Governments to Tap Private Wealth Amid Rising Debt: UBS Report

A UBS report highlights governments leveraging private sector wealth to tackle escalating debt through indirect methods like financial repression and selective taxes. While debt-to-GDP ratios remain high, the emphasis is on financing ability. Capital gains tax may rise, while wealth taxes are seen as less effective.

In an effort to address increasing national debts, governments worldwide are expected to increasingly use private sector wealth through indirect methods such as financial repression and selective taxation, as noted in a recent UBS report. The report underscores that while debt levels remain historically elevated, the primary concern is the ability to finance this debt.

The UBS report points out the unprecedented scale of private sector wealth, which significantly outweighs government liabilities. It highlights an ongoing global wealth transfer, with over USD 80 trillion expected to change hands over the next two decades, noting that governments are unlikely to overlook this financial reservoir.

Governments are predicted to favor financial repression strategies—policies that encourage or mandate investment in government bonds—over direct wealth taxes. This approach promises to reduce borrowing costs by compelling private investors to buy government bonds. The report suggests that capital gains taxes are likely to be increased due to easier implementation and valuation compared to politically contentious and economically inefficient wealth taxes.

(With inputs from agencies.)