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G20 countries such as Brazil, Germany, South Africa and Spain claim that a 2% tax on wealth would reduce inequality and raise funds to minimize the climate crisis.
The finance ministers of Germany, Spain, Brazil and South Africa are for the first time advocating a global tax on billionaires to help tackle the costs of the climate crisis.
“The time has come for the international community to take seriously the fight against inequality and the financing of global public goods,” write the ministers of the four economies in an opinion piece published in The Guardian.
The proposal was first put forward by Brazil, which chairs the G20, at a meeting of finance ministers earlier this year, and could force the world’s 3,000 billionaires to pay a minimum tax of 2% on their wealth. The French finance minister, Bruno Le Maire, has also given his support to the proposal.
This tax system would raise 250 billion pounds (233 billion euros) a year, which is roughly the amount of economic damage caused by extreme weather events last year, according to the authors of the plan. Activists, meanwhile, say that the tax covers around half of the annual costs of losses and damage caused by climate disasters.
“One of the main instruments available to governments to promote greater equality is fiscal policy. Not only does it have the potential to increase the fiscal space available to governments to invest in social protection, education and climate protection. Designed in a progressive way, it also ensures that everyone in society contributes to the common good according to their ability to pay. A fair contribution increases social welfare,” reads the article.
The extra money could be applied to some of the world’s greatest public needs and injustices, namely poverty, inequality and the climate crisis.
According to the ministers, a tax on billionaires is a “necessary third pillar” to complement the negotiations on the taxation of the digital economy and the introduction earlier this year of a 15% minimum corporate tax for multinationals.
In addition to only paying the equivalent of 0.5% of their wealth in personal income tax, billionaires “can easily transfer their fortunes to low-tax jurisdictions and thus avoid tax (…). And that’s why a tax reform of this kind should be included on the G20 agenda. International cooperation and global agreements are key to making this tax effective” and ensuring that tax systems treat “all citizens fairly”.
To counter the use of tax havens, the tax would be designed to prevent billionaires who choose to live in Monaco or Jersey, for example, but who earn their money in larger economies, from reducing their tax bill below a globally agreed minimum. If a country didn’t impose the minimum tax, another country could claim the income.
French economist Gabriel Zucman is now preparing the technical details of a plan that will be discussed by the G20 in June.
“Billionaires have the lowest effective tax rate of all social groups. The fact that the people with the greatest ability to pay taxes are the ones who pay the least doesn’t seem to me to support that idea,” the economist told The Guardian, highlighting the overwhelming public support for the proposal. “I don’t want to be naive. I know that the super-rich will fight. They hate taxes on wealth. They will lobby governments. They will use the media they own.”
The finance ministers are calling for more countries to join their campaign for a fairer tax system.
Marta Cerqueira is from Minho and a vegetarian. Luckily, she lives in Lisbon, where there is more tofu than sarrabulho. She has been a journalist for over 15 years, the last of which writing about food and sustainability. Now, out of the newsroom, she continues to write whenever she can, be it in magazines, journals, post its, or on her Instagram page, which she uses to share a life divided between being a mom-person-foodie-traveler. Still, she created Peggada so she could write about what doesn't fit in a magazine, journal, post it or Instagram: a better world.
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