IIt floated like a curious perfume in the atmosphere of Sao Paulo. The finance ministers of the twenty G20 countries met there on February 28 and 29 to talk about taxes. They discussed the terms of application of the global minimum tax of 15% for multinationals. Decided in 2021, it came into force this year and should complicate the task of tax havens.
But Brazil is determined to put on the table another project on the taxation of billionaires. The idea here again is to fight against tax evasion by large fortunes. The European Tax Observatory estimates that such a tax could bring in $250 billion (€231 billion) per year, or 2% of the approximately $13,000 billion in wealth held by the world’s 2,700 billionaires. .
There is a clear connection between the two subjects. The fortune of some, the multinationals, has made that of others, their shareholders. And if there are more of them than ever, it’s because very large companies have never made so much money. According to the weekly’s calculations The Economiston February 25, the net profits of the top 500 American companies that make up the S&P 500 index increased by an average of 2% per year, between 1962 and 1989. Over the thirty years that followed, this rate doubled, rising to 4% per year, bringing the stock market value to current historic highs.
Fall in the cost of debt
Two explanations for this phenomenon which owes little to productivity and a lot to economic policies. In the wake of the Reagan-Thatcherite revolution, corporate taxation collapsed, and not only in the United States, where the overall rate would have fallen from 50% in 1980 to a little more than 25% in 2023. Same tumble , in similar proportions, in the United Kingdom, Germany or France.
Second reason, the spectacular fall in the cost of debt, especially from the 2010s and the advent of zero or even negative rates. To convince himself of this, the economist of the Federal Reserve (American central bank) Michael Smolyansky compared the trajectory of operational results, that is to say excluding taxes, and that of net results. The latter exploded, when operating profits were growing as before.
But the party is over. As the G20 discussions in Sao Paulo demonstrated, nations, often lacking resources, tend to raise taxes, as the United Kingdom did in 2023. In addition, inflation has closed the episode of low rates. For great fortunes as for the stock market, an era is ending and promises great upheavals.