CHAPTER 3
Taxing High-Net-Worth Individuals Wilson Prichard, Roel Dom, and Anna Custers
The Tax Compliance Challenge The largest gap in tax compliance in most low- and middle-income countries is in taxes on income and wealth—the latter most prominently through property taxes. In Organisation for Economic Co-operation and Development (OECD) countries, taxes on personal income amount to about 8 percent of the gross domestic product (GDP), and social security contributions account for about 10 percent of GDP on average. By contrast, in low- and lower-middle-income countries taxes on p ersonal income, including social security contributions, average only about 3.5 percent of GDP (see figure 2.2 in chapter 2). Across countries, taxes on wealth are more limited, though here, too, lower-income countries raise significantly less revenue. The most important source of wealth taxation across countries is property taxes, which are the foundation of local government finances in almost all OECD countries, generally amounting to 1–2 percent of GDP and sometimes more. In low-income and lower-middle-income countries, property taxes are severely underexploited, with more fragmented data suggesting that in many countries they amount to only 0.1–0.2 percent of GDP and rarely more than 1 percent of GDP in even the most successful cases (see figure 6.1 in chapter 6). Wealthier countries also frequently collect taxes on inheritance and related transfers of wealth, though revenues are generally limited.
Taxing High-Net-Worth Individuals
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