What if some of our taxes were to rise... without a vote, without tax reform and almost without public debate? Behind the spectacular rise in property, shares and certain assets lies a mechanism that is rarely mentioned: monetary policy can mechanically inflate the tax base. When money is diluted, prices rise - and the State then taxes these increases as real gains. A discreet but powerful mechanism at the heart of the relationship between central banking, wealth and taxation.
We often talk about visible taxes. Much less is said about a more discreet phenomenon: the way in which monetary policy mechanically inflates the tax base.
Over the last two decades, the money supply and balance sheets of central banks have exploded. The Swiss National Bank is no exception: its balance sheet has grown from around 100 billion francs in the early 2000s to almost 900 billion in 2022, a level unprecedented in the country's history.
The first effect of this expansion is not always immediately apparent in the consumer price index. It is first apparent in in asset prices.
Between the early 2000s and today :
- swiss residential real estate a more than doubled in many regions
- gold went from around USD 300 to over USD 5,200 per ounce
- the world's major stock market indices have multiplied several times over in nominal terms
Our tax system remains strictly nominal.
Wealth tax taxes valuations inflated by liquidity. Tax on property gains is levied on capital gains that are sometimes largely derived from monetary depreciation rather than real enrichment.
As the economist Friedrich Hayek :
« Inflation is a form of taxation that can be lifted without legislation. »
In other words, when money is diluted, the nominal value of assets increases, The State then takes its share of this increase.
This phenomenon is rarely discussed for one simple reason: it is technically diffuse and politically discreet. Yet it raises a fundamental question of tax justice.
Is it consistent to tax as a real gain an increase in value that comes largely from monetary expansion?
This debate is already taking place in several countries. Some economists are proposing index tax bases to inflation to prevent tax being levied on purely nominal gains.
In Switzerland, the subject remains largely absent from public debate.
However, behind the relationship between central bank, asset inflation and taxation, Behind the tax is perhaps one of the least visible - but also one of the most powerful - taxes in our economic system.
As long as we continue to measure wealth in a diluting currency, the state will inevitably tax gains that sometimes exist only on paper.