Warren Buffett famously pointed out that he pays a lower tax rate than his secretary.
Are billionaires paying their fair share?
Brazil certainly doesn't think so.
The Finance Minister of Brazil, which currently holds the G20 Presidency, has called on other G20 countries to support plans to introduce a global minimum tax.
“It is an undeniable fact that billionaires around the world are still evading our tax system through a series of strategies,” Finance Minister Fernando Hadda said in Sao Paulo.
“As a G20 finance minister, I am genuinely asking myself how I can allow this situation to continue.”
But what is a global minimum tax? How would it work? And how much money would it generate?
Let's take a closer look:
what is that?
First, let's take a look at the current global scenario regarding taxes.
Critics of the current system say countries around the world are currently in a “race to the bottom.''
In some countries, this is where the red carpet is rolled out for corporations and the ultra-wealthy.
In such countries, the super-rich pay zero or low taxes.
For example, Warren Buffett famously pointed out that he pays a lower tax rate than his secretary.
In 2021, G20 finance ministers approved a global tax reform based on two “pillars” to make large multinationals pay.
Companies are now established in tax-free territories such as the Bahamas and the Cayman Islands to avoid paying minimal corporate taxes.
But taxing companies where they make sales rather than where they are established would put an end to “digital tax evasion.”
Companies will pay a minimum corporate tax rate of 15%.
Countries are at different stages in implementing these reforms.
But some countries are now pushing for a “third pillar”: a global minimum tax.
according to guardian, The EU tax watchdog has called for a 2% tax on the wealth of the wealthiest people.
A research group sponsored by the Paris School of Economics said in its 2024 Global Tax Evasion Report that the measure, which also tackles tax evasion by the super-rich, would collect about $250 billion a year from 2,756 billionaires.
according to ICIJ, Nobel laureate Joseph Stiglitz, who wrote the report's foreword, warned of the dire consequences of inequality.
“If people don't believe that everyone pays their fair share of taxes, they will begin to refuse to pay taxes, especially if they see that the wealthy and wealthy corporations are not paying their fair share,” Stiglitz said. he wrote.
Haddad, a close ally of Brazil's leftist president Luiz Inácio Lula da Silva, Citing a recent report by a Paris-based firm led by economist Gabriel Zachman, he said billionaires are paying out large sums of money. Primarily through the use of shell companies, the effective tax rate on their assets ranges from zero to 0.5 percent.
Mr. Zucman is an expert on the link between tax evasion and inequality.
The observatory estimates that billionaires' personal taxes in the United States are close to 0.5%, while in France, where taxes are high, it is close to zero.
“Risk of undermining social acceptability of taxation”
“We think this is difficult to justify because it risks undermining the sustainability of the tax system and the social acceptability of taxation,” Observatory Director Zukman told reporters.
“Effective solutions to ensure the ultra-rich pay their fair share of taxes depend on international cooperation,” Haddad said.
This problem “could be the key to solving many of the challenges we face,” he added.
Brazil has invited a series of speakers to the conference on the issue, including Zucumán, who will speak on a number of issues including inequality, another key area that Brazil wants to address during its G20 presidency. included.
“The idea is to do what we have been able to achieve with multinational corporations, which is to set a floor for effective tax rates, and we will do the same for the ultra-wealthy,” the paper quoted Zucman as saying. We should do something.”
“Right now, nothing has been done in this area about adjusted minimum taxes on individuals and especially the very wealthy. But this is the start of a conversation.”
Susana Lewis, Oxfam's head of tax policy, added: “Just getting this on the agenda at the G20 is an historic step.”
France also supports
France has also expressed support.
French Finance Minister Bruno Le Maire said: Reuters“Currently, the richest people can avoid paying the same level of taxes as other less wealthy people. We want to avoid such tax optimization.”
“We 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.”
Mehr told reporters on Wednesday that Paris was “accelerating” international negotiations on a minimum tax on the ultra-wealthy.
“We have reached an unsustainable situation where the richest 1 percent own 43 percent of the world's financial assets and emit as much carbon as the poorest two-thirds of humanity. “There are,” Zucman was quoted as saying. Guardian.
A coordinated international push to tax billionaires could take years, but the watchdog group hopes governments can eliminate bank secrecy and allow multinational corporations to shift profits to low-tax countries. He pointed out examples of success other than reducing the chance of relocation.
The observatory estimates that automatic sharing of account information, which began in 2018, has reduced the amount of wealth held in offshore tax havens by a third.
The 2021 agreement between 140 countries will set a worldwide 15% floor on corporate tax starting next year, limiting the scope of tax breaks for multinational companies by recording profits in low-tax countries. It has become.
“What many people thought was impossible, we now know is actually possible,” Zucman said. “The logical next step is to apply that logic not only to multinational corporations but also to billionaires.”
Without a broad international push for a minimum tax on billionaires, a “coalition of willing nations” could lead unilaterally, Zucman said.
The report said that while the abolition of bank secrecy and the introduction of a corporate minimum tax ended decades of tax competition between countries, many opportunities remained to reduce taxes.
For example, wealthy people are increasingly putting their assets in real estate rather than offshore accounts, while companies may take advantage of a loophole in the 15% corporate tax minimum.
Meanwhile, governments are increasingly competing for investment through subsidies, even though this has less negative impact on the tax base than competing through lower taxes alone, observers said.
US and UK less likely to support tax
However, some countries remain cautious about such agreements.
This includes the United States, where the chances of passing a tax in the Republican-controlled Senate are close to zero.
U.S. President Joe Biden's 2024 budget proposal included a plan to impose a 25% minimum tax on the wealthiest 0.01%, but lawmakers in Washington warned against threats of a government shutdown and an impending funding deadline. The proposal subsequently fell through.
according to guardian, Things don't look much better in the UK when it comes to taxes either, with Labor vowing not to impose such measures if voted into power.
Wealth inequality is widening in some countries, with the wealthiest citizens receiving more money as public finances struggle to cope with aging populations, massive climate change financing needs and the legacy of coronavirus. There are increasing calls for a tax burden.
according to ICIJ, The report also calls for stronger global minimum taxes on businesses.
He said the law had been “dramatically weakened by a growing list of loopholes.”
“It would be different if the money stayed with companies and they invested in new companies, but that money usually flows to wealthy people. By not taxing multinational corporations, we give wealth to a few.” flow,” Stiglitz wrote.
Stiglitz argued that technology company Apple is a prime example.
“Money that was supposed to go to the people is now in the hands of the wealthy. We now have a responsibility to get it back,” he said.
Despite this, Zachman remains confident.
He said there was “increasing awareness” of the need for cooperation.
“I'm relatively confident that one day we'll wake up and the top item on our morning radio shows will be about countries that have reached an agreement on minimum taxes for the ultra-wealthy. “I'm pretty confident. But it's hard to know whether this is one year, five years, or 10 years or 20 years,” he added.
Based on opinions from agents
