The G20 group of the world’s biggest economic powers met in Rio de Janeiro last week to discuss a proposal by Brazil’s president Luiz Inácio Lula da Silva to create a 2% rate of tax on individuals with over $1 billion in total assets, with revenue going towards action on climate change. The proposal gained widespread support, despite questions over the policy from Germany and the US.
French economist Gabriel Zucman says that at present billionaires give up just 0.3% of their wealth in taxes. And worse, over the last decade alone, the richest 1% have amassed new wealth to the tune of $42 trillion. According to Oxfam, that’s nearly 36 times more than the entire bottom half of the world’s population.
Space programs versus climate tax
Remarking that “At the top of the pyramid, tax systems stop being progressive and become regressive. The super-rich pay proportionally much less tax than the working class,” Lula took aim at billionaires who hoard resources for their own private projects, such as Jeff Bezos and Elon Musk’s rocket firms, rather than contributing their fair share to public finances.
Some individuals control more resources than entire countries. Others have their own space programs.
Luiz Inácio Lula da Silva, President of Brazil
The minimum 2% tax on the world’s richest 3,000 billionaires could release between €184 billion and €230 billion globally each year, Zucman’s report noted. This could be spent on health, education and measure to tackle climate change, proponents of the tax argue.
By Friday, 26 July, the G20 seemed to agree, releasing a joint statement declaring that the participants “engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed” with the announcement welcomed by ecologists.
Irrelevant and undesirable?
But questions remain about how the strategy would be implemented or whether a global wealth tax is even possible, especially with economic powerhouses like the US and Germany remaining aloof. US Secretary for the Treasury, Janet Yellen, claimed that the US is in favour of progressive taxation, but stated that the US “don’t really see a need or really think it’s desirable to try to negotiate a global agreement on that.” Germany’s response was even more dismissive, calling the policy idea “irrelevant” and casting doubt on whether the plan can ever come to fruition.
Still, green stakeholders expressed optimism that a global tax regime is on its way, to prevent billionaires continuing to shield income in tax havens. “We often hear there is not enough money to solve the climate crisis, which is set to cost trillions of dollars every year,” Camila Jardim, a Greenpeace Brazil politics expert said. “But taxing the super-rich can start to show there is more than enough money – it just needs to be channelled away from destruction.”
Meanwhile, tax commentator for Oxfam International, Susana Ruiz, called the G20 joint statement “serious global progress” and hailed the idea that “Finally, the richest people are being told they can’t game the tax system or avoid paying their fair share.”
