A global minimum tax on billionaires could raise $250 billion a year

by Leigh Thomas

PARIS (Reuters) – Governments should open a new front in the international fight against tax evasion by introducing a global minimum tax on billionaires, which could raise $250 billion a year, the European Tax Observatory said on Monday. taxation in a report.

If this sum were taken, it would be equivalent to only 2% of the approximately 13,000 billion dollars of wealth held by the 2,700 billionaires around the world, said 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 wealth holding companies, or family holding companies, to avoid income tax, the group said in its 2024 Global Tax Avoidance Report.

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 the tax, he told journalists.

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 taxes on income”, specifies the Observatory.

Growing wealth inequality in some countries is also fueling calls for the richest citizens to bear a greater share of the tax burden, as public finances struggle to cope with an aging population and enormous needs. financing 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 succeeded in ending banking secrecy and reducing the possibilities for multinationals to transfer their profits to countries low tax rate.

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.

The 2021 international agreement between 140 countries is expected to limit the ability of multinationals to reduce their taxes by recording their profits in low-tax countries, setting a global floor of 15% for corporate taxes from next year, even if it has “been considerably weakened”, according to the observatory.

“What many thought was impossible, today we know it is possible,” said Gabriel Zucman. The next logical step is to apply it to billionaires, not just 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.

While the end of banking secrecy and the minimum corporate tax have ended decades of competition between countries over tax rates, some 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, believes the Observatory, this remains “less damaging” than standard tax competition. because of the potential to accelerate the energy transition.

(Reporting Leigh Thomas; French version Kate Entringer, edited by Blandine Hénault)