The EU Tax Observatory stated on Monday that governments should start a new front in the fight against tax evasion by imposing a $250 billion per year global minimum tax on billionaires.
The amount, if imposed, would only represent 2% of the almost $13 trillion in wealth held by the 2,700 billionaires worldwide, according to the study team based at the Paris School of Economics.
According to the organization’s 2024 Global Tax Evasion Report, billionaires’ effective personal tax rates are currently frequently far lower than those paid by other taxpayers with lower incomes. This is because they can stash money in shell firms that shield them from income tax.
Director of the observatory Gabriel Zucman told media, “In our view, this is difficult to justify since it risks undermining the viability of tax systems and the social acceptability of taxation.
According to the Observatory, the personal tax paid by billionaires is approximately 0.5% in the United States and as low as 0% in normally high-tax France.
As public finances struggle to deal with an aging population, enormous financial demands for the climate transition, and legacy COVID debt, growing wealth inequality in some nations is fueling calls for the richest individuals to shoulder more of the tax burden.
A 25% minimum tax on the wealthiest 0.01% was proposed in U.S. President Joe Biden’s 2024 budget, but it has since been abandoned since Washington lawmakers are focused with potential government shutdowns and approaching funding deadlines.
Although it might take years for a coordinated global effort to tax billionaires, the Observatory cited the achievement of governments in almost eradicating bank secrecy and limiting chances for multinational corporations to shift revenues to low-tax nations.
According to the observatory, the amount of wealth stored in offshore tax havens has decreased by a factor of three since the automatic sharing of account information went into effect in 2018.
By establishing a global 15% floor on corporate taxation as of the next year, a 2021 agreement between 140 countries will restrict multinationals’ ability to reduce tax by posting profits in low-tax jurisdictions.
what many thought as impossible we know what can be done according to Zucman. The next move is to apply that reason to billionaires and not multinational firms
Zucman claimed that in the absence of a strong international movement in favor of a minimum tax on billionaires, a “coalition of willing countries” may take the initiative.
Despite the fact that the corporate minimum tax and the end of banking secrecy have ended decades of tax rate competition among nations, the research noted that there are still many ways to cut taxes.
For instance, wealthy people are increasingly investing in real estate rather than offshore accounts, and businesses can take advantage of the 15% corporate tax minimum’s loopholes.
According to the Observatory, governments are increasingly vying for investment through subsidies, even if doing so is less damaging to their tax bases than merely offering low tax rates.