This is a bad solution to taxation. It brakes the long-established tax practice of "realization principle".

Suppose the same principle was applied to a home owner. At the end of each year your property is evaluated and you're taxed on the difference between last and this years price. You own an asset and this asset is valued by the rating agency as more expensive than before. Now you have a liability that you need to pay and if you don't you'll be in big trouble, because you owe the money to the government.

So independently of your own actions & impossible to predict you will need to plan for this expense. How many homeowners and rentiers would like that?

The "realization principle" in tax law specifies that income is not subject to tax until it is "realized" through a taxable event, such as the sale or exchange of an asset. In the US this was established in early 20th-century U.S. Supreme Court cases such as Eisner v. Macomber (1920). In this case it was established that mere appreciation in value does not constitute taxable income until a sale or exchange occurs.

Europe is not very business friendly. This regulation will make creating businesses even harder. When governments need more revenue they need to create more opportunities to create that revenue, not squeeze the current business tighter and tighter. Startups are risky, adding additional risk would just kill more of them sooner.

BTW, it's easy to fix "loan against my equity" evasion by classifying the "money has been loaned" as a "realization" event.

Wealth tax is a long-established practice in Germanic Europe. The list of countries that collected it in 1965 is kind of interesting: Austria, Denmark, Finland, Germany, Netherlands, Norway, Sweden, and Switzerland. Most of them eventually abolished it.

It made more sense in the past, when speculative valuations were less common and capital flight was less of an issue. It was collected from wealthy people, who could probably afford to pay. And it served as an additional incentive to invest your wealth productively. But then globalization arrived and made the drawbacks bigger than the benefits.

> You own an asset and this asset is valued by the rating agency as more expensive than before. Now you have a liability that you need to pay...

Isn't this exactly how property taxes usually work? (In the absence of caps like California Prop 13, that is.)

The realization principle is a hallmark of income tax law, but many taxes are not income taxes.

The other thing is what happens when the notional value goes down a year later? Do they get a tax refund?

> Suppose the same principle was applied to a home owner.

Norway does apply the wealth tax to home owners. Though there is a discount factor for different types of assets, and the value of your primary home is discounted by 75%. There's also a minimum threshold.