Gabriel Zucman, the French economist notorious for challenging billionaires, is gaining a lot of attention. As the head of the European Tax Observatory, Zucman’s focus revolves around the global taxation scenario, specifically pertaining to the extremely wealthy who manage to escape taxation. His propositions to address this issue are gathering substantial backing.
Invited by Brazil’s chief, Luiz Inácio Lula da Silva, who currently presides over the G20 group of significant economies, Zucman has been advocating for an international consensus to impose a minimum annual tax of 2 per cent on the fortunes of the planet’s approximate 3,000 dollar-billionaires. Zucman believes that such a move could accumulate $200-250 billion. Extending this taxation to centi-millionaires, individuals owning more than $100 million, with an estimated global count of 65,000, could bring in an additional $100-135 billion.
Such an accumulation could help considerably addressing major under-resourced sectors like health and starvation or providing a balanced shift towards the green economy.
The G20 has put this tax proposal on their autumn assembly’s schedule. Recently, the US president Joe Biden proposed a similar “billionaire minimum income tax” at a 25 per cent rate. Nations like France, South Africa, Spain and Germany have endorsed the notion. Furthermore, previous leaders of 20 G20 member states, confirmed their support in a signed letter last month. They assert that it presents an opportunity to “pen a fresh chapter on taxation, the first in a generation,” at a time when “billionaires around the globe are taxed at a rate that is less than 0.5 per cent of their wealth.”
The central argument for billionaire taxation is rooted in the notion of social equity and an urgent need to address growing socioeconomic disparities, especially at a time when the wealth gap between the ultra-wealthy and everybody else is rapidly expanding. It was suggested by an Oxfam study that each time a person from the lowest 90% of earners increases their wealth by $1 in the last two years, every billionaire added approximately $1.7 million to their fortune. This escalating wealth of billionaires, which has doubled over the past ten years in terms of both the count of billionaires and their cumulative wealth, is reportedly increasing by $2.7 billion daily, with the pandemic providing additional financial acceleration.
Forbes’ data indicates that in 1987, the accumulated wealth of billionaires represented about 3% of global GDP. By 2024, this figure had increased remarkably to 13%, which translates to an inflation-adjusted average annual growth of 7%, over twice the average increase in wealth. Yet, even with a 2% annual tax, the speed of wealth accumulation by billionaires would still significantly surpass that of the other majority.
The argument for taxing billionaires also rests on the difficulties faced by national governments to tax the exorbitant incomes of these individuals. This is due, in part, to their ability to disguise revenue as capital or wealth, coupled with the concern that they may choose to leave nations with heavy taxes.
Research conducted by Zucman reveals that as individuals climb up to the tip of the wealth pyramid (into the richest 0.01% category), their effective tax rates steeply decline. So drastically that, typically, billionaires end up paying half in taxes relative to the rates applied to all other social divisions.
In terms of wealth, as against income taxation, Zucman’s G20 report highlights that billionaire’s capital taxation rates are usually about a quarter of the average individual’s. The primary wealth tax that affects the average citizen – residential property taxes, impose a much greater burden on them compared to billionaires, whose major assets are essentially not taxed at all.
Zucman proposed that, in reality, the middle class is subject to wealth taxes, while billionaires mostly escape it. Several European nations used to impose wealth taxes, but as per Zucman’s explanation to a French magazine, they were eventually phased out because they weren’t effective. They failed to tax the wealthiest and did little to tackle tax competition. Zucman pointed out that people could evade taxes by shifting to areas with lower tax rates. Consequently, countries abolished their wealth tax, succumbing to the pressures of such tax competition.
Ireland, within the European Union, long upheld tax competition as an essential national value, a stance that impeded deals involving the taxation of international companies and the distribution of tax data. However, the disdain expressed by its partners regarding their dwindling taxation powers resulted in global cooperation prevailing, leading to substantial pressure from the other member countries and consequently, Ireland’s diplomatic retreat. Currently, Ireland aligns itself with more cooperative measures.
Zucman stresses the critical importance of worldwide collaboration for his suggested plans. He contends that the agreements on corporate tax and data exchange have been pivotal turning points – these agreements render a billionaire tax feasible. Importantly, they illustrate that it’s achievable to encourage hesitant states to engage in a global deal and create structures to enable states to pursue taxes from runaway billionaires.
Presently, Forbes’ yearly list reveals that Ireland is home to 11 billionaires. In 2024, their collective net worth significantly escalated to €49.12 billion, a marked increase from last year’s €33.61 billion. A tax of 2% on this wealth could generate €1 billion annually. Of course, this depends on whether any remaining ideological opposition to backing Zucman’s proposal re-emerges.