Study reveals global billionaire tax could generate $250 billion annually

The EU Tax Observatory suggested on Monday, 23 October, 2023, that governments should introduce a global minimum tax on billionaires as a new measure in the ongoing international efforts to combat tax evasion. This proposed tax could generate approximately $250 billion annually, according to the research group.

To put this into perspective, this amount would represent only 2% of the combined wealth of the 2,700 billionaires worldwide, which currently stands at nearly $13 trillion. The organization, headquartered at the Paris School of Economics, argued that billionaires often pay significantly less in personal taxes than individuals with more modest incomes. They achieve this by parking their wealth in shell companies that shield them from income tax, as detailed in the 2024 Global Tax Evasion Report.

Gabriel Zucman, the director of the EU Tax Observatory, expressed concerns about the impact of such practices on the sustainability of tax systems and the societal acceptance of taxation. He highlighted that billionaires in the United States pay an estimated personal tax rate of around 0.5%, and in high-tax countries like France, it can be as low as zero.

This growing wealth inequality in various nations has led to increased calls for the wealthiest citizens to bear a greater share of the tax burden. This is crucial as public finances grapple with challenges such as aging populations, substantial funding requirements for climate change initiatives, and lingering COVID-related debt.

While President Joe Biden's 2024 budget initially included a proposal for a 25% minimum tax on the top 0.01% of earners, this idea has encountered obstacles in the face of government shutdown concerns and impending funding deadlines in Washington.

The EU Tax Observatory acknowledged that achieving international consensus on taxing billionaires may take time. However, they pointed to previous successes in eliminating bank secrecy and reducing profit-shifting opportunities for multinational corporations as encouraging examples. The automatic sharing of account information, initiated in 2018, has significantly reduced the amount of wealth held in offshore tax havens. Additionally, a 2021 agreement involving 140 countries will establish a global 15% floor on corporate taxation starting next year, reducing multinational companies' ability to minimize taxes by routing profits to low-tax jurisdictions.

Zucman proposed that a "coalition of willing countries" could lead the way in implementing a minimum tax on billionaires if a comprehensive international agreement is elusive. The report also emphasized that despite progress in eliminating tax competition between nations due to banking secrecy and corporate minimum tax measures, opportunities for reducing tax liabilities still exist. For instance, the wealthy increasingly invest in real estate instead of offshore accounts, and companies can exploit loopholes within the 15% corporate tax minimum.

Furthermore, governments are engaged in competitive efforts to attract investments through subsidies, which, while less detrimental to their tax bases than competing solely on low tax rates, can still have an impact.