G20 proposal to tax the super-rich could bring huge global benefits

The decisions taken at the G20 meetings are significant because the forum includes many of the world’s largest emerging and developed economies, with G20 members accounting for about 85% of global GDP, 75% of international trade and two-thirds of global GDP. world population.

G20 leaders met this week after a long year of G20 meetings. Brazilian President Inacio Lula da Silva will pass the baton to President Cyril Ramaphosa when South Africa takes over the G20 in 2025.

One of the most important results of Brazil’s G20 presidency was the ministerial meeting. declarationapproved by the presidents and prime ministers of all G20 countries, on tax cooperation. The declaration states that “With full respect for tax sovereignty, we will seek to cooperate to ensure efficient taxation of ultra-high-income earners. Cooperation could include sharing G20 best practices, encouraging debate around tax principles and developing mechanisms to combat tax evasion, including combating potentially harmful tax practices.”

This agreed text stems from Brazil’s efforts to include international taxation on the G20 agenda, facilitated by report he was tasked with outlining options for more effectively taxing the super-rich. A report by French economist Gabriel Zucman found that billionaires pay less efficient income taxes than other income groups. Moreover, current arrangements for taxing billionaires are hampered by limited information about the rich, such as the location of their wealth, lack of global cooperation, and the regressive nature of tax systems internationally.

The report proposes a project for a coordinated minimum effective tax standard for ultra-high-income earners. The basic proposal aims to have dollar billionaires (3,000 worldwide) pay at least 2% of their wealth in personal taxes annually. The Zucman report explains that “the individual taxes taken into account in calculating this minimum will be the individual income tax, the wealth tax, and economically equivalent levies.” Globally, the proposal estimates revenues of $200–250 billion per year.

Taxing the super-rich at 2% per year is a small price to pay for global efforts to achieve the UN Sustainable Development Goals (SDGs) and reduce global inequality. Only 19% of SDGs are on track to be achieved, and the funding gap exceeds 4 trillion dollars. As the world becomes increasingly divided, there is a need for mechanisms that build solidarity and bind the international community together. The plan to tax the super-rich is a landmark proposal that brings together finance ministries and central bank governors from different countries. different parts world to discuss ways to make the global tax system more progressive.

Several issues surrounding the proposed minimum standard for the ultra-wealthy require closer examination, including:

• Although this proposal was originally submitted to the G20, for effective cooperation between countries it is necessary to move its discussion to the UN to bring it into line with the protocols of the UN Framework Convention on International Tax Cooperation.
• The focus on dollar billionaires narrows the amount of revenue that could be generated from African billionaires to serve the continent. In Africa there is only 20 billionaires, six of them from South Africa. For comparison, there are more than 800 dollar billionaires in the United States and 320 in Europe. In this case, the basic proposal would only raise about $1.6 billion per year in Africa. This is only 0.66% of estimated revenue. Unless there is a global agreement that revenues generated will be pooled and redistributed globally from this vertical fund, countries in the Global North will disproportionately benefit.
• The tax target should be expanded to increase progressivity, especially for countries with few dollar billionaires. Zucman’s broader proposal to expand coverage and increase revenue to include centi-millionaires (more than $100 million) at the same proposed 2% tax rate would generate between $108 billion and $135 billion in additional revenue.
• Local tax administrations should be strengthened while creating international instruments. Many African countries such as Kenya, Rwanda, Sierra Leone, Uganda and Zimbabwe have introduced tax provisions for high net worth individuals. However, implementation and enforcement remain a challenge, due in part to the corruption of political officials by the super-rich. Other problems include a lack of comprehensive data on wealth and income, limited tax administration capabilities, and widespread tax evasion.

Progress in addressing these problems is possible. In 2015, Uganda created a special tax unit for wealthy individuals, which increased tax compliance among wealthy individuals as the number of wealthy Ugandans filing tax returns increased from From 13% to 78% throughout the year. South African Revenue ServiceThe division has also made progress managing more than 4 000 high net worth individuals with gross assets of R75 million or more.

International and domestic tax systems must go hand in hand if we are to reduce inequalities between and within countries. Strengthening domestic tax systems will enable African countries to take advantage of proposals for improved international tax cooperation.

The proposal for a minimum standard for taxing the super-rich has intensified the debate about taxing the rich. We have a tool we can use to raise enough revenue to address poverty, inequality and hunger, and to finance climate change adaptation and mitigation.

• Authors from Institute for Economic Justice.