INTERNATIONAL TAXATION

Taxing the super-rich: at the G20, Gabriel Zucman advocates for international standards for tax justice

In an exclusive interview, French Economist and Brazilian proposal influencer deliberates the crucial role of a 2% billionaire wealth tax in tackling global inequalities, bolstering public services, and cultivating a fairer, sustainable economy.

05/23/2024 12:06 PM - Modified a month ago
Gabriel Zucman in an exclusive interview for the G20 Brasil official website. The economist delivered a keynote speech at a symposium on international taxation, promoted by the Finance Track of the Forum in Brasilia | Photo: Rebecca Omena/MF

As crucial as it is contentious, the taxation of the super-rich stands out as a priority during Brasil's G20 Presidency, offering a pivotal avenue to mobilize resources for combating global hunger and inequality. This issue has been under discussion within the forum since at least 2013, demonstrating remarkable advancements, garnering endorsement from member nations, and enjoying substantial public backing in numerous countries where research on the matter has been conducted.

In a recent study published on the occasion of the World Economic Forum in Davos, Switzerland, Survation interviewed a group of individuals identified as the top 5% wealthiest in the world's largest economies. The results revealed that 74% of them support higher taxes on wealth to help address the cost-of-living crisis and improve public services.

The key idea is that the G20 proposal combines international coordination with national sovereignty. We are working together globally to establish a standard of fairness and justice, but each country retains the freedom to use various tools to implement it within its national tax systems.

Gabriel Zucman, a French economist and Associate Professor of Public Policy and Economics at the University of California, gave an exclusive interview for the G20 official website about the proposal to establish an international standard of progressive taxation in which the world's super-rich would pay an annual tax of at least 2% of their wealth. According to Zucman, some of the world's 3,000 billionaires currently pay no tax at all on their annual earnings. 

The economist is a key influencer behind Brazil's G20 proposal for progressive international taxation to promote tax justice. He was in Brasília to deliver a keynote speech at the International Taxation Symposium, organized by the Brazilian Ministry of Finance, which coordinates the Finance Track along with the Banco Central do Brasil (BCB).

Minimum tax for billionaires

We have a global issue with our tax systems: the super-rich pay significantly less tax than the rest of us. The proposal aims to establish a new international standard to rectify this disparity. Under this standard, billionaires in every country would be required to pay at least 2% of their wealth in taxes annually.

This is a minimum tax. While some billionaires already pay more, many pay far less in most parts of the world — sometimes nothing at all. This new standard would require them to pay additional taxes to uphold the basic principle of fairness and justice. The idea is that it is acceptable to become very rich, but paying zero is not. Billionaires must pay at least 2%.

Actions for the effectiveness of progressive global taxation

I am optimistic about the prospects of a new standard emerging primarily because of the overwhelming popular demand for this policy worldwide. Surveys show that when asked about supporting a more progressive tax system, 70% to 80% of people express strong approval.

Secondly, we have collectively made significant progress in international tax cooperation over the last 15 years, largely thanks to the G20. There have been two major successes. First, in 2013, the G20 approved the automatic exchange of banking information as a new global standard, with over 100 countries now automatically sharing bank details. This marked a significant shift from the era of offshore banking secrecy, which allowed the wealthy to easily hide assets. Second, in 2021, more than 130 countries agreed on a minimum tax for multinational companies, establishing that they should pay at least 15% in taxes.

In both cases, the G20 provided the impetus for these reforms, which all began there. The next logical step is to apply the principle of the global minimum tax for multinationals to billionaires, through the automatic exchange of banking information. This would create a new minimum tax standard for global billionaires.

Recommendations on specific mechanisms and policies

Once we reach a collective agreement on the minimum tax for the super-rich, countries to implement this standard with their domestic policies in many ways. For example, they can create what is known as a presumptive income tax, which means they will be able to predict that super-rich people earn a considerable amount of income and tax it accordingly, ensuring they pay at least 2% of their wealth in tax.

The key idea is that the G20 proposal combines international coordination with national sovereignty. We are working together globally to establish a standard of fairness and justice, but each country retains the freedom to use various tools to implement it within its national tax systems.

Importance of international cooperation

Zucman advocates for a minimum tax rate of 2% for the world's super-rich. The proposal is under debate by the G20 member countries | Photo: Rebecca Omena/MF
Zucman advocates for a minimum tax rate of 2% for the world's super-rich. The proposal is under debate by the G20 member countries | Photo: Rebecca Omena/MF

International cooperation is essential because there is a risk of a race to the bottom in taxation, with countries offering very low tax rates or zero taxes to attract billionaires, thereby undermining other countries’ ability to tax their wealthy residents. To mitigate this risk, the most powerful tool is to have a common international standard that applies everywhere: the super-rich must pay at least 2% of their wealth. Is it too much? Is it not enough? It is a good starting point, considering the economic potential and the political resistance to such taxes. The first step is to acknowledge that we made significant progress in creating new forms of international tax cooperation, largely thanks to the G20.

Nearly everyone believed it was utopian to envision a future where countries could unite on a minimum tax rate for multinational corporations. Such a notion seemed utterly impossible. Multinational corporations wield immense power, and countries vie for their favor by providing low tax rates. International tax competition was deemed a fundamental law of nature, with the prevailing belief that we were powerless to change it.

But that has changed, thanks to the leadership of the G20. And now we know that international tax competition is not a law of nature. It is a political choice. We can choose to tolerate it, but we can choose to contain it, opting for coordination over competition. And that is a very important source of optimism.

But that has changed, thanks to the leadership of the G20. And now we know that international tax competition is not a law of nature. It is a political choice. We can choose to tolerate it, but we can choose to contain it, opting for coordination over competition. And that is a very important source of optimism.

Striving for a sustainable and fair economy

I do not want to be naive. The very wealthy individuals who would be affected by this 2% minimum tax are not numerous. There are about three thousand billionaires in the world, but they are powerful and will advocate for their interests and oppose these kinds of measures. However, I believe that some of them, perhaps many of them, or most even the majority, can also understand that it is in their own interest to agree with such attacks on income concentration.

We know that globalization leads to increasing inequality, with the wealth of multimillionaires growing much faster than everyone else’s. This is unlikely to be sustainable. It is indeed in their own interest to have a more sustainable and fairer economy so that they can continue to benefit.

This proposal represents a first step towards what could become a more sustainable and fairer globalization, one that is in everyone's interest, including the billionaires themselves.

Progressive taxation and inequalities

Progressive taxation is perhaps one of the most crucial institutions in democratic societies. The progressive tax system is essential for fostering trust in governments and social cohesion, for funding public services, which are the primary drivers of economic growth; and for ensuring education for all, healthcare, and robust public infrastructure. It is important for regulating inequality and preventing an undue concentration of wealth. That is why advocating for it is so important.