Billionaires hardly pay any taxes. An international proposal to introduce a 2% global tax on billionaires could raise a substantial $250 billion each year, according to the EU Tax Observatory.
This tax would amount to just 2% of the immense $13 trillion in wealth collectively owned by the world’s 2,700 billionaires, as reported by the research group situated at the Paris School of Economics.
Currently, billionaires pay significantly less in personal taxes compared to individuals with more modest incomes.
They can safeguard their wealth by placing it in shell companies, effectively avoiding income taxes.
This revelation comes from the 2024 Global Tax Evasion Report by the EU Tax Observatory.
According to Gabriel Zucman, “In our view, this is difficult to justify because it risks undermining the sustainability of tax systems and the social acceptability of taxation.”
In the United States, billionaires pay a meager estimated 0.5% in personal taxes, and in high-tax France, they might even pay as low as zero.
Rising wealth inequality in various countries has led to calls for the wealthiest citizens to contribute more towards the tax burden.
This is necessary as public finances grapple with challenges such as aging populations, extensive financing needs for transitioning to clean energy, and the debt accumulated during the COVID-19 pandemic.
While US President Joe Biden had initially proposed a 25% minimum tax for the top 0.01% of the wealthiest individuals in his 2024 budget, this plan has taken a backseat due to other pressing matters in Washington.
Although it may take several years to coordinate an international effort to tax billionaires, the EU Tax Observatory points to the past success governments have had in reducing bank secrecy and limiting opportunities for multinational corporations to shift profits to low-tax nations.
For instance, the introduction of automatic sharing of account information in 2018 reduced the amount of wealth stored in offshore tax havens by a factor of three, according to the observatory’s estimates.
A 2021 agreement between 140 countries has set a global 15% minimum for corporate taxation, which will go into effect next year, thereby restricting the ability of multinationals to reduce their taxes by booking profits in low-tax nations.
Zucman stressed that what many thought was impossible has been achieved, and the next logical step is to apply similar principles to billionaires, not just multinational companies.
If there isn’t broad international support for a minimum tax on billionaires, Zucman suggested that a “coalition of willing countries” could take the lead unilaterally.
While the end of banking secrecy and the corporate minimum tax have curtailed the long-standing competition between countries regarding tax rates, the report notes that numerous opportunities still exist to reduce tax liabilities.
For example, the wealthy increasingly invest in real estate instead of offshore accounts, and companies can exploit loopholes in the 15% corporate tax minimum.
Additionally, governments are now vying for investments by offering subsidies rather than solely competing through low tax rates, as pointed out by the EU Tax Observatory.
