Minimum tax on billionaires could raise $250bn per year

According to a G20-commissioned report, a global minimum tax on billionaires could raise up to $250bn per year and be implemented successfully even if not all countries adopted it.

Gabriel Zucman is an economist who wrote the paper. He said that a coordinated minimum tax on all the wealth of the 3,000 billionaires in the world was necessary to increase their contribution.

The report published on Tuesday stated that the current effective tax rate for billionaires is just 0.3% of their wealth. The G20 Finance Ministers will meet next month to discuss these proposals.

Zucman is a professor of Economics at the Paris School of Economics, and the University of California at Berkeley. “Very few people agree that billionaires should pay lower taxes than other social groups,” Zucman said. The super-rich should not pay less taxes than teachers or firefighters. This is just not acceptable.

The report recommends that individuals who have more than $1bn of total wealth including real estate, equity stakes, and large corporate shares, pay at least 2 percent of their wealth in tax.

It said that this would raise between $200bn and $250bn per year. The extension of the levy on individuals with net worths above $100mn could raise $100-140bn more. Individuals who pay income tax of more than 2% on their wealth would not be subject to any additional tax.

Zucman stated that a tax rate of 2 percent would prevent the overall tax levies from being perceived as regressive by the super-rich. “We’re only talking about 2 percent.” It’s not much. “We’re not trying to make it progressive, but rather less regressive.”

According to the study, the authorities are in a “better position” than ever before, given the changes that have taken place over the last 15 years. These include the elimination of the bank secrecy law and the automatic exchange of tax agency information.

It acknowledged that “several potential obstacles” could be associated with this idea. The difficulties in valuing individual wealth, improving compliance, and ensuring effective taxes if certain countries refuse to implement the tax were among them.

Dan Neidle of Tax Policy Associates was more critical. He argued that the proposal would have a hard time gaining traction in the places where it matters. “The US and China have the most billionaires.” He said that neither will implement it in a realistic way.

The report stated that countries must create new forms of information exchange across borders about wealthy individuals to be effective. The report said that countries would need to increase the identification of ultimate beneficial owners of financial assets and other assets, including companies, properties and other legal vehicles.

Zucman suggested that if some jurisdictions didn’t enact this measure, they could use exit taxes, or a “tax collector as a last resort” system similar to the one introduced with the global minimum corporation tax which went into effect in 2018.

According to the reform, if a multinational’s profit is taxed at less than a minimum effective tax rate of 15 percent in one country, then other countries may charge a surcharge.

“This is very important, because it gives all countries incentives to join the agreement.” Zucman stated that not joining would mean leaving tax revenues on the table.

Brazil, the G20 president, has been promoting the idea of raising taxes on the super rich. The report was commissioned after Zucman was invited to speak at the G20 Finance Ministers meeting in February.

The proposal has been endorsed by ministers from South Africa as well as Spain, France, and Germany. Zucman stated that Belgium, Colombia and the African Union also supported the tax. Last month, US Treasury Secretary Janet Yellen appeared to reject the idea.

Zucman said that the goal of the report was to begin the conversation and not end it. “We can make it [a global tax for billionaires] work. But now, there is a political decision to be made.”