When Wealth Taxes Don't Bite: Behavioural Responses to the Belgian Asset-Specific Wealth Tax

This paper examines taxpayers’ behavioural responses to an asset-specific wealth tax. Leveraging the introduction of Belgium’s Annual Tax on Securities Accounts (ATSA) and unique individual-level banking data, we provide the first evidence on the behavioural effects of a financial asset-specific wealth tax. Using a dynamic bunching method, we find no statistically significant evidence that taxpayers near the threshold reduced their taxable securities to avoid the tax, suggesting the absence of extensive margin responses. An event-study design further reveals that, while aggregate taxable securities remain unaffected, treated taxpayers selectively reallocate their portfolios. In particular, they reduce holdings in low-return and low-transaction-cost assets, as reflected in the decline in bond holdings of approximately 22%, as well as in other low-transaction-cost assets such as shares, whose holdings fall by about 12%. Taken together, these findings suggest that wealth taxes targeting fully observable assets and relying on third-party reporting may substantially limit avoidance behaviour, even when the taxable base is relatively narrow and highly liquid - which could offer valuable guidance for policymakers in designing efficient wealth taxes.