According to the EU Tax Observatory, most taxpayers pay a higher rate than the ultra-wealthy, who can avoid taxes by using complex business structures.
The Call for a 2% Minimum Tax on Billionaires
It was estimated that a 2% minimum tax on the global wealth of billionaires would generate $250 billion (£205 billion) annually.
Approximately 2,500 individuals have amassed a total wealth of $13 trillion as billionaires.
EU Tax Observatory, an affiliate of the Paris School of Economics, analysed the effectiveness of initiatives to ensure that businesses and individuals pay their fair share over the last decade in its report.
The automatic sharing of account information of the affluent across more than one hundred countries, according to the report, has substantially reduced offshore tax evasion.
“However, billionaires frequently use shell corporations to evade income taxation,” the report states, resulting in tax rates of 0% to 0.5% of their wealth.
Strategies for Wealthy Individuals to Minimize Taxation
Quentin Parrinello, senior policy adviser at the EU Tax Observatory, said that global billionaires “structure their wealth to generate minimal taxable income.”
“Join the Webull revolution in the UK and receive your free shares today.”
While acknowledging the “utopian” nature of countries imposing a 2% tax on billionaires, he stated that “the notion of requiring Swiss banks to share tax information with tax authorities a decade ago is no longer a central provision in the fight against tax evasion.”
Global Efforts and Their Shortcomings
While the report commended a 2021 agreement between 140 countries to require corporations to pay at least 15% in corporation tax, it stated that a “growing list of loopholes” has “dramatically weakened” the plan since then.
In the report’s introduction, Nobel Prize-winning American economist Joseph Stiglitz argued that inequitable taxation threatens democracy.
“Citizens will begin to reject taxation if they do not believe that everyone is contributing their fair share of taxes, and especially if they observe wealthy individuals and corporations not accomplishing this.”
“Since the wealthy do not surrender their hard-earned money, why should they?” “This egregious tax disparity erodes the social contract, exacerbates inequality, and undermines faith in our institutions, all of which are detrimental to the proper functioning of our democracy.”
The Importance of Tax Fairness in Upholding Democracy
Mr. Parrinello suggested discussing a tax on the ultra-wealthy at the next G20 summit in Brazil in less than a year.
Although international agreements are preferable, “we must also be realistic,” he said, adding that countries can pursue certain proposals detailed in the EU Tax Observatory report unilaterally.
A considerable proportion of the wealthiest individuals globally have made a solemn commitment to donate the vast majority of their assets. The “Giving Pledge” was established in 2010 by Warren Buffett, philanthropist Melinda French Gates, and Microsoft co-founder Bill Gates with the intention of “establishing a new benchmark for opulence among the ultra-wealthy.”
In 2013, subsequent to a sequence of tax modifications, Mr. Buffett acknowledged that despite an increase in his tax rate, he continued to remit a lesser percentage of his income than his secretary.
“I anticipate receiving the lowest tax refund in the office,” he predicted at the time.
As governments are compelled to make vital investments in education, health, infrastructure, and technology, and as nations confront the challenges of climate change, pandemics, and inequality, Mr. Stiglitz stated that addressing tax fairness and revenue collection was “critical” for society.
MacKenzie Scott, an author and erstwhile spouse of Jeff Bezos, one of the Giving Pledge’s endorsees, has only recently done so.
Four years ago, their divorce judgement gave her 4% of the online retailing giant. Forbes estimates Ms. Scott is worth $33.6 billion and has donated $14 billion.
At $148 billion, her ex-husband of twenty-five years, Mr. Bezos, ranks third in the world in terms of wealth. He stated to CNN a year ago that he intended to donate the majority of his fortune.
Forbes ranks Elon Musk, proprietor of X, formerly Twitter, and co-founder and leader of Tesla and SpaceX, as the wealthiest individual in the world at present, amassing a $225 billion fortune.
