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A global minimum tax on billionaires raising up to $250 billion annually is “technically feasible” and could be successfully enforced even if it were not adopted by every country, a report commissioned by the G20 said.
Gabriel Zucman, economist and author of the paper, said a coordinated minimum tax on the total wealth of the world’s 3,000 billionaires was needed to increase their contributions.
The current effective tax rate for billionaires was equal to just 0.3 percent of their wealth, the report published Tuesday said. G20 finance ministers will meet next month to discuss the proposals.
“Very few individuals agree with the idea that billionaires can have lower tax rates than other social groups,” Zucman, an economics professor at the Paris School of Economics and the University of California, Berkeley, told the Financial Times. “The super-rich should not pay less in taxes than teachers or firefighters. That’s just not okay.”
The report recommends that individuals with total assets exceeding $1 billion, including assets such as real estate, stock interests and larger business holdings, pay a minimum amount of tax equal to 2 percent of their wealth.
This would generate between $200 and $250 billion per year, the report said. Expanding the levy 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 taxes do not have to pay additional taxes.
Zucman said a 2 percent level would ensure that overall taxation is not seen as regressive on the super-rich. “We are talking about 2 percent. That’s not very much. We are not talking about making it progressive, but about making it less regressive.”
The study shows that developments over the past fifteen years, such as the widespread end to bank secrecy laws and the automatic exchange of information between tax authorities, have left authorities in “a better situation” to implement the proposal to carry out successfully.
However, it was acknowledged that there were “several potential challenges” associated with the idea. These include the difficulties of valuing individuals’ wealth, improving compliance and ensuring effective taxation if some countries refused to implement the levy.
Dan Neidle, founder of the think tank Tax Policy Associates, was more critical, saying the proposal would struggle to gain traction where it mattered. “The two countries with the largest number of billionaires are the US and China. Neither will realistically implement this,” he said.
To be effective, the report argues that countries must create new forms of cross-border information exchange about wealthy individuals. Nations should also encourage the identification of beneficial ownership of financial and other assets, including property, businesses and other legal vehicles.
If some jurisdictions did not implement the measure, Zucman said countries could implement exit taxes or use a “tax collector of last resort” mechanism, similar to that introduced in the global minimum corporate tax, which came into effect this year.
If a multinational’s profits are taxed below the effective tax rate of at least 15 percent in one country, other countries may charge an additional tax.
“That is very important because it encourages all countries to join the agreement. Not participating means leaving tax revenue on the table for others to collect,” Zucman said.
Brazil, which holds the G20 presidency, has backed the idea of raising taxes on the super-rich. The report was produced after it invited Zucman to speak to G20 finance ministers in February.
Ministers from South Africa, Spain, France and Germany have supported the proposal. Zucman said Belgium, Colombia and the African Union also supported the levy. But US Treasury Secretary Janet Yellen appeared to reject the idea last month.
“The purpose of the report is to start the conversation, not end it,” Zucman added. “We can make it [a global tax on billionaires] work, but now a political decision has to be made.”