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Global Billionaire Tax to Yield US$250 billion Annually

October 23, 2023
Stephen M.Cby Stephen M.C
in Economy
0
Global Billionaire Tax to Yield US$250 billion Annually

The EU Tax Observatory has stated in its report that governments should open a new front in the international clampdown on tax evasion with a global minimum tax on billionaires, which could raise US$250 billion annually.

The research group hosted at the Paris School of Economics noted that if levied, the sum would be equivalent to only 2% of the nearly US$13 trillion in wealth owned by the 2,700 billionaires globally.

Currently billionaires’ effective personal tax is often far less than what other taxpayers of more modest means pay because they can park wealth in shell companies sheltering them from income tax, the group said in its 2024 Global Tax Evasion Report.

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“In our view, this is difficult to justify because it risks to undermine the sustainability of tax systems and the social acceptability of taxation,” the observatory’s director Gabriel Zucman said.

Billionaires’ personal tax in the United States is estimated to be close to 0.5% and as low as zero in otherwise high-tax France, the Observatory estimated.

Growing wealth inequality in some countries is fuelling calls for the richest citizens to bear more of the tax burden as public finances struggle to cope with aging populations, huge financing needs for climate transition and legacy COVID debt.

Meanwhile, U.S. President Joe Biden’s 2024 budget included plans for a 25% minimum tax on the wealthiest 0.01%, but that proposal has since fallen by the wayside with lawmakers in Washington preoccupied with government shutdown threats and looming funding deadlines.

Though a coordinated international push to tax billionaires could take years, the Observatory pointed to the example of governments’ success in all but ending bank secrecy and reducing opportunities for multinationals to shift profits to low-tax countries.

The 2018 launch of automatic sharing of account information has reduced the amount of wealth held in offshore tax havens by a factor of three, the observatory estimated.

A 2021 agreement between 140 countries will limit multinationals’ scope to reduce tax by booking profits in low-tax countries by setting a global 15% floor on corporate taxation from next year.

“Something that many people thought would be impossible, now we know can actually be done. The logical next step is to apply that logic to billionaires, and not only to multinational companies,” Zucman said.

Broad International Push for A Minimum Tax On Billionaires

In the absence of a broad international push for a minimum tax on billionaires, Zucman said a “coalition of willing countries” could unilaterally lead the way.

Although the end of banking secrecy and the corporate minimum tax have put an end to decades-long competition between countries on tax rates, numerous opportunities remain to reduce tax bills, the report said.

For example, the rich increasingly park wealth in real estate instead of offshore accounts while companies can exploit loopholes in the 15% corporate tax minimum.

Meanwhile, governments are increasingly competing for investment through subsidies even though that is less harmful to their tax bases than competing only on low tax rates, the Observatory said.

A global billionaire tax would likely lead to a redistribution of wealth from the ultra-rich to government coffers. This could be used to fund social programs, infrastructure projects, and other government initiatives. This redistribution could help reduce wealth inequality, which is a concern in many countries.

Moreover, critics argue that taxing billionaires heavily may discourage investment and entrepreneurship, as individuals may be less inclined to take on financial risks if a significant portion of their wealth is subject to taxation. However, proponents counter that the tax revenue could be reinvested in ways that benefit the economy, such as education and research.

With the world in crisis and the poverty keeps widening, a global billionaire tax could generate significant revenue for governments. This additional revenue could be used to reduce budget deficits, fund public services, and stimulate economic growth, especially if it is directed towards productive investments.

READ ALSO: The Cedi, Shilling Remain Steady As Most African Currencies Weaken

Tags: 2024 Global Tax Evasion ReportBillionaire TaxBudget deficitsEconomic GrowthGlobal Billionaire Tax to Yield US$250 billion Annually
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