2023-10-23 09:37:00
Billionaires use a whole bunch of devices to avoid income tax. In its report, the European Tax Observatory calculated what a global minimum tax on billionaires could bring in.
Governments should open a new front in international fight against tax evasion by establishing a global minimum tax on billionaires, which could bring in 250 billion dollars per year, the European Tax Observatory said in a report on Monday. If this amount were taken, it would only be equivalent to 2% of the approximately 13,000 billion dollars of wealth held by the 2,700 billionaires around the worldspecified the research group hosted by the Paris School of Economics.
Currently, the effective personal tax of billionaires is often much lower than that paid by more modest taxpayers, because they can invest their fortune in personal asset holding companies, or family holding companies, to avoid income tax, indicated the group in its global report on tax evasion for 2024. According to Gabriel Zucman, director of the observatory, this situation is difficult to justify, because it risks compromising the viability of tax systems and the social acceptability of tax, he told reporters. Billionaires around the world have effective tax rates on their wealth ranging from 0% in France to 0.5% in the United States, “due to the frequent use of shell companies to evade income tax”specifies the Observatory.
Facing growing inequalities
Growing wealth inequality in some countries is also fueling calls for the richest citizens to bear a greater share of the tax burden, while public finances are struggling to cope with the aging of the population and the enormous financing needs for the climate transition. and the legacy of debt linked to the COVID-19 pandemic.
US President Joe Biden’s 2024 budget included a minimum tax of 25% on the richest 0.01%, but this proposal has since been shelved, with elected officials in Washington still preoccupied by the threat of a partial shutdown of American federal administrations (“shutdown”). Although coordinated international action to tax billionaires may take years, the Observatory cited the example of governments that have managed to end banking secrecy and reduce the opportunities for multinationals to shift profits to low-tax countries. The automatic and multilateral exchange of banking information since 2018 has made it possible to divide by three the amount of wealth held in offshore tax havens.
Global coordinated action
The international agreement concluded in 2021 between 140 countries should limit the ability of multinationals to reduce their taxes by recording their profits in low-tax countriessetting a global floor of 15% for corporate taxes from next year, even though it has “been considerably weakened”according to the observatory. “What many thought impossible, today we know it is possible”, said Gabriel Zucman. The next logical step is toapply to billionaires, and not just to multinationals, he added. A “coalition of willing countries” could unilaterally pave the way, he believes, even in the absence of a vast international campaign in favor of a minimum tax on billionaires.
If the end of banking secrecy and the minimum corporate tax have put an end to decades of competition between countries in terms of tax rates, part of the assets still escape tax, according to the report. The wealthy, for example, increasingly park their funds in real estate rather than offshore accounts, while businesses can exploit loopholes in the 15% minimum corporate tax. Furthermore, governments are increasingly competing to attract investments through subsidies, particularly for green energy producers even if, estimates the Observatory, this remains “less damaging” than standard tax competition because of the potential to accelerate the energy transition.
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