Marlene Engelhorn, in her early 30s and heir to the multibillion-dollar fortune of the multinational company BASF, attended Davos in January, along with a group of billionaires from various backgrounds, to seek political leadership. They asked them to pay more money. Taxes to address inequality. The International Monetary Fund (IMF) has proposed devising an interim tax on the highest income earners to cover the burden of the pandemic. Brazil, which holds the interim G20 presidency, hopes to finalize a joint declaration on a minimum tax for the wealthiest individuals by the summer. Additionally, the US economy, the world's largest, does not usually welcome tax hikes, but it recently proposed heavier taxes on wealthy Americans. Is this a coincidence or the beginning of a tax revolution that will force the world's rich to pay higher taxes?
Never before have so many different voices spotlighted taxes on large amounts of wealth at the same time. They come at a time when many countries need more resources to tackle major challenges such as huge debts accumulated due to the COVID-19 pandemic, ecological transition, digitalization and environmental issues. , wants to make this one of the hot topics of international debate in a context of growing inequality. Population aging.
“The ultra-rich should pay more taxes for a variety of reasons. Since 2020, the world's five richest people have doubled their wealth, while 5 billion poor people have seen their wealth decline. “We've seen it happen,” says Rebecca Gowland, international director of the Patriotic Millionaire Association, founded in the United States in 2010. A letter sent by 60 billionaires to then-President Barack Obama calling for increased taxes on their largesse. Now he has gathered more than 300 people. “The current economic system is designed to benefit a handful of very wealthy people. Those who work pay much higher taxes.”
There is no shortage of data and the facts speak for themselves. Although the number of billionaires is modest at about 2,700, their fortunes are overwhelming and growing. According to Swiss bank UBS's latest Billionaire Ambitions Report, this amount will increase by 7% from 2022 to 2023 to more than $12 trillion. Most of them are based in the US. Another notable feature is that the new ultra-rich have achieved this status through inheritance rather than entrepreneurial ventures. In other words, it's not based on your job, it's based on your birth. Thirty years ago, in 1995, only 377 taxpayers were considered millionaires, and they had accumulated less than $1 billion.
This modest but powerful circle of individuals is not only accumulating more wealth, but also sharpening their strategies to reduce their bills on the public treasury. According to the EU Tax Supervisory Board, global tax evasion According to a 2024 report, the ultra-wealthy, or people with assets over $1 billion, pay a frightening proportion of personal taxes, including personal income tax, relative to their wealth. The effective tax rate is between 0% and 0.5%.
There are many examples of this. In the summer of 2021, when the pandemic was still at its height, the income tax returns of 25 wealthy Americans, including Elon Musk, Bill Gates, and Michael Bloomberg, were made public. The country's powerful businessmen pay a lower effective tax rate than the working class, according to the information released by the ProPublica journalist network.
Much of this contradiction stems from the fact that the system simply allows it. Wealth such as property, stocks, and companies enjoy tax benefits on earned income. In the United States, the wealthiest people are also large consumers of tax engineering services. They structure their wealth to produce lower incomes and taxable profits, for example using instruments such as asset holding companies.
French Finance Minister Bruno Le Maire made this clear during his recent meeting with finance ministers at the G20 in São Paulo. “The richest people can avoid paying the same tax rate as other less wealthy people. We want to stop this,” he said. “I want Europe to move forward with the idea of a minimum tax on individuals as soon as possible, and France will be at the forefront of this,” he said.
On the same podium, Brazilian Fernando Haddad called for a global tax on large fortunes to limit tax evasion and avoidance by the ultra-wealthy and to align with more country-approved minimum taxes on multinational corporations. He appealed to them to act “together'' to establish this. It is guided by the Organization for Economic Co-operation and Development (OECD) and has membership in more than 140 countries.
I don't think there is any prospect of a global minimum tax on the wealthy in the short term.
Pascal Saint-Amans, Analyst at Bruegel Think Tank
Pascal Saint-Amans, an analyst at the Bruegel think tank and a leading expert on multilateral tax negotiations, acknowledged that “interest in this issue is increasing.'' He has many years of first-hand experience of these negotiations and was the Director of his OECD Center for Tax Policy and Management when the agreement on taxation of multinational companies was reached. After the deal was signed, he left his post. Perhaps for this reason, the man who has been active behind the scenes remains cautious about the possibility of billionaires following in his footsteps. He said: “Personally, he doesn't think a global minimum tax on the wealthy is likely to materialize in the short term.”
Every country is very different, with some having high taxes and others having very little, St. Amands explains. “But we need a way to counter tax competition from the more mobile wealthy.” [they have a better means of changing residence] than the rest of the population. For example, the OECD could launch an initiative to address harmful prosecutorial practices. In the long term, there may be scope for increased cooperation. “We must not forget that bank secrecy is now over and countries can now tax capital more effectively,” he points out.
This view is shared to some extent by US economist Kimberly Clausing, a professor at the University of California, Los Angeles, and a member of the Peterson Institute for International Economics, who says: At least the top. Another starting point may be Europe. This is because, although liquidity is very high, tax rates are primarily set at the level of the nation-state. I was able to lead by example and create consensus. However, I think it would be more difficult to gather 140 countries and say, “We all agree on a certain minimum tax rate.'' ”
She argues that the distribution of income and wealth differs from country to country. “It makes no sense for Sweden and the United States to adopt the same marginal interest rate, because even though they are both wealthy countries, the underlying economic problems are completely different. “For the first time, we can ensure that countries enforce their laws and build some intellectual debate and consensus around tax systems, which play an important role,” she added.
One of the biggest drivers of consensus, or at least information, on this subject through his academic research efforts has been French economist Gabriel Zucman. A professor at Berkeley's Paris School of Economics and director of the European Union's tax watchdog, he recently submitted a proposal to G20 finance ministers on a minimum tax on the wealthy. For more information on this initiative, please visit global tax evasion He calculates that an additional $250 billion will be raised annually globally, according to a report he co-authored.
wealth tax
Spain doesn't have much wealth compared to its neighbors, according to UBS data. According to UBS data, there will be only 24 billionaires in 2023, with a combined net worth of $129 billion. In Germany, he had 109 donors with a total of $496 billion, while in France he had 34 donors, but the wealth was still highly concentrated ($501 billion). Despite these numbers, Spain is the only EU member state to tax its entire wealth through two taxes instead of one. One is the regional wealth tax and the tax on large wealth, which is a state tax of a temporary nature. The government intends to make it permanent. In Europe, only Switzerland and Norway have similar numbers.
“Most countries have abolished wealth taxes in recent years (one of the most recent examples being France) because wealth taxes have a negative impact on investment and collections are very low. This is an outdated figure. “It involves double taxation, for example on assets that are already taxed, such as income, inheritances and donations,” says Christina Enache, an economist at the Tax Foundation think tank. She believes that although there is an open discussion at the international level about taxing large amounts of wealth, “barriers cannot be imposed.” She said, “This issue is on the table, but I don't see a solution.''
The idea that Spain's wealth tax is outdated and raises little revenue is widely shared by economists from all walks of life. New taxes on high-value properties also do not represent a qualitative leap forward. He follows the local equivalent system, except that the tax threshold is higher at 3 million euros. However, there is broad consensus on the need to maintain the inheritance tax and, at the same time, overhaul the wealth tax.
There's a lot of talk about billionaires and taxes on wealth, but the reality is more complex. There are different aspects of wealth, such as real estate, bank accounts, companies, stocks, dividends, inheritance, donations, etc., and therefore different ways of demanding high endowments from the richest people. In fact, France has abolished what amounts to a wealth tax, but like other countries it maintains special taxes on certain assets.
Zukman and his team's proposal is to introduce a global minimum tax rate of 2% only for billionaires. This would be calculated according to their wealth, he argues, because that is the measure that best defines a group's economic capabilities, rather than just income. “This is in line with what has been done with the taxation of multinational companies. There is an international agreement on a global minimum tax of 15%, which has been applied in the EU since January 1st this year. The next steps are: Do the same for very wealthy people,” he said in a recent interview with EL PAÍS. If an agreement cannot be reached, it urges each country to proceed unilaterally.
Abdul Muhit Chaudhary of the South Center Tax Initiative, an organization representing developing countries, has a similar view. “International cooperation and unilateral solutions are complementary,” he says. “Countries should consider introducing unilateral solutions immediately, as it is a viable option at this time. There are no ready-made international solutions and they will take time to develop. It is clear that relying on unilateral solutions is not enough, as there is a risk that large amounts of property will be relocated.
There is also a sense of momentum overall. Corporate tax reform came to a kind of end with the introduction of a minimum tax rate of 15%. Work continues on another aspect of the OECD agreement, the so-called Pillar 1, the taxation of a portion of the profits of the largest multinational corporations, although the United States and China, where most of these companies are based, Not applicable. Meanwhile, the Global South is insisting on a greater voice in international tax debates, and is doing so through a new channel: the United Nations. Last November, developing economies won the upper hand in negotiations for a new global financial framework within the organization.
Chaudhary, who is also head of the United Nations Wealth Tax Subcommittee South Center, said: “In the near future, reforms may be advocated by the countries that benefit most from this tax – the US and Europe, where billionaires live.” talk. But he admits that the few national figures who have levied huge taxes have not achieved much in terms of tax justice. “But the fact that it hasn’t happened in the past doesn’t mean it won’t happen in the future. Wealth taxes have huge potential and, if thought well, can reduce inequality and improve redistribution. .”
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