INTERNATIONAL TAXATION

At the G20, Brasil's proposal to tax the super-rich may raise up to 250 billion dollars a year

The document provides technical support for Brasil’s G20 presidency’s proposal to tax the world's billionaires. Prepared by French economist Gabriel Zucman, the study highlights the importance of international collaboration to avoid tax evasion, as well as the obstacles to implementing an international taxation standard.

06/25/2024 5:00 AM - Modified 16 days ago
Iniciativa brasileira discutida no G20 quer taxar em 2% por ano as super-riquezas no mundo e já recebeu apoio de vários países  | Fofo: Zervas via Flickr
A Brazilian initiative discussed at the G20 proposes to tax the world's super-rich at 2% per year. It has already received support from several countries | Photo: Zervas via Flickr

A 2% minimum tax on the world's billionaires’ wealth would generate USD 200 to 250 billion in revenue per year. The estimate is based on the Brazilian proposal to the G20 on taxing the super-rich presented on Tuesday, June 25, prepared by French economist Gabriel Zucman, a professor of Economics at the Paris School of Economics and the University of California.

According to the report, the progressive taxation approach would initially affect around 3,000 people individuals who own fortunes of over one billion dollars —distributed in assets, real estate, shares, and company ownership, among others— who do not yet pay at least 2% in annual income tax. "Only individuals with ultra-high net worth and particularly low tax payments would be affected," the document states. 

Zucman argues that the study turns Brasil's suggestion of a minimum tax on super-riches "something technically feasible" and highlights the boldness of G20 Brasil in introducing the idea into the discussions of the world's greatest economies. "It may sound utopian, yet many countries can implement it. There are reasons to believe that we will achieve this over time," he said. 

Felipe Antunes, General Coordinator of International Financial Affairs at the Brazilian Ministry of Finance, which coordinates the G20 Finance Track, indicated that there is great interest in the Brazilian proposal and the timing of the debate has proved to be appropriate, as several countries have already expressed support for a taxation pattern for the super-rich. Antunes realizes that the discussions on the topic are in the early stages and need time to be properly explored and implemented. 

"A top concern for G20 Brasil is making sure the super-rich pay a fair amount of taxes. We still need to have parallel discussions to see how to take this tax proposal to the countries. The countries will be able to implement it in different ways and use their efforts to reach an understanding of this reform in order for it to have a chance of moving forward. I cannot say how soon we will be able to advance. Conversations have been going on in some international forums, and we will bring this matter to all these meetings," said the diplomat.

Gabriel Zucman, French economist responsible for the matrix of the Brazilian proposal to tax the super-rich at the G20 | Photo: Rebecca Omena/MF
Gabriel Zucman, French economist responsible for the matrix of the Brazilian proposal to tax the super-rich at the G20 | Photo: Rebecca Omena/MF

International cooperation 

In his analysis, Zucman emphasizes that international cooperation is key to improving the effectiveness of taxing the super-rich. "A coordinated minimum tax adds value because, in practice, there is a risk that they will hide their income and send it to countries that tax less. An international exchange and a common standard of taxation are essential to avoid tax competition," he said. 

However, the expert points out that the normative standard is flexible and can be implemented by countries as a group or individually, through domestic taxation mechanisms such as an estimated tax on a broad notion of income or wealth. "The G20 has traditionally been quite effective in putting bold and innovative projects on the agenda, as well as providing political leadership for long-term agreements. "I think that could happen here," he remarked. 

Challenges and solutions for implementation 

The matrix of the Brazilian proposal for progressive taxation highlights challenges for the implementation by the countries, such as determining the value of individuals' wealth; overcoming international financial opacity by improving the transparency of information on transactions; and "imperfect" international coordination, since some countries can adhere to the taxation standard, but not all of them necessary need to implement it. 

Although the initiative needs to be discussed in greater depth, the economist expects to seize the opportunity offered by previous advancements in international coordination on the issue of taxation, such as bank exchanges and the minimum tax on multinationals, which have already been discussed within the framework of the G20, and expand on them. "I consider the action plan to be a technical document, aimed at feeding into the political discussion, showing the number of possibilities and existing challenges, and demonstrating how to overcome the potential problems that could arise," he said. 

In order to implement the tax standard, Zucman stressed that it is necessary to weigh up the costs and benefits of the proposal and that, at the moment, the focus needs to be on the billions of dollars that are lost every year by not taxing the super-rich. "We're making a basic proposal to raise taxes for 3,000 people. It won't really cost that much, but a small fraction of what they expect from the 250 billion dollars of additional revenue," he concluded.

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