Disadvantages of Capital Levy:

The foremost problem of capital levy is that it is very difficult to identify and estimate a fair value of the property accumulated during war time. So it s difficult to assess and administer the tax. This tax may act as a disincentive to save and invest which are subject to tax. It looks like imposing a tax on thrift. Within the domestic economy it discourages savings and investment and may also prevent the inflow of foreign direct investment thus effecting adversely commerce and industry in the long run.

Such a heavy dose of tax, even though once-for-all, may affect badly the confidence and faith of the business and investor class and also may encourage tax evasion. Given the opportunity, the capital may take a flight from the domestic economy to where there is no such tax. 

No doubt, capital levy can be chosen in specific circumstances due to its quick and equity consideration. But alternative methods of repayment are also suggested as this heavy levy has its own adverse effects on the people and economy. For example, U.K.Hicks states that "A levy thus amounts to a major surgical operation on the body politic, it will either kill or cure and is very different in its effects from regular dosage or massage applied by the normal tax structure".