Tax On Ultra-High-Networth Individuals Could Contribute $250 Billion A Year

A report commissioned by the Brazilian G20 presidency has found that a tax on ultra-high-net-worth individuals could contribute $250 billion a year toward domestic and global needs.

In February 2024, the Brazilian G20 Presidency invited leading economist Gabriel Zucman to address G20 Finance Ministers gathered in Sao Paulo and make the case for a reform to safeguard tax progressivity. In his speech, professor Zucman advocated for a coordinated minimum tax on billionaires, a reform that would build on the previous steps of international cooperation to address the issue of low effective taxation of the super-rich.

Following the meeting, the Brazilian G20 Presidency commissioned a report to Zucman to highlight the details and feasibility of the proposal. This report, entitled “A blueprint for a coordinated minimum tax on ultra-high-net-worth individuals” was released at the end of June, in advance of the G20 Finance Minister Summit of July 2024.

In advance of next month’s G20 Finance Ministers Summit Economist Gabriel Zucman outlines how “a global minimum tax on the ultra-rich” could work and how much it could raise, building on his recent Global Tax Evasion report and his latest op-ed in Le Monde.

The report finds that taxing just 3,000 US Dollar billionaires could raise vital funds in a year that it is hoped will culminate in a vital agreement on climate finance at the COP29 negotiations to be held in Azerbaijan. Such funds would provide a powerful benefit in terms of making tax systems more progressive and thus address inequality concerns that have been at the forefront of voters’ minds in recent and upcoming elections.

The baseline scenario of this minimum standard is a minimum rate of 2% of wealth for dollar billionaires (around 3,000 individuals globally) which would generate about $250 billion a year in additional tax revenue.

Similarly to the minimum tax on multinational corporations endorsed by 140 countries in 2021, taxes would only have to be paid by billionaires who do not pay the equivalent of 2% of their wealth in income tax already. As such, the proposal is not a wealth tax but functions as a top-up mechanism. This minimum is expressed as a fraction of wealth, rather than income, as it is far more difficult to manipulate.

Brazil, France, Spain & South Africa, Belgium, and Colombia have already voiced their support for such a measure. This month’s G7 summit committed to “work constructively” with the Brazilian G20 tax agenda.

The main findings include-

• The super-rich have lower tax rates than other social groups.
• Tax regressiveness deprives governments of significant amounts of tax revenues, undermines social cohesion, and contributes to the rise of wealth concentration.
• To avoid a race to the bottom, the most effective approach to address this issue involves a globally coordinated minimum tax.
• The proposal is the most efficient way to address tax regressiveness.

The report compared the wealth tax proposal with an increase in personal income tax and estate tax. All the alternatives fail to address this issue. They can function as complementary options.

The writer of this article is Dr. Seema Javed, an environmentalist & a communications professional in the field of climate and energy