In a bold move to tackle soaring inequality, Spain and Brazil have launched a joint initiative to promote higher tax contributions from the world’s super-rich. The initiative aims to ensure that the wealthiest individuals pay their fair share of taxes, addressing the growing wealth gap between the rich and the rest of the population.
The Problem: Low Tax Rates for the Ultra-Rich
According to economist Gabriel Zucman, the world’s ultra-high-net-worth individuals have seen their fortunes increase by an average of 7.5% per year over the past four decades, while paying an effective tax rate of just 0.3% on their wealth. This tax avoidance has contributed significantly to the widening wealth gap.
The Solution: A Global Minimum Tax
The joint initiative proposes a global minimum tax on billionaires, set at 2% of their personal wealth. This tax would apply to around 3,000 individuals worldwide and could raise up to $250 billion annually. Extending the tax to centi-millionaires (those with wealth over $100 million) could add another $140 billion. A 3% tax rate could increase the annual revenue to $688 billion.
How It Would Work
Each participating nation would determine how to enforce the minimum tax standard, allowing flexibility in implementation. Possible approaches include;
- Defining Unrealized Capital Gains as Income: Taxing wealth growth as income
- Wealth Tax: Implementing a tax on personal wealth
- Presumed Income: Taxing a fraction of wealth as presumed income
Global Support and Momentum
The initiative has already gained significant international attention, with Brazil’s Finance Minister Fernando Haddad stating that a global billionaire minimum tax would “affect just a few thousand individuals while benefiting billions”. The proposal builds on the success of the global minimum tax on multinational corporations, which has been adopted by over 130 nations and territories.
Addressing Inequality and Funding Global Challenges
The additional tax revenue could be used to address pressing global issues such as poverty, climate change, and inequality. By promoting progressive taxation, the initiative aims to strengthen social cohesion and trust in governments.
Next Steps
The proposal will be discussed at the upcoming G20 finance ministers meeting in Rio de Janeiro. With growing international momentum, the initiative has the potential to reshape the global tax landscape and promote greater economic equality.
