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We welcome the launch of the report, drafted by Gabriel Zucman, discussing a blueprint for a minimum tax on ultra-high-net-worth individuals. Currently, there are around 3000 billionaires worldwide, concentrated in rich countries, paying less than 0.5% of their wealth in personal income tax.
Zucman’s proposal argues for an internationally coordinated standard to ensure that the “super rich” pay a minimum amount of tax, after showing how tax systems fail to tax them fairly. If the minimum tax was equal to 2% of the wealth of billionaires, it would raise $200-$250 billion per year globally from about 3,000 taxpayers; $100-$140 billion more could be mobilized if the tax was extended to centimillionaires.
"Unless we get a global agreement to tax the super-rich, wealth inequality will continue increasing, depriving countries of the necessary funds to resource human rights and climate adaptation and mitigation. It is a matter of justice, revenue, redistribution, representation, and reparations," says Dr. Maria Ron Balsera, CESR's Executive Director.
The report, which expands on Brazil’s proposal in the G20 to use an international approach to ensure that extreme wealth is fairly taxed globally, represents a huge step forward in the efforts to promote tax justice that civil society organizations have been advancing for years. As noted in the report, there is a systemic pattern of regressivity in our tax systems (which is particularly patent in some regions, such as Latin America). Given rising and extreme inequality, and the urgent need to finance public services that allow for dignified living conditions for everyone and a sustainable just transition, governments across the globe need to take urgent and bold measures to address tax regressivity and mobilize sufficient resources to discharge their commitments to the well-being of people and the planet.
Taxing the super-rich would not only raise revenue, but would also help redistribute wealth and reduce social inequalities, and increase representation through a stronger social contract. It could also open the door to reparations, redressing some of the fortunes stemming from colonial legacies, fossil fuel investments, market speculation and general exploitation. Introducing taxes in connection to wealth is inherently progressive as wealth inequality is larger than income inequality. These measures can also incentivize a more productive use of capital, and put a stop to continuously increasing wealth inequality to strengthen democracy and promote social justice. That is why taxing the super-rich increases revenue, redistribution, representation, and reparations.
We need to join forces to ensure that the super-rich pay their fair share
While there are many reasons to support the proposal discussed in the report, we’d like to note that taxing the super-rich appropriately is key for realizing human rights on equal footing for all, and strongly aligned with States’ duties under international human rights law. Current levels of extreme inequality run contrary to human rights commitment and often lead to multiple forms of discrimination. Under international human rights law, States must ensure that their tax policy is effective, progressive, and socially equitable. They must take financial measures (including tax measures) to effectively address discrimination and inequalities including income and other economic inequalities, as a matter of priority. As a result, States should ensure tax systems are “increasingly redistributive and socially fair”, for example, ensuring that those with higher income and wealthier are subject to an appropriate tax burden.
Furthermore, the significant revenue potential of the proposal aligns with States’ duty to mobilize their maximum available resources for the full realization of human rights; and would allow countries to adequately finance human rights and climate adaptation and mitigation.
The proposal is not only relevant to bring into practice long-held demands in the human rights movement, but is also crucial for the climate and gender justice movements. The richest 1% has produced as much carbon pollution in 2019 as the poorest two-thirds of humanity. Sufficiently taxing this small group of people would allow governments to raise revenue to redress at least some of the consequences of their actions, as a way to —partially— operationalize the polluters pay and the common but differentiated responsibilities principles. Furthermore, given the significant funding gaps in climate finance, the report provides data on the enormous revenue potential of progressive taxes. In this way, Zucman’s proposal offers a human rights-compliant alternative to ‘solutions’ based on attracting private finance, more debt, and other market-based solutions to the climate crisis.
A global deal on taxing the super-rich is also significant for the gender justice agenda (and, relatedly, to racial justice demands). In many countries, including Brazil, the correlation between vertical and horizontal inequality for race and gender is clear. Given the overrepresentation of men among the wealthiest individuals, the proposal has an enormous potential to promote gender equality, by taxing highly “male-biased” income and wealth.
Additional points for consideration
Zucman’s proposal is a valuable step forward in the pursuit of tax justice. At CESR, we offer the following recommendations to further enhance its impact:
- As a key milestone in debates on international taxation, the proposal should align with current efforts to make tax cooperation more inclusive and effective. Therefore, the proposal should be taken up and further advanced in the context of the United Nations (UN) Framework Convention on International Tax Cooperation, currently being discussed. There is no other forum that has sufficient democratic legitimacy to move forward with a proposal that promotes justice at its very core. Importantly, the current zero draft of the terms of reference of the Convention makes a clear call to make commitments in connection with “effective taxation of high-net-worth individuals”, and suggests developing an early protocol, within the Convention, on the issue. These efforts could easily build on the important, recent work on wealth taxation of the UN Committee of Experts on International Tax Cooperation.
- Given the colonial legacies of international taxation, the proposal should be advanced in ways that ensure sufficient revenues to countries and peoples in the Global South. As the report notes, it is essential to give countries flexibility to implement the tax proposal according to their resources and capacities. We suggest moving away from only taxing billionaires, as initially suggested by Brazil in the G20, to allow flexibility in country differences. The implementation of the proposal in each country should ensure that there is actual redistribution of wealth, as well as sufficient mobilization of the maximum available resources to finance human rights (this could mean, for example, using the minimum thresholds discussed in the report; or supporting proposals to tax the richest 1% of each country at least at 8% of their wealth). This is particularly relevant in regions such as Latin America, to correct structural tax regressivity in historically unequal regions.
Furthermore, extreme inequality would be best tackled if highly progressive taxes are allocated, as a matter of priority, to highly progressive, rights-aligned spending. - Given long demands in the tax justice movement, the proposal should provide an opportunity to advance in tax transparency. The proposal gives a unique opportunity to expand the scope of existing efforts on exchange of information, for example to cover various classes of assets such as real estate, and move forward in the creation of a public, global asset register.
What’s next?
Taxing extreme wealth is high up in the political agenda, and should be increasingly so. Brazil’s proposal in the G20 has led to support from the majority of G20’s countries’ population, from countries such as Germany, Spain, South Africa —and to high-level political debates in countries like the United States—, and from spaces such as the Latin American Platform on Tax (PT-LAC) and the African Union. G7 countries have similarly committed to engage constructively with the Brazilian G20 tax agenda, and the ad hoc Committee working on the Terms of Reference for a UN Convention on Tax has also picked up the relevance of taxing high networth individuals internationally.
As CESR has argued in its work with the PT-LAC, the G20, and around the UN Tax Convention, we believe that more countries, civil society organizations and movements should join existing efforts. This is crucial to make sure the proposal, which is already at the table, incorporates a rights, climate and gender lens from the beginning.
Similarly, we believe it is crucial for countries from the Global South to collaborate and cooperate to engage in relevant discussions and shape debates in accordance with their interest. The engagement of PT-LAC (where only one of its members, Brazil, is also a G20 member) with the proposal and its overall concern with the issue of tax progressivity with an international approach is a perfect example of this. The proposal has a huge potential to trigger and support national-level debates on much needed fiscal reforms, and to reshape existing narratives on wealth, economic justice, and the role of the State in the economy.