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Capital Levies: A Step Towards Improving Public Finances in Europe


  • Stefan Bach


Ever since the financial and economic crisis of 2008/2009, public debt in almost all OECD countries has increased significantly. The European debt crisis has further intensified over the past few weeks. Private households with high levels of wealth and income could be enlisted to help with refinancing and reducing this public debt through forced loans and one-off capital levies, without a risk of slowdown in consumer demand. This would also counteract the increased inequality in the distribution of wealth. Imposing such levies is not easy, however, since it involves valuation of assets and preventing tax avoidance and evasion. It is difficult to estimate the revenue effects of such a levy for the countries in crisis due to the current lack of sufficient data. For Germany, simulations by DIW Berlin based on a personal allowance of 250 000 euros (500 000 euros for married couples) give a tax base of 92 percent of the GDP. A forced loan or a levy of, for example, ten percent of this tax base could thus mobilize just over nine percent of the GDP-around 230 billion euros. This would affect the richest eight percent of the adult population. It would presumably also be possible to generate considerable revenue in the European crisis countries in the same way. This would be an important step towards consolidation of public finances, and would facilitate reforms to promote growth.

Suggested Citation

  • Stefan Bach, 2012. "Capital Levies: A Step Towards Improving Public Finances in Europe," DIW Economic Bulletin, DIW Berlin, German Institute for Economic Research, vol. 2(8), pages 3-11.
  • Handle: RePEc:diw:diwdeb:2012-8-1

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    Cited by:

    1. Tomasz Uryszek, 2014. "Public finance crisis and sustainable development financing – evidence from EU economies," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 3(1), pages 161-173.
    2. repec:ifs:fistud:v:37:y:2016:i::p:821-849 is not listed on IDEAS

    More about this item


    public debt; forced loan; capital levy;

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy


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