During a press conference on February 29, 2024 Economist Gabriel Zucman, serving as Minister Fernando Haddad's special guest in the G20 debate on the taxation of large fortunes, advocated for the necessity of a globally coordinated minimum tax on substantial fortunes, set at a minimum of 2% annually.
If implemented, the measure would potentially unlock an additional 250 billion American dollars in tax revenues. What is most impressive is that today, this extra amount would be generated with a minimum taxation of 2% applied to a restricted group of 3 thousand billionaires. This is an indicator of the concentration of wealth and the need to implement a more equitable system, which in Zucman’s view would help strengthen social cohesion and democracy.
Zucman congratulated Brasil’s Presidency of the G20 for bringing the issue to the negotiation table of the world’s major economies for the first time. “Brasil’s leadership in introducing this topic fosters a historical development,” stated the 37-year-old economist, also the director of the EU Tax Observatory.
The best way to solve the issue of “regressivity at the top of the distribution,” or in other words, the wealthiest people paying less taxes while the poorest proportionally pay more, is to create a minimum pattern to tax the super-rich, which would avoid a fiscal war among countries.
And why impose a tax over large fortunes when an Income Tax already exists? According to Zucman, the concept of income is not well-defined, while wealth is. In the Brazilian case, for example, a wage-earning citizen pays Income Tax monthly through withholdings from their paycheck while wealthier individuals can either reduce or simply avoid paying taxes by utilizing legal and/or tax advisory services.
According to Zucman, the concept of wealth, especially that of billionaires, is much more clearly defined. He emphasizes that there is good information about the value of the companies owned by the super-rich, many of which are listed on stock exchanges. And even when these companies are not publicly traded, it is possible to estimate their value simply by comparing them with companies of similar size and in the same industry that have shares traded on stock exchanges.
When questioned about the viability of the proposal, Zucman stated that believing that all countries will agree with one solution is likely utopic. At the same time, he declared that there is no need for all countries to agree for the taxation of the super-rich to be implemented. “We do not need a global consensus on the matter. We can advance with a coalition of agreements,” he said.
Zucman recalled the minimum taxation of 15% over the profits of multinational companies, proposed by the Organization for Economic Co-operation and Development (OECD); around 140 countries agreed with the measure, even though only 35 are currently implementing it.
When questioned about when the large fortunes taxation would start taking effect, Zucman said there is no deadline, but highlighted that the sooner it happens, the better. The economist stated that his proposal had received positive feedback, highlighting that the US Secretary of Treasure, Janet Yellen, mentioned that the Biden administration would have a similar project. “It is clear that there is room for ideas like this in key countries, such as the US. France is also highly in favor of it.”
Winner of the John Bates Clark medal in 2023, the second most important recognition in the field of Economics, second most significant in the field of Economics, surpassed only by the Nobel Prize, and author of impactful books such as “The Hidden Wealth of Nations”, Zucman said he is working on a study, at the request of minister Haddad, about issues such as the best destination for the resources obtained with the possible taxation of the super-rich.
* The text above is the text of a press release as published on March 1, 2024 on the website of the G20.
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