth” therefore requires a comprehensive valuation system.
That is the first major test for Tsipras’ proposal.
Europe Tried Wealth Taxes — Many Countries Later Abandoned Them
The European experience is far more complicated than the domestic political debate often suggests.
In 1990, 12 OECD countries imposed recurrent net wealth taxes on individuals. By 2017, only four remained. Countries that abolished such taxes included Austria, Denmark, Germany, the Netherlands, Finland, Luxembourg and Sweden.
That does not mean wealth taxation is inherently unworkable.
It does demonstrate, however, that taxing accumulated wealth is considerably more difficult than announcing a 1% headline rate.
Several European states still operate versions of wealth taxation, while others target specific classes of assets instead of imposing a comprehensive annual levy on net worth.
The difference lies in the design.
What the OECD Debate Really Shows
The policy challenge is particularly important because wealth inequality is typically far more concentrated than income inequality.
That gives the progressive argument for wealth taxation considerable force: extremely large fortunes can grow much faster than ordinary labour income, reinforcing inequality over time.
But there is another side to the equation.
A recurrent wealth tax is imposed on the value of assets regardless of whether those assets generate equivalent cash income.
Someone can therefore be extremely wealthy on paper while having comparatively limited liquidity.
That is especially relevant for entrepreneurs whose company valuations rise sharply without them selling their shares.
From €10 Million to €100 Million — Without Receiving €90 Million in Cash
This distinction between wealth, income and realised capital gains is fundamental.
Imagine an entrepreneur who originally acquired company shares worth €10 million.
Years later, those shares are valued at €100 million.
The entrepreneur is clearly €90 million wealthier.
But has he received €90 million in taxable income?
Not necessarily.
If the shares have not been sold, the gain remains unrealised.
That is why traditional capital-gains taxation and wealth taxation operate on fundamentally different principles.
A wealth tax attempts to tax the stock of accumulated wealth itself rather than waiting until an asset generates income or is sold.
And to do that, the tax authority needs to know what the asset is genuinely worth.
The “Buy – Borrow – Die” Problem
This leads to one of the most important issues in the international debate over taxing billionaires: the strategy commonly described in the United States as “Buy – Borrow – Die.”
The basic mechanism is simple.
A wealthy investor buys assets that appreciate substantially.
Instead of selling those assets — and potentially triggering capital-gains taxation — the investor can use them as collateral for borrowing.
A bank loan is not treated as income because it comes with an obligation to repay.
The result is that an individual can obtain substantial liquidity while continuing to hold appreciating assets.
The American “Die” component then refers to specific features of the U.S. inheritance system, particularly the step-up in basis rule. That part is specific to the United States and should not be mechanically transferred to Greece.
But the broader problem is relevant internationally:
very large fortunes can provide enormous economic spending power without producing conventional taxable income every year.
This Is Why a Wealth Tax Looks Attractive — Until Valuation Begins
That is the strongest argument for the Tsipras approach.
If the richest households can accumulate wealth without realising taxable gains, then taxing the stock of wealth itself can theoretically close part of the gap.
But it immediately creates another problem.
How does the state value the assets?
A listed share has an observable market price.
But what about:
- a family-owned company with no listed shares?
- a holding company?
- a private equity stake?
- a work of art?
- a business theoretically valued at €50 million but with no available buyer?
- assets embedded in several layers of international corporate ownership?
This is where wealth taxation becomes administratively and politically difficult.
Spain Shows That It Can Be Done — But Not Simply
Wealth taxes are not impossible.
Spain operates a progressive wealth-tax system, while Norway and Switzerland also maintain their own models.
But those systems contain thresholds, exemptions, valuation rules and provisions governing how debts and different asset categories are treated.
That matters.
A wealth tax can produce very different results depending on whether:
- the primary residence is exempt,
- business assets receive preferential treatment,
- pension wealth is included,
- debt is fully deductible,
- privately held companies receive valuation discounts,
- the threshold begins at €1 million, €5 million or €20 million.
The serious policy discussion therefore cannot end with the phrase “1% on the rich.”
That is where it must begin.
Six Questions Tsipras Still Needs to Answer
For the proposal to become a credible tax plan rather than a political signal, at least six issues require clarification:
- Where is the threshold? What level of net assets qualifies someone as part of the richest 1%?
- Which assets are covered? Property, deposits, listed shares, private companies, bonds and foreign holdings?
- How will assets be valued? Especially private businesses and assets without transparent market prices.
- Which debts will be deductible? All liabilities or only those directly associated with taxable assets?
- What exemptions will apply? Primary homes, productive business capital or pension assets?
- How will overseas wealth be identified? What information-sharing and beneficial-ownership systems will support enforcement?
Until those questions are answered, neither the genuine tax base nor the expected fiscal yield can be calculated with confidence.
Greece’s 5% Dividend Tax Adds Another Dimension
The debate also becomes more interesting when wealth taxation is viewed alongside Greece’s broader taxation of capital.
Dividend income for individuals is currently taxed at 5%.
This means the debate about tax fairness cannot logically be limited to a single wealth levy.
The wider question is:
What should be the overall balance between taxation of labour, capital income, capital gains, property, gifts and inheritances?
That is arguably the harder question for Tsipras’ economic program.
A 1% levy can carry considerable political symbolism.
On its own, however, it is not a complete policy for taxing major fortunes.
The Political Strength of the Proposal — and Its Technical Gap
Politically, Tsipras’ objective is easy to understand.
He wants to draw a clear contrast with New Democracy and restore the traditional redistribution agenda: lower burdens on salaried workers and a larger contribution from concentrated wealth.
In an environment shaped by inflation, housing costs and pressure on household purchasing power, that message can have electoral appeal.
But Tsipras is now presenting his program as a prospective governing platform rather than merely an opposition slogan.
That raises the standard of scrutiny.
It is not enough to say who should pay more.
A credible governing proposal must also explain what exactly will be taxed, how the assets will be valued, how hidden or offshore wealth will be identified, and how much revenue the measure can realistically generate.
That is the distance between a politically attractive announcement and an operational tax reform.
Until those mechanisms are presented, the “patriotic contribution” remains more a statement of political direction than a fully engineered wealth-tax system.
Source: pagenews.gr