Last week, Brazil presented a plan to the G20 to impose a global tax on billionaires.
Currently holding the G20 presidency and gearing up for a big leaders’ summit in Rio de Janeiro in November, Brazil’s progressive government under President Lula da Silva contracted French economist Gabriel Zucman (a frequent collaborator with Thomas Piketty) to report on how such a global tax on the ultra-wealthy could be implemented.
Zucman found that if the world’s 3,000 billionaires paid a minimum tax per year of 2% of their wealth, global tax coffers would increase by up to A$380 billion. His proposal would only apply to billionaires who don’t already pay the equivalent of 2% of their wealth in income tax, acting as a top-up. He insists it is now, for the first time, technically feasible.
It may seem radical to tax the stock of wealth instead of the flow of income. But as Oxfam International found last year, the wealth of the world’s billionaires has been growing so quickly in recent years that it would only have stagnated if taxed at a rate of approximately 12.8%.
The proposal has split G20 leaders, however, with France and other European countries in support, but the US and Germany expressing doubts about the feasibility of implementing such a scheme. The meeting’s declaration thus stated that G20 nations will work together to effectively tax the ultra-rich, but stopped short of agreeing on how. A decision on Brazil’s proposal was postponed until the leaders’ summit in November.
The response from the Albanese government? So far… crickets. It has yet to voice a public position on the idea.
This comes as Oxfam Australia reported last week that Australian billionaires are $120 billion richer since 2020 (a 70% increase) and 74% of Australians support a wealth tax on individuals with over $50 million. It’s unsurprising — Gina Rinehart, Clive Palmer and Anthony Pratt are not exactly beloved national treasures.
Perhaps Australia’s wait-and-see position reflects an exhaustion with such global tax agreements, the last of which — on multinational corporations — is still causing the government headaches.
In 2021, nearly 140 countries signed a global multinational tax deal brokered by the OECD. The deal, aimed at ending the “race to the bottom” on company tax rates among various tax haven jurisdictions, contained two “pillars”. The first reallocates the residual profits of large multinationals from their “home” countries (read: where they are technically domiciled to pay the lowest possible rate of corporate tax) to countries in which they generate the most revenue. The second establishes a 15% global minimum corporate tax — still low by developed country standards, but much higher than in many tax haven countries.
The Albanese government initially promised to go even further than the OECD agreement, pledging to make companies disclose more information about exactly where their revenues were booked. They would have to disclose it publicly, as opposed to the OECD’s system of private disclosure to tax officials.
But then, as the Financial Times exposed in 2023, the OECD successfully lobbied Australia to water down and delay the implementation of its laws. The Paris-based organisation, helmed by former Coalition finance minister Mathias Cormann, worried that Australia’s more ambitious system would undermine its more modest efforts, with powerful corporations fearful of a slippery slope. Cormann rejected the FT’s reporting.
The subsequent bill passed in June last year ditched a number of disclosure requirements, particularly on related-party expenses, effective tax rates and intangible assets, and the public “country-by-country” reporting regime was delayed until 2024.
To its credit, the Albanese government has returned to the fight this year, tabling another bill to implement the OECD’s second pillar, which is currently being argued over by corporate lobbyists in Senate hearings. Public “country-by-country” reporting is also back on the table. Treasury set up a taskforce last week to help implement its obligations under the global tax agreement. Assistant Minister Andrew Leigh seems determined to keep pushing. Watch this space.
As for future ambitious global tax agreements, especially those originating from the Global South, the Albanese government seems less than enthusiastic after its bruising multinational fight.
In November 2023, for instance, Australia voted against a resolution of the UN General Assembly that called on countries to cooperate to ensure multinationals pay tax in the countries where they make money. The resolution looked to go beyond plugging holes in the current system with minimums and top-ups, and to invite a more fundamental rethink of global corporate taxation. It was overwhelmingly approved by 125 mostly developing nations; most of the richest countries opted out.
“The signalling was stark,” wrote QUT’s Kerrie Sadiq and the University of Western Australia’s Richard Krever. “The richer countries preferred the international tax system we have — the one that grants taxing rights to the countries that multinational countries call home rather than the countries in which those multinational corporations derive their profits.” The current system is managed by the OECD (the rich nations club), as opposed to the broad-based UN assembly which includes poorer nations.
The odds are thus stacked against Brazil successfully prosecuting a second front on ultra-rich individuals.
But their proposal deserves a proper look in Canberra. Part of Labor’s original impetus to go hard on multinationals was to compensate for a retreat on entrenched tax concessions like franking credits and the capital gains tax discount, beloved by the upper-middle classes as much as billionaires.
If one maintains this aversion, yet still acknowledges the need for increasing revenue amid growing social need, billionaires are an easier target than most. Even if, as proposed by some, the revenue went towards global climate mitigation, that would still align with Australia’s national interests abroad.
I don’t doubt being harangued by C-suiters and the chairman’s lounge set is tiring. But if Albanese needs good reasons to knuckle down, I can provide a few. A few billion, in fact.
Should billionaires be paying more tax? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
