Global Attention Turns to Taxation of Vast Fortunes Amid Rising Inequality
Marlene Engelhorn, heiress to the billion-dollar fortune from multinational BASF, joined a chorus of voices at the Davos Forum urging political leaders to address inequality through increased taxation.
This call comes as the International Monetary Fund suggests implementing a temporary tax on high incomes to address pandemic-related burdens.
With Brazil, holding the G20 presidency, aiming to finalize a declaration on a minimum tax on the wealthiest by summer, and the U.S. proposing heavier taxation on its highest net worth individuals, a question arises: Is this the dawn of a tax revolution to ensure the world's richest pay higher taxes?
Never before have such diverse voices simultaneously highlighted taxing vast fortunes.
This push aims to make wealth taxation a prominent topic in international debates amid mounting challenges: pandemic-induced debt, ecological transition, digitalization, and aging populations.
"The super-rich should contribute more taxes for various reasons. While the five richest individuals doubled their fortunes since 2020, 5 billion people witnessed their wealth decline," says Rebeca Gowland, international director of Patriotic Millionaires, a U.S.-based association advocating for higher taxes on large fortunes.
Data underscores this urgency. While the number of billionaires is relatively modest, their wealth is staggering and continues to grow exponentially.
The latest Billionaire Ambitions Report by Swiss bank UBS reveals a 7% increase in billionaire wealth between 2022 and 2023, surpassing $12 trillion, predominantly concentrated in the United States.
However, this small yet powerful cohort not only accumulates wealth but also leverages strategies to minimize their tax contributions. The EU Tax Observatory's report indicates that billionaires pay minimal personal taxes relative to their wealth, often between 0% and 0.5%.
This disparity is glaring. During the peak of the pandemic, income tax returns of America's 25 richest individuals, including Elon Musk and Bill Gates, unveiled that they paid lower effective tax rates than the working class.
The system's shortcomings are apparent.
Wealth enjoys preferential tax treatment over earned income, allowing the wealthiest to exploit tax loopholes and employ tax planning services to minimize tax obligations.
Finance ministers globally are advocating for change. Bruno Le Maire of France emphasizes curbing tax avoidance, while Fernando Haddad of Brazil calls for global cooperation to combat tax evasion by the ultra-rich.
Despite growing awareness, implementation remains a challenge.
Pascal Saint-Amans, a tax expert, cautions against expecting immediate global consensus on wealth taxation due to stark differences among nations.
Nonetheless, momentum is building. Gabriel Zucman, a prominent economist, proposes a global minimum tax of 2% exclusively for billionaires, suggesting that unilateral action may be necessary in the absence of international agreement.
As debates intensify, the world watches with anticipation whether this movement will usher in a new era of tax justice and economic equity.
