The G20 group of the world’s most powerful countries is exploring plans for a global minimum tax on the world’s 3,000 billionaires, aiming to end a “race to the bottom” that has enabled the super-rich to pay less than the rest of the population.
Leaders gathering in São Paulo for a key G20 meeting of finance ministers and central bank governors are preparing to discuss an internationally agreed backstop on the taxation of hypermobile wealthy individuals, amid increasing global cooperation to tackle tax avoidance.
Aiming to build on the cooperation that resulted in a 15% global minimum tax on multinational companies, which came into effect in January, the plan is being promoted under Brazil’s presidency of the G20 before a summit of world leaders in Rio de Janeiro in autumn.
Brazil’s finance minister, Fernando Haddad, under the leftwing government of the president, Luiz Inácio Lula da Silva, is pushing for the adoption of the policy. France’s finance minister, Bruno Le Maire, also gave his backing this week, saying Europe should take it forward.
“Currently the richest people can avoid paying the same level of tax as other people who are less rich. We want to avoid such tax optimisation,” Le Maire told Reuters news agency before the meeting.
“We want Europe to take this idea of minimum taxation of individuals forward as quickly as possible, and France will be at the forefront.”
The economist Gabriel Zucman has been invited by the Brazilian government to kickstart the G20 talks on Thursday.
The EU Tax Observatory, a Paris-based thinktank led by Zucman, set out a mechanism for a global wealth tax in a report last year. It called for a 2% annual levy on the wealth of the world’s richest individuals as the starting point for a global minimum tax.
It estimates the measure could raise $250bn (£197bn) a year from the 2,756 known billionaires, who together are believed to be worth $13tn. The idea is based on the 2021 agreement between 140 countries to impose a global minimum tax rate of 15% on the biggest multinational companies.
Zucman said the G20 talks would mark “the beginning of a conversation”. Various details would need to be hammered out between countries over how the wealth tax would function, in a process that could take years.
The global minimum corporate tax took a decade to be introduced, with relatively limited movement until the election of the US president, Joe Biden, who championed the policy.
Zucman said: “The idea is what we have been able to achieve with multinational firms – putting a floor to their effective tax rates – we should do the same for super-rich people.
“At the moment, nothing is being done in that space, of coordinated minimum taxation of individuals and the very wealthy in particular. But this is the beginning of the conversation.”
Using holding companies, offshore trusts, and other intermediate structures, most billionaires are able to pay a much lower rate of tax as a proportion of their income than the rest of the population. The EU Tax Observatory, which is funded by the EU, estimates they pay the equivalent of 0-0.5% of their wealth in personal income taxes.
In countries including UK, France, the US and Brazil, the super-rich pay an effective tax rate lower than the average worker, According to research by Oxfam, G20 countries are home to nearly four in five of the world’s billionaires.
Tax justice campaigners have described the discussions in Brazil as a pivotal moment. Oxfam’s tax policy lead, Susana Ruiz, said: “Just getting this on to the agenda at the G20 is a historic step.”
Opening the gathering, Fernando Haddad urged his counterparts to join forces: “We need to ensure that the world’s billionaires contribute their fair share in taxes.”
In a speech that linked the uneven distribution of wealth to climate policy, he said both issues needed to be tackled together. “We have reached an unsustainable situation in which the richest 1% own 43% of the world’s financial assets and emit the same amount of carbon as the poorest two-thirds of humanity.”
However, the debate comes at a delicate time, with a steady breakdown in cooperation between global powers and reluctance in some countries to impose higher taxes. In the UK, Labour has ruled out any new taxes on wealth if elected to power.
Several countries are still to ratify the deal agreeing a global minimum corporate tax – including the US, where it lacks support to pass through the Senate amid Republican opposition – while the plan risks losing political support in several other important jurisdictions.
Zucman acknowledged some countries would be reluctant but said there was “growing recognition” of the need for international cooperation in an age of hypermobile global capital.
“I’m relatively certain that at some point, one day we’ll wake up and the morning radio programme the top item will be countries reaching an agreement on a minimum tax on the very rich. I’m pretty confident. But it’s hard to know if this is one year, or five, or 10 or 20,” he added.
