2023-10-23 11:58:00
The American politician Benjamin Franklin stated in the eighteenth century that only two things are truly inevitable in life: you will die one day, and until then you have to pay taxes. Although? Many super-rich people manage to defy one of those two certainties, says Nobel Prize winner in economics Joseph Stiglitz.
Billionaires may not be immortal, but they know how to avoid taxes, he writes in a foreword to new extensive research by the EU Tax Observatory. This independent think tank, affiliated with the Paris School of Economics, has extensively mapped out with one hundred researchers how it wants to proceed in the fight once morest tax avoidance and evasion.
Good steps made
There is still so much room for improvement that the researchers, and Stiglitz with them, argue for a new type of wealth tax. By having billionaires pay 2 percent annually on their assets, countries worldwide would raise $250 billion. Money that, according to Stiglitz, is desperately needed for education, health care and climate change, with the added benefit that inequality would decrease in the world.
Good progress has been made over the past ten years, according to the underlying research, especially in the field of tax evasion.
Unlike evasion, this is punishable: with evasion, a taxpayer hides his assets and does not report them to the tax authorities, for example by storing them in a tax haven. Countries such as Bermuda or the British Virgin Islands shielded the assets from the tax authorities in the country where the person in question lived.
There’s less point in hiding
But since 2017, tax authorities in more than a hundred countries, including those in many tax havens, have been exchanging information regarding the assets in bank accounts. Hiding makes less sense, the researchers praise this approach, and evasion via tax havens has decreased by a factor of three compared to 2013.
The researchers are less satisfied with the approach to tax avoidance, the legal transfer of money in order to make maximum use of loopholes in the tax legislation.
What strikes them: tax avoidance by wealthy individuals is increasingly happening in their own country. They set up personal companies to which they then have their dividends and other income transferred. As a result, they would have to pay less than if they had had that income deposited into their personal account.
In the Netherlands, the rich pay less than the non-rich
It is clear that rich people in countries such as the Netherlands, the US and France pay relatively much less tax than people with a lower income, according to the researchers’ models. For the Netherlands, billionaires average an effective rate of just under 20 percent of their income, while the vast majority of Dutch people pay around 40 percent in taxes.
To do something regarding this, the researchers argue for a new wealth tax for the very rich. In Europe, where according to the report there are 499 billionaires with an aggregate wealth of $2.4 trillion, this would generate 42 billion euros in tax revenue annually.
Tilburg tax professor Arjen Lejour thinks it is a good idea to a certain extent. “The reason that this type of wealth tax has not worked so far and is therefore not being introduced is that billionaires would simply move their wealth to another country,” says Lejour. “By introducing it worldwide you would prevent that, and it might work.”
You also find the transparent billionaires
At the same time, it is a ‘blunt tool’, he thinks. “Not every billionaire has done his best to pay as little tax as possible. Many wealthy people are completely open, transparent and have not set up personal BVs purely for tax reasons. You also find that with a tax like this.”
In addition, it is a rather ambitious proposal. To introduce a global minimum tax, almost all countries must be on the same page regarding how to organize such a thing, while rich and less rich countries often have very different interests. Although they have recently shown that this is theoretically possible: more than 140 countries have recently agreed on a completely different tax measure, a minimum tax for large companies.
Also read:
Shrewdly, grain trader Cargill once more finds a route to avoid taxes, via the Netherlands
Cargill, one of the largest and most powerful food and raw materials traders in the world, can do something that new laws and regulations were supposed to make impossible: avoid taxes. And this, among other things, via the Netherlands.
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