New Delhi

Governments worldwide may increasingly turn to private sector wealth to manage rising public debt, largely through indirect measures rather than outright taxation, according to a report by UBS.

The report noted that global government debt remains high by historical standards, with debt in developed economies projected to exceed 113 per cent of GDP in the coming years. However, it emphasised that the critical issue is not the size of the debt itself, but the ability of governments to finance it.

It pointed out that sovereign debt is rarely fully repaid and is instead managed over time through refinancing and sustained access to capital markets.

Highlighting the scale of global wealth, UBS said private sector assets are at record levels and far exceed government liabilities. This imbalance suggests that there are sufficient resources available to support government borrowing needs.

The report also underscored a major intergenerational wealth transfer underway, estimating that over USD 80 trillion in personal wealth will change hands over the next two decades. It added that governments facing high debt burdens are likely to factor this shift into future policy decisions.

Rather than imposing direct wealth taxes, the report suggests governments are more likely to rely on “financial repression”—a set of policies that encourage or compel investors to hold government bonds, often resulting in lower returns on savings. This approach can help reduce borrowing costs without triggering significant political resistance.

On taxation, UBS indicated that capital gains taxes are more likely to be increased, as they are relatively easier to implement and assess. In contrast, wealth and inheritance taxes were described as less effective due to valuation challenges, administrative complexity, and potential economic side effects.

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The report concluded that while governments may seek to tap into private wealth, they are expected to favour indirect tools such as regulatory measures and controlled returns on investments, rather than aggressive direct taxation.