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The Elephant in the Room: A Minimum Tax on Billionaires Update created: 2 August 2024
Catarina Gomes Correia | Tax Attorney, Author & Researcher and IBFD Correspondent
What is everyone talking about, but some don’t even want to think about? The possibility for a minimum tax on high-net-worth individuals (HNWIs). Gabriel Zucman and other researchers from the EU Tax Observatory first wrote about this in a report of October 2023. In June 2024, at the request of the Brazilian G20 presidency, Zucman built up on this proposal. The OECD also addressed the taxation of HNWI in its report to the G20 finance ministers and central bank governors in July 2024. Will the European Union catch up on this trend? 1. The 2023 October report of the EU Tax Observatory In October 2023, the EU Tax Observatory (EUTO) published the Global Tax Evasion Report 2024, in which the proposal for a minimum tax on ultra-high-net-worth individuals (UHNWIs) was introduced. For the EUTO, this discussion is vital, given rising income and wealth inequality, high public debt and government revenue needs for addressing climate change and funding health care, education and public infrastructure. At stake is the question of the social sustainability of globalization and the social acceptability of modern tax systems. According to the data provided, billionaires have effective tax rates equivalent to 0% to 0.5% of their wealth: “[T]ax systems in major countries are, at least at the top, regressive, with the very rich paying a small fraction of their income in taxes compared to those below. … [B]illionaires are proportionally taxed far less than ordinary citizens.” The report further points out that “[i]f citizens don’t believe that everyone is paying their fair share of taxes – and especially if they see the rich and rich corporations not paying their fair share – then they will begin to reject taxation. Why should they hand over their hard-earned money when the wealthy don’t? This glaring tax disparity undermines the proper functioning of our democracy; it deepens inequality, weakens trust in our institutions and erodes the social contract”. 2. Gabriel Zucman’s report of June 2024 at the request of the Brazilian G20 presidency In June 2024, at the request of the Brazilian G20 presidency, Gabriel Zucman presented A blueprint for a coordinated minimum effective taxation standard for Ultra-High-Net-Worth Individuals. The proposal is for individuals with more than USD 1 billion in wealth to pay a minimum effective tax of 2% of their wealth, which, given the known universe of 3,000 billionaires, would raise USD 200-250 billion per year globally. According to Zucman, wealth, for which market values are observable, is the best reference on which to calculate this tax. Additionally, wealth is harder to manipulate than income.
The Elephant in the Room: A Minimum Tax on Billionaires
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