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A global minimum tax for billionaires who earn up to $250 billion a year is “technically feasible” and could be successfully enforced even if not adopted by all countries, a report commissioned by the G20 says.
Gabriel Zucman, an economist and author of the article, said a coordinated minimum tax on the total wealth of the world’s 3,000 billionaires is needed to increase their contributions.
Billionaires’ current effective tax rate was just 0.3 percent of their wealth, according to a report released Tuesday. G20 finance ministers will meet to discuss the proposals next month.
“Very few individuals agree that billionaires can have lower tax rates than other social groups,” Zucman, a professor of economics at the Paris School of Economics and the University of California at Berkeley, told the Financial Times. “The super-rich shouldn’t pay lower taxes than teachers or firefighters. It’s just not right.”
The report recommended that individuals with a total wealth of more than $1 billion, including assets such as real estate, property holdings and larger corporate holdings, pay a minimum amount of tax equal to 2 percent of their wealth.
That would bring in $200 to $250 billion a year, he said. Extending the tax to individuals with a net worth of more than $100 million would raise an additional $100 billion to $140 billion. Individuals who already pay more than 2 percent of their wealth in income tax will face no additional tax liability.
Zucman said the 2 percent level would help the overall tax levy not be seen as regressive to the super-rich. “We’re talking about 2 percent. That’s not much. We’re not talking about making it progressive, just making it less regressive.”
The study said developments over the past 15 years, such as the sweeping end of bank secrecy laws and the automatic exchange of information between tax authorities, meant that authorities were in a “better position” to successfully implement the proposal.
However, she acknowledged that there were “several potential challenges” associated with the idea. These included difficulties in valuing individual assets, improving compliance and ensuring effective taxation should some countries refuse to impose a levy.
Dan Neidle, founder of the Tax Policy Associates think tank, was more critical, arguing that the proposal would struggle to gain traction where it matters. “The two countries with the largest number of billionaires are the US and China. Neither will realistically implement it,” he said.
For the report to be effective, countries would have to create new forms of cross-border exchange of information on wealthy individuals. States would also need to strengthen the identification of ultimate beneficial ownership of financial and other assets, including real estate, companies and other legal instruments.
If some jurisdictions did not take action, Zucman said countries could use output taxes or use a mechanism of “excise taxes of last resort” similar to the one introduced in the global minimum corporate tax that came into force this year.
Under the reform, if a multinational company’s profit in one country is taxed below the minimum 15% effective tax rate, other countries can charge an additional tax.
“This is very important because it provides incentives for all countries to join the agreement. Not joining is leaving tax revenue on the table for others to collect,” Zucman said.
Brazil, which chairs the G20, is pushing the idea of raising taxes on the super-rich. It commissioned the report after inviting Zucman to speak to G20 finance ministers in February.
Ministers from the Republic of South Africa, Spain, France and Germany supported the proposal. Zucman said Belgium, Colombia and the African Union also support the levy. But US Treasury Secretary Janet Yellen appeared to reject the idea last month.
“The purpose of the message is to start a conversation, not end it,” Zucman added. “We can produce [a global tax on billionaires] work, but now a political decision needs to be made.”