EU Tax Observatory bats for global minimum tax on billionaires; says could yield $250 billion a year

Tax on Billionaires: The EU Tax Observatory has said that Governments should introduce a global minimum tax on Billionaires to clampdown on tax evasion. The reserach group further mentioned that this could raise $250 Billion annually.

2024 Global Tax Evasion Report

In the 2024 Global Tax Evasion Report, the research group had mentioned that if the tax is levied it would be only 2% of the nearly $13 trillion in wealth owned by the 2,700 billionaires globally.

As per the report, the effective personal tax is often far less than what other taxpayers of more modest means pay. This is because the billionaires can park wealth in shell companies sheltering them from income tax.

"In our view, this is difficult to justify because it risks to undermine the sustainability of tax systems and the social acceptability of taxation," said the observatory's director Gabriel Zucman.

The Observatory further estimated that billionaires' personal tax in the United States is estimated to be close to 0.5% and as low as zero in otherwise high-tax France.

Wealth Inequality

Public finances struggle to cope with aging populations, huge financing needs for climate transition and legacy COVID debt. These factors are fuelling calls for the richest citizens to bear more of the tax burden.

U.S President Joe Biden in 2024 Budget included plans for a 25% minimum tax on the wealthiest 0.01%. However, the proposal has fallen by the wayside with lawmakers in Washington preoccupied with government shutdown threats and looming funding deadlines.

Actions Taken

The research group has also addressed how big the task of implementation would be. It pointed out that though coordinated international push to tax billionaires could take years, governments have seen sucess in ending bank secrecy and reducing opportunities for multinationals to shift profits to low-tax countries

The amount of wealth held in offshore tax havens has reduced by a factor of three after the 2018 launch of automatic sharing of account information, the Observatory estimated.

Another 2021 agreement between 140 countries will limit multinationals' scope to reduce tax by booking profits in low-tax countries by setting a global 15% floor on corporate taxation from next year.

"Something that many people thought would be impossible, now we know can actually be done," Zucman said. "The logical next step is to apply that logic to billionaires, and not only to multinational companies."

The report further added that although the end of banking secrecy and the corporate minimum tax have put an end to decades-long competition between countries on tax rates, numerous opportunities remain to reduce tax bills.