Wealth Tax Enforcement: The Role of Tax and Institutional Design

• Authors: Alejandro Esteller-Moré, José María Durán-Cabré, Christos Kotsogiannis and Luca Salvadori.
• BSE Working Paper: 1527 | October 25
• Keywords: Tax evasion , tax audit evaluation , tax compliance , overlapping tax audit mandates , wealth tax
• JEL codes: H26, D31, O17, D02

Enforcing wealth tax compliance among high-net-worth individuals is particularly challenging. Using administrative data on the Net Wealth Tax for Catalan taxpayers over the 2011–2020 period, this paper evaluates the impact of audits on voluntary compliance. The evidence suggests that wealth tax audits do enhance compliance, but the impact is short-lived — and driven by taxpayers rebalancing their tax evasion and avoidance responses. On the institutional side, the results indicate that Spain’s overlapping tax audit mandates can create coordination frictions that reduce the efficiency and effectiveness of audit-based enforcement of the New Wealth Tax. Effective enforcement depends not only on robust audit strategies, but also on coherent institutional design and sound tax policy.