An incisive report from the EU Tax Observatory asserts that the imposition of a minimum tax rate on billionaires is imperative given that a considerable faction of the global ultra-rich are handing over little to no taxes. It’s revealed that, contrary to everyday individuals, the mega-wealthy often manage to pay less tax, exploiting intricate business structures to maneuver around the system.
The proposal outlines a minimum of 2% tax on the worldwide wealth of billionaires, capable of generating an annual revenue of approximately $250bn (£205bn). Today’s world harbors around 2,500 billionaires who collectively hold wealth totaling $13 trillion.
The research conducted by the EU Tax Observatory, a subsidiary of the Paris School of Economics, analyzed efforts made over the last decade aiming to ensure that both individuals and businesses contribute their rightful share of taxes. Positive strides have been made, including the automatic exchange of the affluent’s account data across more than 100 countries, thwarting offshore tax evasion to a significant degree.
However, drawbacks remain. Billionaires continue to evade fair taxation, some reporting tax rates as low as 0% or 0.5% of their wealth. These unnaturally low rates result principally from the use of shell companies to avoid income taxation.
Quentin Parrinello, a high-ranking policy adviser at the EU Tax Observatory, pointed out that global billionaires strategically structure their wealth in such a way that it does not yield substantial taxable income. While admitting that imposing a 2% tax on billionaires might initially seem implausible, he reminded us that even the act of asking Swiss banks to share tax information with authorities was once considered utopian.
The study proffers praises for the 2021 agreement reached by 140 countries to ensure businesses pay at least 15% in corporation tax, while also criticizing its significant weakening via myriad loopholes that have arisen since.
Nobel laureate and renowned American economist Joseph Stiglitz urged the need for fairness in taxation, warning that any inequity could pose severe threats to democracy. Citizens’ perception of tax injustice can lead to reverberations across political and societal structures, with ramifications ranging from public disdain towards taxation, to overall erosion of trust in democratic institutions.
Parrinello highlighted the forthcoming G20 summit in Brazil as a prospective platform to debate this tax imposition on the ultra-rich. While international consensus is ideal, he suggested several unilateral measures outlined in the report for countries to consider implementing.
Prominent billionaires such as Bill Gates, Melinda French Gates, and Warren Buffett have pledged to donate the majority of their wealth, setting a new standard among the world’s wealthiest. Despite an increase in his tax rate following tax reforms in 2013, Buffet conceded that he still paid a lower percentage than his secretary.
Moreover, revenues collected through tax fairness are crucial for societal sustenance and growth, Stiglitz argues. As we grapple with challenges such as climate change, pandemics, and inequality, ensuring that all citizens pay their fair share in taxes is fundamental to funding essential investments in education, health, infrastructure, and technology.
Even newer signatories to the Giving Pledge like MacKenzie Scott, former wife of Amazon founder Jeff Bezos, are making substantial philanthropic contributions. Scott has already donated around $14bn of her fortune, in spite of a present net worth of approximately $33.6bn.
Despite bearing the titles of ‘world’s third richest man’ and ‘world’s richest man’ respectively, Jeff Bezos and Elon Musk, owner of X and co-founder of Tesla and SpaceX, have both expressed an intent to donate the majority of their wealth.
