A global tax on billionaires is on the agenda. Will it ever happen?
CNN
By Anna Cooban, CNN
London (CNN) — Finance officials from the world’s biggest economies began talks this week on introducing a global minimum tax on billionaires.
The representatives of the G20 countries discussed the proposal at a summit in São Paulo, Brazil, two years after a landmark agreement showed the world could act together in setting a minimum tax rate of 15% for multinational companies.
According to the EU Tax Observatory, the super-rich in big countries pay a far smaller share of their income in taxes than ordinary people. And their wealth is hardly taxed, at effective rates of just 0%-0.5%.
Practices ranging from illegal tax evasion to exploiting loopholes in tax systems or simply moving to countries with lower rates are all depriving governments of desperately needed income at a time of soaring debt.
“Progressive taxation is a key pillar of democratic societies,” Gabriel Zucman, director of the EU-backed research group, told leaders at the summit, which wrapped up Thursday. The world’s current patchwork of tax regimes fails “to properly tax the individuals with the highest ability to pay taxes,” he added.
Similarly, a report last month by Oxfam said that “in countries including Brazil, France, Italy, the UK and the US, the super-rich pay an effective tax rate lower than the average worker.”
Nearly 80% of the world’s billionaires live in G20 countries, according to the charity.
The EU Tax Observatory has proposed, among several early ideas, to set a minimum global 2% tax on billionaires’ net wealth — that is, the value of their assets once their debts are subtracted — which it estimates could generate $250 billion per year.
That’s equivalent to half of the additional funds required by African countries each year to transition to cleaner energy sources, according to a report, published in November 2022, by the Independent High-Level Expert Group in Climate Finance.
Billionaires already paying 2% would not be taxed further under the proposal.
Getting agreement among the G20, which includes the United States, the European Union, China, India, Brazil, Saudi Arabia and Argentina among others, will be tough and could take a very long time.
“This is just the beginning of the road. The negotiations on a minimum tax on corporations took years,” Quentin Parrinello, senior policy advisor at the EU Tax Observatory, told CNN.
“But an international agreement seemed utopian at the time, and now we have it — so there is a precedent.”
Parrinello said the super-wealthy were able to conceal their money and avoid paying hefty taxes by, for example, parking it in holding companies, trust funds or using it as collateral against loans.
Practical headaches
A global minimum tax on billionaires would be more complicated to implement than the one introduced for corporations, says Arun Advani, an economics professor at the University of Warwick.
Multinational companies are based in multiple countries, he told CNN, making it easier to determine which governments need to demand tax payments and therefore to assess whether a firm has paid the global minimum rate. In contrast, billionaires are often more mobile, making it less clear which authorities would need to tap their wealth.
“It’s not totally obvious where you call home for them,” Advani said. “(They could say) ‘I’m going to spend lots of time going to the theater in London. I’m going to spend lots of time in New York doing some shopping. I’m going to spend lots of time on my yacht… but I want my tax to be based in some very specific country.’”
Individuals also tend to pay a higher number of taxes than companies, Advani said, such as taxes on income, capital gains and social security contributions. “Harmonizing all of those things internationally is quite a hard thing to do.”
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